The McKnight Foundation, the $2bn (€1.6bn) Minnesota-based philanthropic body, has become the first investor in a new fund which overweights carbon-efficient companies in the US and underweights poor performers developed by Mellon Capital Management, the San Francisco-based index fund arm of US financial services powerhouse BNY Mellon.
McKnight is backing Mellon’s Carbon Efficiency Strategy, which has been put together with the help of its consultant Mercer and impact firm Imprint Capital.
“Like many of our peers, the McKnight Foundation specializes in pairing data-informed strategies with ambitious goals. Among those goals is helping to accelerate the transition to a low-carbon economy. With a goal this big, we need to leverage all our resources, including McKnight’s $2bn endowment,” said foundation president Kate Wolford in a blog posting.
She explained how Mellon, one of its longstanding fund managers, agreed to work with the foundation and its advisors to design a climate-responsive solution “for a $100m investment we’d previously had in a low-fee, broad market US stock portfolio”.
McKnight hopes the strategy will reduce McKnight’s emissions profile in the investment by over 50%, relative to a more typical index exposure. In addition, the strategy bars investments in coal mining and production companies.
The strategy is benchmarked against the Russell 3000 Index and McKnight says it not only “fills a gap in the universe of investment products” but that it may be a powerful solution for other foundations and institutional investors who want to “send signals to the market about carbon emissions”.The fund will vote at company annual meetings in “support of forward-looking environmental risk management”.
Wolford added there had been a “tremendously fruitful dialogue” with the Divest-Invest movement. The new investment is in addition to a commitment announced in June to direct 10% of its endowment ($200m) to high-impact investments.
In July the foundation named Elizabeth McGeveran, the former F&C senior vice president of governance and sustainable investment, to direct its program-related and mission-driven investing.
Mellon Capital’s CEO Gabby Parcella said the firm was seeing “growing numbers of foundations, universities and other institutional investors” worldwide interested in impact investing where they can address environmental challenges through their investment portfolios.
Mellon Capital, which became a signatory to UN-Backed Principles for Responsible Investment (PRI) last year, has a total of $370bn under management, of which around $49bn is in “strategies for companies pursuing sound environmental, social or corporate governance practices”.
Imprint Capital is the firm that is helping Perella Weinberg as it assists the Rockefeller Brothers Fund in its high-profile divestment of fossil fuels. Imprint was founded in 2007 by Taylor Jordan and John Goldstein, who are still with the firm. It named former Rockefeller Brothers Fund Chief Operating Officer William McCalpin as CEO in September last year. McCalpin, who is also independent chair of trustees of the Janus funds family, is a director of the F.B. Heron Foundation.