The goals of impact investing can be more easily achieved through private assets, said Martin Bélanger, director of investments at Western University, during a fireside chat at the Canadian Investment Review’s 2024 Endowment & Foundation Investment Forum in June.
“We’ve transitioned our private equity portfolio from a fund-to-fund approach to making direct investment in primary funds. That was with the help of our investment committee.”
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The university has a 10 per cent allocation to impact investment opportunities, primarily in private equity and infrastructure, that’s aligned with the United Nations’ sustainable development goals. The benefit of seeing change enacted in the private market, he added, is that the manager owns the company and can implement the necessary changes much more efficiently than in the public markets. Western is currently reviewing impact investment opportunities in public equities, real estate and fixed income.
The operating endowment fund at the school consists of $2.2 billion in assets and while it’s overseen internally, the fund is externally managed by 32 external managers with 43 investment mandates.
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The endowment fund essentially doesn’t have any liquidity needs because any payout is made by shifting assets from short-term funds to long-term funds, he said. “Technically, we could have 100 per cent of the endowment fund invested in private equity and we would still be able to make our four per cent payouts to pay for scholarships or fund teaching shares. That’s an advantage that we use when we build our portfolio.”
With the widespread adoption of environmental investment goals, including commitments to achieve net-zero emissions by 2050, more endowments will likely follow suit to prove they’ve made an impact without any concession in returns, said Bélanger.
Investment managers at universities in North America continue to receive questions from activists demanding to see divestments from sectors such as the oil and gas industry. Divestments typically don’t accomplish much since they’re simply a transfer of ownership, he said, adding that when dealing with calls for divestment, it’s important to explain the complexities associated with any type of divestment strategy.
“We need to listen, we need to establish a conversation with our stakeholders and to try to convince them of our view as much as we can and keep an open dialogue with them. But obviously it’s difficult when they’re set in their position that they want us to divest of specific industries.”
Read more coverage of the 2024 Endowment & Foundation Investment Forum.