Stanfords Endowment and Climate Change Lessons Learned from an Early Success

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Stanfords Endowmentand Climate ChangeLessons
Learned from an Early Success

• Power Shift 2007
• Aimée Christensen
• November 3, 2007

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Overview of a Case Study

• Objective Get Stanford to adopt a climate policy
  governing the Universitys endowment stop
  corporate opposition to action on climate policy.
• Strategy Work within the system, build support
  internally, engage with outside stakeholders.
• Lessons Learned Third party validators are
  critical, credible metrics needed, and follow-up.
• Recommendations Its about ethics and its
  about fiduciary responsibility, and alumni power.

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What Governs Stanfords Investments?

• The primary fiduciary responsibilityis to
  maximize the financial return... However, when
  the Trustees adjudge that corporate policies or
  practices cause substantial social injury, they,
  as responsible and ethical investors, shall give
  independent weight to this factor in their
  investment policies and in voting proxies on
  corporate securities.
• -- Stanford Statement on Investment
  Responsibility Concerning Endowment Securities
  (1972)

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What is Substantial Social Injury?

• The injurious impact on employees, consumers,
  and/or other individuals, or groups resulting
  directly from specific actions or inactions by a
  company.
• Company actions or inactions must be proximate
  to and directly responsible for identifiable
  social injury.
• -- Stanford Statement on Investment
  Responsibility Concerning Endowment Securities
  (1972)

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How to Adjudge Substantial Social Injury?

• 1972 Investor Responsibility Research Center
  established by Stanford, others to research
  issues.
• 1973 Stanford Trustees established predecessor
  to the Advisory Panel on Investment
  Responsibility (APIR).
• APIR twelve members
• Four faculty
• Four students (two graduate and two
  undergraduate)
• Two alumni
• Two staff
• APIR advises President and Trustees Special
  Committee on Investment Responsibility (SCIR).

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What does the APIR Do?

• Receives and researches allegations of corporate
  substantial social injury
• human rights, labor, diversity, environment.
• Too unwieldy to consider all resolutions
• Develops policy recommendations
• Proxy votes for shareholder resolutions
• Engagement
• Divestment
• Recommendations presented to Trustees SCIR each
  year.

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Case Study Climate Policy

• Fall of 1998 joined as grad student member of
  APIR. Member of Environment Subcommittee.
• Subcommittee assessed whether a topic arose to
  substantial social injury deserving research
  and recommendations for action
• Reviewed resolutions on current proxy ballots
• Egregious
• Likely to reappear in future
• Likely to appear frequently
• No question that climate change met the standard.

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My Strategy

• Dont push Allow other members of the APIR
  Environment Subcommittee come to the conclusion
  that climate change was the top issue which at
  that time was not a foregone conclusion
• Do the work They suggested I lead on research on
  the topic people are happy to have students do
  the work, and it puts the pen in our hand
• Make the case I drafted the background statement
  with a great deal of emphasis on
• clear scientific consensus (IPCC)
• economic benefits of climate leadership and
  economic harms of inaction (1997 Economists
  Statement) and
• growing corporate diversification of position
  (Pew Business Environmental Leadership Council).

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My Strategy

• Develop reasonable actionable policy
• Obtain support of key third party validators
• Don Kennedy, former President of Stanford during
  South Africa divestment campaigns, respected
  environmental studies professor
• Steve Schneider, climatologist, professor and
• Walter Falcon, APIR member, director of the
  Stanford Center for Environmental Science and
  Policy.

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The Policy

• Vote in favor of shareholder resolutions that ask
  companies to take realistically actionable and
  affordable steps to address greenhouse gas
  emissions i.e.
• measuring greenhouse gas emissions
• developing ghg reduction plans
• reporting on significant climate-related actions
  by the company and
• producing regular reports assessing potential
  material impacts due to corporate climate action
  or inaction.
• Send letters of appreciation to companies who
  were leading on climate change by
• tracking and reduce emissions
• investing in, deploying cleaner, more efficient
  technologies and
• acting in accordance with the four Pew
  Principles.
• Engage companies in a dialogue regarding their
  position on climate, sent survey requesting
  information on corporate position, policies,
  methods of assessment, standards, any other
  information useful for our research.

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The Wrinkle

• While I worked within the system, outside NGO
  pressure arrived on campus.
• Ozone Action / Green Corps wanted divestment from
  companies in Global Climate Coalition
• I argued engagement, option of divestment
• Agreed to work together to get student government
  endorsement of APIR policy
• Outside pressure provided momentum and made the
  policy look like a good solution.

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Making the Case to the SCIR

• The Trustees Special Committee had to
• Adjudge whether we had made our case that
  corporate action or inaction on climate arose to
  substantial social injury
• Adjudge whether recommendations were reasonable
• Decide whether to recommend adoption of
  recommendations to full Board of Trustees

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The Verdict

• Success! Why?
• Strong background case, informed approach, and
  excellent third party validators and
• SCIR Chair, Roger Clay, experienced from South
  Africa issue, pleased to be acting on issue of
  importance after much time of inaction.
• SCIR provided excellent amendments.
• Full Board of Trustees adopted it June 9 1999.
• Roger Clay continued to play active role, signing
  letters to corporations w/ our survey.

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Now for the Hard Part, Implementation!

• First, benchmark companies climate performance
• How to compare companies, even within sectors?
• How to measure lobbying? Dollars spent, topic?
• How to measure impact of climate inaction,
  particularly with no system of GHG reporting for
  comparison?
• Developed our own system of evaluation and
  ranking based on responses to survey.
• Used EPA industry segments with highest Clean Air
  Act penalties.
• Relied on other information environmental
  compliance, sustainability, transparency.

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Corporate Performance Criteria

• Written climate policies, GHG measuring
  reporting
• Voluntary emissions tracking reductions, energy
  efficiency programs
• Compliance with environmental laws
• Voluntary adherence to respected environmental
  codes and standards (CERES)
• Proactive versus negative lobbying, PR, education
• Relevant proactive, negative affiliations, ie
  GCC or Pew BELC, industry, governmental,
  educational research and support

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Lessons Learned

• Obtain third party validators
• Gauge how best to involve campus community
• Identify process for comparing corporate
  performance and
• Establish clear follow-up mechanism to ensure
  university compliance beyond proxy voting.

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Recommendations

• Talk their talk Now use financial justification
  for climate action CERES, Marsh Insurance,
  Swiss Re, Lehman Brothers, JP Morgan Index.
• Proactive investment More feasible now to call
  for green endowment investments, and to call on
  companies to use and invest in clean energy.
• Have robust system for benchmarking Third party
  analysis, i.e. Carbon Disclosure Project.
• Ensure implementation Create a reporting
  mechanism to Trustees on implementation.
• Andif no action, then push for SRI endowment
  set-aside alumni and other donors can choose to
  split donation or direct entirely to SRI fund --
  Steve Bing at Stanford.

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Questions?

• Aimée Christensen
• Email aimee_at_christensenglobal.com