With an endowment valued at $2.3 billion, the McKnight Foundation is a substantial client for fund managers. We can use this position to promote integrated thinking on environmental, social, and corporate governance (ESG) issues among the asset managers we hire.
Here’s how we do it:
Evaluate and Rate
Evaluate and rate all our investment managers on their Environmental, Social, & Governance (ESG) capabilities.
Pose questions about ESG capability in new manager searches and in-person meetings. This simple act of asking direct questions has led to a deeper understanding of how our managers invest, and can prompt change. In the last several years six managers have introduced new ESG funds or are building new strategies.
Engage with Partners
Consultants Imprint Capital and Mercer have helped inform our impact investing approach, advising Foundation staff and conducting due diligence. Imprint play a primary role in helping McKnight build a robust pipeline that balances risk with financial, learning, and impact returns.
Our fund managers are important thought partners too. In 2013, Mellon Capital Management created the Carbon Efficiency Strategy, a diversified equities fund. With $100 million in seed funding from McKnight, Mellon built a model that overweights efficient generators of greenhouse gas and underweights inefficient producers. It also excludes coal mining companies. The process created new ESG capacity within Mellon and launched a new product for institutional investors: a win-win for customer and fund manager. This demonstrates how investors have the power to build new markets. (NOTE: BNY Mellon produced a related case study, Value Chain Analysis: Partnership for a Carbon Efficiency Strategy, in May 2016.)