A New Commitment to Sustainability: The School’s 10 Million Dollar Shift to ESG Investments

This past February, the Board of Trustees voted unanimously to shift 10 million dollars (46% of the School’s endowment) to environmental, social, and governance (ESG) funds, marking a large leap forward in the School’s commitment to sustainability. ESG funds are investment portfolios comprised of companies deemed environmentally sustainable and thoughtful in the treatment of their employees and means of production. This method of investing is generally called “impact investing,” and has soared in popularity over the last few years due to its mix of positive social impacts and great financial returns.

The School’s relationship with impact investing began in 2014 when Senior Class presidents Dylan Carlson and Thomas Peterson proposed that the School divest from their traditional assets. The following year, three students and one teacher — all part of the School’s Green Team — followed up with the Board of Trustees and proposed the School divest all, or part, of the endowment. 

Head of School Crystal Land was intrigued and began researching ESG funds, presenting the idea of divestment to the board. Land said that while the Board was theoretically interested in ESGs, their primary responsibility was, and is, to be a good fiduciary: “first and foremost, they make sure the School survives not just this year but in 20 years.” At the time, “ESGs had higher costs than normal investments while their performances tended to lag” explained Chair of the Board Investment Committee, Jeff Lee. Investing in the new, expensive, higher-risk stocks did not fit with the School’s passive, broad-market economic strategy. Since ESGs felt risky, the Board voted to engage in a trial run entrusting only 5% of the School’s endowment into the new funds, planning to review the performance of the stocks in five years time.

This past year, the trial investment was examined; the 5% bubble grew just as well as the School’s non-ESG investments, surprising everyone. Land and the Board agreed it was time for a large-scale move to ESG funds, as it would be both “mission-aligned and financially sound.”

 Lee and The Investment Committee began to research newer and economically stronger ESG packages from other investment management companies. They ultimately went with Vanguard’s ESG option (Vanguard is the main investment management company the School uses; it did not offer an ESG portfolio back in 2015). After doing a thorough comparison of the Vanguard ESG package and their traditional US-based investments, The Investment Committee concluded ESGs were the way to go. “Not only did it make sense for us to raise our investment in ESGs, but we decided to move our entire US stock portfolio to them,” Lee stated. This move consisted of nearly 50% of the School’s endowment — almost 10 million dollars. This impact investment is a huge step for the School, and should be considered a critical point in its history regarding environmental and social awareness.

Land, Lee, and CFO Jerry Mullaney are anticipating the day when the School transfers its bonds and international stocks to ESG — and thereby 100% of the endowment — as not far off. Mullaney says that he is already starting “to hear of ESG options for international stocks and bonds.”

While extremely impactful, ESG investing is not the only endeavor the School has to demonstrate its key mission statement of sustainability. In an effort to revamp our buildings with carbon-neutral technology, the School recently contracted Carbon Lighthouse, an environmental organization that leads carbon reducing projects for office buildings, hotels, large apartment buildings, industrial facilities, and schools. Overall, this past year has been very successful for the School and our climate relations.