April 26, 2018 INVESTING WITH IMPACT - OACUBO...1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090 3 HARTLAND.com AT SOME POINT, YOU WILL ANSWER “YES” • In

1100 Superior Avenue East Suite 700

Cleveland, Ohio 44114

216.621.1090 | HARTLAND.com

INVESTING WITH IMPACT: NAVIGATING THE RESPONSIBLE INVESTING LANDSCAPE

April 26, 2018

2 1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090

HARTLAND.com

QUICK POLL

1. Asked about Responsible Investing (SRI, ESG, and/or Impact Investing) in the

last year?

2. Your institution currently has or has had a student or faculty-led divestment

movement?

3. Your institution currently incorporates Responsible Investing into the investment

program?

4. If your program is not currently incorporating Responsible Investing, are you

considering it?

Why hasn’t your institution considered it?

1. Not of interest to institution / Board / Committee

2. Complexity

3. Investment Results

4. Fees


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AT SOME POINT, YOU WILL ANSWER “YES”

• In 1995, there was $639 billion invested according to Responsible Investing

principles

• That number has grown by 1300% (a 14-fold increase)

• $8.72 trillion in 2016

Source: US SIF.

Responsible Investing in the United States 1995-2016


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AGENDA & KEY TAKEAWAYS

Agenda Key Takeaway

1. What is Responsible Investing? 1. Umbrella of approaches to values-based investing

that includes exclusionary screens, ESG integration,

and Impact Investing

2. Growth in Responsible Investing 2. Responsible Investing is here to stay. Demand will

continue to grow from key stakeholders: board,

donors, faculty, students, millennials, etc.

3. Responsible Investing Considerations 3. Organizations must juggle financial, risk, and

stakeholder considerations

4. Incorporating Responsible Investing 4. Organizations need to have a clear process to

assess, implement, and evaluate a Responsible

Investing program


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HARTLAND OVERVIEW

Independence

• Employee owned

• Single revenue source: advisory services

• Objective

Expertise

• 29 years advising institutional clients

• 100+ Endowments, Foundations, and

University Asset Pools

Results

• Competitive results

• Low total costs

• Highest fiduciary standards *By number of relationships

$20+ Billion Assets Under Advisement

500+ Number of Private

Clients: Families,

Individuals, and

Related Accounts

28 Number of

Shareholders

120+ Number of Institutional

Clients: Not-for-Profits,

Hospitals, and Retirement

Funds

72 Number of Employees

28 Number of Employees

with CFA, CPA, and CFP®

Designations

36 Number of states in

which we have clients

29 Number of Boards on which

we Volunteer

Institutional Clients

Foundations and

Endowments 46%

Operating Pools 18%

Retirement Plans 36%


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PRESENTING TODAY

Professional Years

Experience Previous Experience and Education

Mike Shebak

Senior Managing Director

Head of Institutional Consulting

Group

17

The Huntington Investment Company

MBA – The Ohio State University

BA – Wittenberg University

John Evans

Director 8

Goldman Sachs

BA – University of Pennsylvania

WHAT IS RESPONSIBLE INVESTING?


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ALPHABET SOUP: DECODING THE TERMINOLOGY


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SIMPLIFYING THE TERMINOLOGY AND LANDSCAPE

Source: US SIF: The Forum for Sustainable and Responsible Investment

Exclusionary

(SRI)

Integration

(ESG)

Impact

Investing

Direct social

and environmental

impacts

Responsible Investing

Positive tilts

to incorporate

ESG factors

Avoid investments

not compatible with

mission and goals

Alignment Impact


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ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)

FACTORS

Environmental

(E)

• Green Building / Smart

Growth

• Climate Change / Carbon

• Clean Technology

• Pollution / Toxics

• Sustainable Natural

Resources / Agriculture

• Water Use and Conservation

Source: US SIF, The Forum for Sustainable and Responsible Investment and Bloomberg

Social

(S)

• Workplace Safety

• Labor Relations

• Workplace Benefits

• Diversity and Anti-Bias

Issues

• Community Development

• Human Rights

Governance

(G)

• Board Independence

• Anti-Corruption Policies

• Board Diversity

• Executive Compensation

• Corporate Political

Contributions

GROWTH IN RESPONSIBLE INVESTING


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$8.72 trillion invested according to Responsible

Investing strategies in the US1

RESPONSIBLE INVESTING: TREMENDOUS GROWTH

Sources: 1 US SIF Report on US Sustainable, Responsible and Impact Investing Trends 2016. 2Governance & Accountability Institute. 3 Principles for Responsible Investment 2016. 4 Morgan Stanley. 5 “How

College Kids Helped Divest $50 Billion from Fossil Fuel,” Time Magazine, September 22, 2014.

86% of Millennials say they are interested

in Responsible Investing4

400 Since 2011, 400 college campuses

have had divestment movements

fueled by student activism5

135% growth in Responsible Investing

since 20121

82% of S&P 500 companies published

corporate sustainability reports in

2016, up from 20% in 20112

$70 trillion assets under management by

Principles for Responsible Investment

signatories3


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LEADING CRITERIA: EDUCATIONAL INSTITUTIONS

Source: US SIF Foundation

$- $50.0 $100.0 $150.0 $200.0 $250.0 $300.0

Affordable Housing

Labor

Pornography

Faith-Based

Military/Weapons

Prison-Related Issues

EEO/Diversity

Human Rights

Fossil Fuel Divestment

Climate Change/Carbon

Governance - General

Social - General

Environmental - General

Tobacco

Conflict Risk (Terrorist or Repressive Regimes)

$ Billions

Leading Responsible Investing Criteria for Educational Institutions 2016


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NOTABLE MOVERS

Source: 350.org. Institutions include full commitments, partial commitments, and divestments from coal & tar sands.

EDUCATIONAL INSTITUTIONS

RESPONSIBLE INVESTING CONSIDERATIONS


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FIDUCIARY BALANCE

Financial

Responsibility

Social

Responsibility


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Factor Considerations

Financial • Returns

• Objectives

• Fees

Risk • Portfolio Risk and Complexity

• Implementation

• Headline Risk

Stakeholder • Organization Priorities

• Board Members

• Donors

• Faculty & Students

• Future Constituents


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• Objectives

• Fees


• Implementation

• Headline Risk


• Board Members

• Donors




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• Objectives

• Fees


• Implementation

• Headline Risk


• Board Members

• Donors



INCORPORATING RESPONSIBLE INVESTING


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CASE STUDY: PORTLAND, OREGON (APRIL 2017)

• April 2017, Portland City Council voted unanimously to divest from all corporations

o Activists mounted campaign to divest from controversial companies

o City could not agree on an investment process or what exclusions to apply

• Portland will move $539 million currently invested in corporate securities to federal bonds and other

non-corporate options

• Estimated to cost the City at least $4.5 million a year

o Equivalent of over 200 affordable housing units or 600 new shelter beds

Source: The Oregonian. www.oregonlive.com/politics/index.ssf/2017/04/portland_to_stop_corporate_inv.html

http://www.oregonlive.com/politics/index.ssf/2017/04/portland_to_stop_corporate_inv.html


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RESPONSIBLE INVESTING ROADMAP

CLIENT

HARTLAND

Education

• What is Responsible Investing?

• How can it be incorporated into the portfolio?

Identify Objectives

• Core mission & values

• Focus areas

Decide Approach

• Exclusionary

• ESG Integration

• Impact

Reporting & Risk Management

• Performance

• Objective

• Monitoring and risk management

Portfolio Construction

• Manager selection

• Partial vs. full integration

• Active vs. passive


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CLIENT QUESTIONNAIRE

• Hartland has developed a questionnaire to lead clients through

o Identifying Objectives

o Deciding Approach


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CONCLUSION

Agenda Key Takeaway

1. What is Responsible Investing? 1. Umbrella of approaches to values-based investing

that includes exclusionary screens, ESG integration,

and Impact Investing

2. Growth in Responsible Investing 2. Responsible Investing is here to stay. Demand will

continue to grow from key stakeholders: board,

donors, faculty, students, millennials, etc.

3. Responsible Investing Considerations 3. Organizations must juggle financial, risk, and

stakeholder considerations

4. Incorporating Responsible Investing 4. Organizations need to have a clear process to

assess, implement, and evaluate a Responsible

Investing program

Documents

April 26, 2018 INVESTING WITH IMPACT - OACUBO...1100 Superior Avenue East Suite 700 Cleveland, Ohio 44114 216.621.1090 3 HARTLAND.com AT SOME POINT, YOU WILL ANSWER “YES” • In