Pitt published an update on endowment investing related to ESG factors

The University of Pittsburgh has published its second report on how environmental, social and governance (ESG) factors are used in the management of the University’s Consolidated Endowment Fund (CEF).

The update to last year’s inaugural report reflects the University’s commitment to providing greater clarity regarding how ESG factors are applied in the CEF’s investment decision-making process. Read the full report, along with links to the inaugural report and other related documents.

This report is aligned with the University’s formal ESG Policy, which was adopted in March 2020. It also provides an update regarding the endowment’s fossil fuel exposure, in response to the recommendation of the Ad Hoc Committee on Fossil Fuels convened by the University’s Board of Trustees.

Key disclosures

The update explains that total exposure to fossil fuels increased from 5.9% of the CEF as of June 30, 2021, to 8.1% as of June 30, 2022. Chief Investment Officer Jeffer Choudhry explained the increase was primarily attributable to changes in the market value of fossil fuel companies and commodity prices for oil and natural gas and was not the result of new investment activity. “Prices for oil and natural gas increased 47% and 73%, respectively, during the period, which caused the value of our existing investments to increase,” Choudhry said.

He added that although the University does not preemptively exclude fossil fuel investments, known as applying a negative screen, the endowment has not made any new fossil fuel investments since February 2021.

Reflecting the University’s commitment to ESG principles, a new disclosure in the report states that external investment managers currently overseeing 87% of the CEF have formal ESG policies in place or take ESG considerations into account when making investments. “This reflects the state of the investment industry, where many managers are already taking certain ESG considerations into account in pursuit of stronger returns,” said Choudhry.

He further added that updates to how ESG factors are applied to the endowment’s investments will be published annually. “Pitt was one of the first universities to publish an ESG report for its endowment. With this second edition, it remains our goal to enhance awareness and understanding regarding the endowment’s investment practices,” Choudhry said.

The endowment benefits the University community

As the University’s largest financial asset, the endowment supports financial aid, scholarships, faculty positions and research activities.

Choudhry reiterated his and the University’s commitment to ensuring the endowment investments continue to support responsible business practices, which are integral to producing strong investment outcomes.

“We will also continue to monitor developments in ESG-related standards, particularly those that have direct financial impact on our investments. As those standards are developed, we will explore incorporating them in our investment process,” Choudhry said.