Sustainability Performance Report FY24
About the Foundation for WWU & Alumni
The Foundation was established in 1966 as a vehicle to receive and encourage private giving to WWU. In the past year, donors have provided over $18 million to the University in the form of annual gifts, endowed gifts, estate gifts, and gifts in kind like real estate, equipment, and works of art. Gifts fund student scholarships, as well as provide support for programs, faculty, clubs, and teams.
In 2023, The Foundation for WWU & Alumni was formed when the Foundation merged with the WWU Alumni Association. The Foundation for WWU & Alumni serves all alumni, donors, and members of the WWU community from a single, streamlined organization.
The Foundation for WWU & Alumni is led by a group of dedicated, volunteer board members who advocate for the importance of private support to public institutions. These alumni, parents, and community leaders bring their professional experiences to promote the mission of WWU while stewarding the more than $140 million in assets under the Foundation’s management.
Letter from the CEO of The Foundation for WWU & Alumni
Greetings WWU Campus Community!
Welcome to the first annual Sustainability Report for the Endowment Investment Fund (Endowment). We are eager to share our sustainable investing practice as it looks today, and to begin the work of tracking our impact and progress into the future.
In the past year, University Advancement staff has worked with the President’s Sustainability Council and the Sustainability Engagement Institute to revisit and update our goals and contributions to campus sustainability initiatives and the Sustainability Action Plan. Reporting annually on the Endowment’s sustainability performance is one of our commitments.
In the past year, we have additionally committed to sharing information regarding sustainable investing with the campus community and to that end, have built out the Foundation website to include the following:
- Information on the Endowment;
- Information on Russell Investments and the Outsourced Chief Investment Officer model;
- FAQs on Sustainable Investing;
- A summary of the Endowment Investment Policy.
We plan to keep the Investment Information and Sustainability Performance web page updated as we take on additional projects and reporting, and we welcome your questions and feedback.
The Foundation for WWU & Alumni plays an essential role in advancing the mission of WWU and supporting its goals. It is a great honor to serve this campus. Our projects in the coming fiscal year will include working with an investment consulting firm to evaluate our existing practices around sustainable and responsible investing and to create learning opportunities for the Foundation’s Board of Directors to ensure we are operating in the ways that most fully serve the needs and goals of our exceptional university.
Sincerely,
Kim O’Neill
Vice President for University Advancement
President and CEO of The Foundation for WWU & Alumni
About the Endowment
WWU’s Endowment is comprised of gifts from thousands of donors, with the purpose to generate consistent and predictable income to support scholarships, programs, and faculty at Western Washington University. WWU’s Endowment is invested to support Western Washington University in perpetuity and to achieve intergenerational equity.
The Fund’s investment objectives are designed to ensure the Fund can generate regular income while also maintaining the long-term purchasing power of the portfolio. This is achieved by maximizing the value of the Fund while also balancing its exposure to investment risk. The Fund must also ensure the necessary amount of liquidity is available to support the Foundation’s commitments to WWU. As of June 30, 2024, over half of the Foundation’s endowment investment portfolio (53.3%) is invested in a Sustainable Multi-Asset Growth (SMAG) Fund. The remaining 46.7% of investment funds are spread across a diversified range of assets which include bonds, private equity investments, and real estate.
The Endowment Investment Policy for The Foundation for WWU & Alumni sets forth guidelines for the management, standards of conduct, and investment targets for WWU’s Endowment Fund. The Finance Committee of the Foundation’s Board of Directors is responsible for developing the Endowment Investment Policy, for establishing investment policies and procedures, and is additionally responsible for the development of target asset allocations, benchmarks, investment strategies, guidelines, and restrictions for the Endowment Fund. Foundation Management (i.e., the President and CEO of the Foundation and the CFO of the Foundation) are responsible for ensuring the investment policies and procedures are followed as stated in the Endowment Investment Policy.
The Foundation has a fiduciary responsibility to ensure the portfolio is managed with the same degree of care and loyalty as with any personal assets. The Foundation has chosen to outsource this management to external managers who also serve as co-fiduciaries of the portfolio. Russell Investments of Seattle, WA, Commonfund of Wilton, CT, and Mason Investments of Reston, VA serve as the Endowment’s investment managers and co-fiduciaries.
About the SMAG Fund
In 2018, The Foundation for WWU & Alumni responded to the WWU campus community’s requests for more sustainable investment options by working with Russell Investments to develop an investment fund for endowment assets that emphasizes environmental, social, and governance (ESG) factors and that reduces the portfolio’s carbon footprint by 50% compared to its benchmark—a composite which is most heavily weighted by the MSCI ACWI IMI.
Over half of the endowment investment portfolio ($76.9 million) is currently invested in the Russell Investments Sustainable Multi-Asset Growth (SMAG) Fund, which considers environmental, social, and governance (ESG) factors in the security selection process and emphasizes holding stocks that reduce the carbon footprint of the portfolio by 50% compared to a market index. The Fund excludes investments in coal, tobacco, controversial and small firearms weapon companies, private prisons, and predatory lending companies; the Fund emphasizes investments in companies participating in the energy transition, such as companies related to wind power generation.
The Foundation for WWU & Alumni takes great pride in being the inaugural client for this fund in 2019 with a $50.0 million commitment. Today the fund has over $400.0 million of investments from various clients.
How Does the Foundation Make Investment Decisions?
BOARD OF DIRECTORS
FINANCE COMMITTEE
- Responsible for the oversight and management of Endowment assets;
- Responsible for establishing investment policies and procedures, developing target allocations, benchmarks, investment strategies, guidelines, and restrictions;
- Presents to the Board, at least annually, a report of the investment structure and financial performance of the Endowment.
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EXECUTIVE COMMITTEE
- Responsible for approving the Endowment Investment Policy;
- Responsible for reviewing, at least annually, the Endowment’s investment structure and financial performance.
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FOUNDATION MANAGEMENT
- Responsible for implementing the investment policies and procedures as directed by the Finance Committee;
- Responsible for providing quarterly reports of investment accounts;
- Responsible for monitoring all hired investment managers to ensure compliance with investment policies and objectives;
- Responsible for collection and investment of contributions and investment income, and payment of expenditures for the management of the Endowment.
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RUSSELL INVESTMENTS
- Engages in day-to-day investment activities of the Endowment Fund, per the guidelines set forth by the Foundation Board.
Sustainable Multi-Asset Growth Fund Sustainability Performance
The SMAG Fund employs exclusionary screens to reduce the portfolio’s carbon footprint, while simultaneously overweighting the portfolio with companies participating in the energy transition. The portfolio’s sustainability performance demonstrates this approach to investing among several ESG measures.
Carbon Intensity
Carbon Intensity measures the amount of CO2 emitted per unit of economic activity; lower carbon intensity indicates that the entity being measured is more efficient in terms of its greenhouse gas emissions. The SMAG Fund demonstrates its commitment to investing in sound environmental performers by its combined portfolio holdings having less than half of the carbon intensity of its benchmark.
Fossil Fuel Reserves
A company or portfolio’s measure of fossil fuel reserves represent oil, gas, or coal assets that will likely become future carbon emissions. Portions of the SMAG Fund are aligned with broad indexes such as the S&P 500, which obligates the portfolio to have some exposure to fossil fuel reserves. SMAG’s exposure, however, is only one-third of that of its benchmark.
Annual Water Usage
Water management practices among corporations are an important ESG consideration because of water scarcity issues and the high potential for pollution in discharging used water. The UN General Assembly and the Human Rights Council have recognized that without access to water, poverty, hunger, social exclusion, and poor health is exacerbated.1 The SMAG Fund’s holdings use only 42% of the water that is used annually by its benchmark portfolio.
Board Diversity
Just as diversity is an indicator of health in an ecosystem, so it is in matters of corporate governance. Research conducted by Ayman Issa and Jalala Rajeh Hanaysha in 2023 found that “a higher representation of women on boards is correlated with a reduction in the number of ESG controversies, particularly when there are three or more female directors.”2 While the SMAG Fund has room to improve its number of holdings with three or more women on the board, it is currently keeping pace with its benchmark, also at 31%.
Net Zero Commitments
The United Nations Environment Programme (UNEP)’s 2023 Emissions Gap Report finds that greenhouse gas emissions continue to trend upward and that “relentless mitigation and low-carbon transformations” are “essential” to stay on target for the 1.5°C warming goal.3
While the UNEP focuses its work at the national and global level, businesses around the world are a critical piece of the emissions reduction equation. The companies that make a net zero commitment are publicly committing to reduce their greenhouse gas emissions by 45% by 2030, and then to reduce emissions further—to as close to zero as possible by 2050—while committing to offset any remaining emissions above zero. Corporations that make meaningful progress toward these commitments are essential for steering the course toward the imperative emissions reductions.
United Nations Global Compact
Calling itself the “world’s largest corporate sustainability initiative,” the UNGC sets forth ten principles for companies to incorporate into their strategies, policies, and procedures. The ten principles cover responsibilities in the areas of human rights, labor practices, environmental stewardship, and anti-corruption policies.
Beyond integrating the ten principles into their business operations and highest-level decision-making processes, UNGC participants further agree to engage in partnerships that support broader UN goals, undertake advocacy measures to promote the UNGC and responsible business practices, report annually on efforts to operate responsibly and support society, and make a financial commitment to supporting the work of the UNGC.
Other Investor-Focused UN Programs
United Nations Principles for Responsible Investing
The UN’s Principles for Responsible Investment (PRI) is an initiative in partnership with the United Nations Environment Programme and the UN Global Compact. Asset owners, investment managers, and service providers who wish to align with the PRI are required to publicly declare support for the following six principles:
- To incorporate environmental, social and corporate governance (ESG) issues into investment analysis and decision-making processes;
- To be an active owner and to incorporate ESG issues into ownership policies and practices;
- To seek appropriate disclosure on ESG issues by the entities in which signatories invest;
- To promote acceptance and implementation of the Principles within the investment industry;
- To work with the PRI Secretariat and other signatories to enhance their effectiveness in implementing the Principles;
- To report on activities and progress towards implementing the Principles.
Russell Investments has been a signatory to the PRI since 2009. The Foundation for WWU & Alumni will be evaluating how the Principles can be integrated into our investment activities and reporting measures in the future.
United Nations Sustainable Development Goals
In 2015, leaders from around the globe adopted the 2030 Agenda for Sustainable Development which included seventeen specific goal areas for concentrated work. Each of the seventeen goals is broken down into targets, and each target uses indicators to measure progress.
The Sustainable Development Goals are frequently used by investment managers to guide ESG decisions and to help report on investment impact. The Foundation for WWU & Alumni will be evaluating how the SDGs can be integrated into our investment activities and reporting measures in the future.
About Russell Investments
Since 2019, Russell Investments has managed the equity and bond allocation of WWU’s endowment investment fund. During the 2018 RFP process, Russell Investments was identified as a leader and a values-aligned partner in terms of its ability to provide thoughtful and sustainable investment strategies.
Russell Investments is a leading global investment solutions partner providing a range of investment capabilities to institutional investors, financial intermediaries, and individual investors around the world. Since 1936, Russell Investments has been building a legacy of continuous innovation to deliver exceptional value to clients, working every day to meet client’s investment objectives. Headquartered in Seattle, Washington, Russell Investments has offices worldwide, and has been a signatory to the United Nations Principles for Responsible Investment since 2009. Russell Investments is also a signatory to the CDP (formerly Carbon Disclosure Project), Climate Action 100+, and is a supporter of the Task Force on Climate-Related Financial Disclosures.
Russell Investments and Responsible Investing
Responsible investing is at the heart of Russell Investments’ investment beliefs, and an integrated responsible investing practice is executed across the firm. This practice is founded on the following set of four core beliefs, codified in 2015:
Exhibit 1: Responsible investing beliefs
Source: Russell Investments, for illustrative purposes only.
Drawing on these core beliefs, Russell Investments has developed formal policies on responsible investing, climate change risk, and sustainability risks, which are regularly reviewed to ensure they develop in accordance with market best practices. These policies are the foundation for Russell Investments efforts to efficiently integrate ESG considerations into their investment activities. More information on Russell Investments approach to responsible investing can be found in their 2023 Investment Stewardship Report.
What Measures are in Place to Make Sure Russell Investments is Managing the Endowment Fund with ESG Measures in Mind?
Mutual funds that are available to the general public are required to set forth the investment objectives, strategies, risks, and other information about the fund’s investment adviser in a document called a prospectus that is filed with the Securities and Exchange Commission. The information presented in the prospectus is intended to give an investor valuable information about how the fund will be managed.
Because the SMAG Fund is not available to the general public, it is not required to file a prospectus with the SEC. Instead, the fund operates with a private placement memorandum, which contains much of the same information as a prospectus, including its investment guidelines. These guidelines include the following:
- Pursuing a low-carbon investment objective, which includes holdings with less exposure to fossil fuels, smaller carbon footprints, and increased exposure to green energy.
- Excluding issuers [companies] involved in the following:
- Manufacture of tobacco;
- Manufacture of controversial weapons (described as cluster munitions and anti-personnel mines);
- Deriving more than 10% revenue from the manufacture and/or sale of firearms;
- Deriving more than 10% revenue from predatory lending activities;
- Deriving more than 10% of revenues from thermal coal mining and coal power generation.
Russell Investments is required to follow these guidelines when managing the fund and employs a robust enterprise risk management system that receives real-time security level position detail to ensure that all portfolio holdings are aligned with the fund’s guidelines and that none of the exclusions are violated. In addition, there are various internal controls and audits that are conducted to ensure compliance with the investment guidelines.
Looking Ahead
The Foundation for WWU & Alumni plays an essential role in advancing the mission of WWU. The Foundation shares the university’s values and exists solely to support Western. Simultaneously, the Foundation must ensure that its investment funds are managed in a way that provides the best opportunity for the endowments to thrive for decades. Managing ESG risks is a key component of this work, which is why in 2020, the Foundation Board’s Finance Committee added specific language to its investment policy stating that it will consider sustainable or ESG-related investment vehicles as long as the sustainable or ESG vehicles approximate the risk and return profile of the original portfolio. Additionally, The Foundation is committed to including ESG criteria in all future RFP processes for outside investment managers.
Sustainable environment
There has been a significant dispersion in returns from global equity vs. sustainable-focused strategies. Outperformance in non-sustainable sectors negatively impacted sustainable securities.
For fiscal year 2025, The Foundation for WWU & Alumni has engaged the consulting firm Aon Investments to review the Foundation’s existing practices around sustainable and responsible investing. This partnership will include a review of the existing Endowment Investment Policy and Foundation governance structure and will develop goals and benchmarks for measuring the Foundation’s responsible impact, including:
- Definitions of responsible investing and related terms;
- Education for Board Members around terminologies and approaches;
- Global trends, including thematic risks and opportunities such as energy transitions;
- Considerations regarding investment vehicle types and size;
- Fiduciary and regulatory developments;
Investment landscape.
The Foundation is committed to reporting on this impact annually and looks forward to sharing such reports with our campus community and beyond.
What is Shareholder Engagement?
Owning stock in a company gives an investor a tiny share of ownership in that company—and thus, the ability to have a say in issues that are brought forward to a vote by company management or by other shareowners. When an investor divests from its shares in a specific company, they give away their opportunity to have an influence in the direction and priorities of that company, and their ability to meaningfully engage with the company.
Divestment Versus Engagement
Investors have several different ways to approach socially responsible and sustainable investing. Some investment managers may choose to screen out specific industries or companies from their investment portfolios or to divest from specific industries all together. Other investors choose to hold companies or industries in their portfolios so that they can engage with those companies on important environmental, social, or governance issues.
While divestment makes a bold statement, shareholder engagement strategies can increase the probability of making real change by persuading a company to be more transparent in its reporting, or in the ways it handles any number of ESG issues.
The Foundation’s work with Aon Investments during FY 2025 will include educational content around divestment issues, shareholder engagement, and other sustainable and responsible investing strategies.
- Karoui, A. and Zerter, L. (March 2022). Water-Related Risks and Challenges: A Quantitative Research Perspective. Sustanalytics. https://connect.sustainalytics.com/hubfs/INV/Thought%20Leadership/SUST_261_RESEARCH_PAPER_WATER_SUMMARY.pdf
- Issa, A. and Hanaysha, J.R. (June 2023). “Breaking the glass ceiling for a sustainable future: the power of women on corporate boards in reducing ESG controversies,” International Journal of Accounting & Information Management, Emerald Group Publishing Limited, vol. 31(4), pages 623-646, June.
- United Nations Environment Programme (November 2023). https://www.unep.org/news-and-stories/press-release/nations-must-go-further-current-paris-pledges-or-face-global-warming
- The MSCI ACWI Sustainable Impact Index is designed to identify listed companies whose core business addresses at least one of the world’s social and environmental challenges, as defined by the United Nations Sustainable Development Goals. The categories include: nutritious products, treatment of major diseases, sanitary products, education, affordable housing.
SOURCE: Bloomberg. Data from 07/01/2020 — 06/28/2024. Past performance is not indicative of future results.