Endowment fund investments: responsible and sustainable orientations

To meet tomorrow’s sustainable development challenges, INRS and its Foundation have adopted responsible and sustainable investment guidelines.

Through its investment strategy, the Foundation continues to support the INRS scientific, student and graduate community, while growing its funds in an enlightened way. It does so by taking into account the environmental, social and governance factors followed by the companies in which it invests.

To find out more, consult the INRS Foundation's Endowment Fund Investment Policy (PDF) and our Frequently Asked Questions below. You can also send your questions and suggestions to fondation@inrs.ca.

The six pillars of our responsible and sustainable investment strategy 

  1. Integrating environmental, social and governance (ESG) factors into investment decisions
  2. Adherence by asset managers to the United Nations Principles for Responsible Investment and carbon neutrality objectives
  3. Membership of the Climate Action 100+ investor grouping
  4. Exclusion of companies on the Carbon Underground 200 (CU200) list from shares held directly by the Foundation
  5. Reduced carbon footprint and biodiversity impact of investment portfolio, and strategy aligned with INRS climate goals
  6. Transparent reporting to the Investment Committee, Board of Directors and INRS community

Frequently asked questions

 
What is the Foundations investment policy?

Visit the Foundation's Sustainable Investment page to learn more about our Endowment Fund Investment Policy.

The result of a balance between various imperatives linked to the realities of the Foundation, this policy is inspired by best practices in the sector. It is informed by recent research on responsible and sustainable investment. As knowledge in this area evolves, the Policy will be updated at least every three years.

 
What is the Foundations commitment to environmental, social and governance factors in its investments?

The Foundation is firmly committed to helping INRS achieve its institutional objectives in terms of sustainable development. It has developed its Endowment Investment Policy with these objectives in mind, particularly with regard to obtaining STARS certification.

In line with its commitment to responsible and sustainable investing, the Foundation has adopted the integration of factors commonly referred to as "ESG" in the evaluation of its investments, including environmental, social and corporate governance practices. This inclusive approach will enable the Foundations investments to have a more responsible scope by giving equal weight to each of these three components, and mitigating undesirable or unintended effects on all aspects of sustainable development.

 
What assets does the Foundation invest?

The Foundation is the trustee of endowment funds entrusted to it as part of its mission to support the development of INRS and the research work of its student and scientific community. A significant proportion of this work addresses ESG issues, including climate change, the effects of human activity on biodiversity, the energy transition and carbon footprint reduction.

The Foundation invests the capital of its endowment funds in long-term markets to generate income that enables it to meet its obligations and charitable objectives in a responsible and sustainable manner. Endowment capital is preserved for the benefit of future generations of students and scientists.

 
What are the Foundations objectives in managing its funds?

The Foundation aims to ensure capital sustainability and optimize returns on funds while assuming an acceptable level of risk, whether economic or environmental, social or governance (ESG).

The income generated by the endowment funds held by the Foundation provides members of the INRS student and scientific community with the means to realize their ambitions: to make the world a better place through research.

 
What measures is the Foundation taking to combat climate change in the context of its investments?

The Foundation recognizes the urgency of the climate and the biodiversity crisis, and is determined to contribute to the fight. To this end, it has set itself bold objectives, given its small size. It has put in place concrete means of achieving these objectives, and is committed to evaluating them on an annual basis.

For example, the Foundation undertakes not to directly hold any shares in companies on the Carbon Underground 200 (CU200) list. The CU200 is an index of the world's 200 largest companies exploiting fossil fuel reserves.

In the selection of its other types of investment, insofar as the criteria of capital preservation and growth are met by the products available to it, and all ESG factors are taken into account, the Foundation will give preference to investments that exclude fossil fuel investments.

The Foundation is also committed to choosing portfolio managers who are signatories to the United Nations Principles for Responsible Investment (UN PRI) and Climate Action 100+, two strict, globally recognized frameworks for decarbonizing portfolios.

The Foundation requires its portfolio managers to measure and reduce the carbon footprint of their investments. The data will be published as part of the Investment Committees annual report.

 
Who is responsible for applying the investment policy?
  • The FoundationBoard of Directors and its Investment Committee share responsibility for overseeing the implementation of, and compliance with, the Foundations Endowment Investment Policy.

    The Foundations Board of Directors is made up of thirteen individuals: three represent INRS and ten are leaders from the business and philanthropic communities, reflecting INRSs research and training sectors.

    The Investment Committee is made up of at least three voting members with significant expertise in institutional investments, as well as non-voting members drawn from the Foundation and INRSs student, faculty and administrative communities.

 
Is the integration of ESG factors sufficient to encourage companies to adopt more sustainable practices?

More and more investors are adopting an ESG grid in their decision-making. Incorporating ESG factors encourages companies to adopt more sustainable practices in a number of ways. Firstly, requiring companies to report on their ESG performance encourages them to take these factors into account in their decision-making, and to focus on long-term value creation rather than short-term gains.

On the other hand, investors can use their investment power to encourage companies to adopt more sustainable practices by favoring those with good ESG performance and avoiding those that fail to meet these criteria.

Finally, by integrating ESG factors into their risk assessment, investors can help raise companies awareness of the risks associated with climate change and other ESG issues, encouraging them to adopt more sustainable practices in order to mitigate these risks.

 
How can the Foundation be sure that companies really do respect ESG criteria?

Investors have a number of tools at their disposal to assess companies compliance with ESG criteria. Some of the most commonly used tools include ESG ratings provided by independent rating agencies, such as MSCI, Sustainalytics and FTSE Russell, as well as sustainability reports published by companies themselves.

Investors can also use ESG monitoring standards, such as the guidelines of the Task Force on Climate-related Financial Disclosure (TCFD), to assess the quality of ESG information provided by companies. The TCFD was established in 2015 by the Financial Stability Board, an international regulatory body. Since then, the TCFD has received growing support from companies, investors, regulators and governments around the world. By 2020, more than 1,500 organizations had already declared their support for the TCFDs recommendations, including over 500 companies worldwide.

 
How will the Foundation ensure that ESG principles are effectively integrated by its asset managers?

The Foundation will select managers who are signatories to the United Nations Principles for Responsible Investment (UNPRI). The UNPRI are a set of voluntary principles that guide institutional investors in taking ESG factors into account in their investment decisions.

To join the PRI, an asset manager must commit to the following six principles:

1. Integrate ESG factors into analysis and investment decisions;
2. Be transparent about ESG practices and results;
3. Encourage the adoption of ESG practices by the companies in which they invest;
4. Require companies to be transparent about ESG practices;
5. Collaborate with other investors to improve ESG practices;
6. Report on activities and progress in implementing ESG principles.

The Foundations asset managers are expected to report annually on ESG factors, with figures and benchmarks on the integration of the responsible investment policy, including the carbon and ecological footprints of portfolios.

 
What are the shortcomings of simple exclusion?

Excluding companies from the fossil fuel industry may appear to be an effective solution for tackling greenhouse gas emissions. However, it is imperfect because of the following limitations:

1. Fossil fuel companies are often vertically integrated, which means they are involved in several stages of energy production and distribution, including renewables. Consequently, it may be difficult or undesirable to exclude them altogether;
2. Divestment from fossil fuels necessarily implies that the investment will be taken over by an acquirer who does not share our decarbonization objectives and will seek to increase the productivity, profitability and sustainability of the emissions-producing investment. Thus, the result of divestment may be the very opposite of our intended objectives;
3. Divestment from fossil fuel companies can have significant social and economic consequences, particularly for these companies workers and their communities;
4. Shareholding enables institutional investors (through the voting rights attached to the shares they hold) to influence an issuers strategy to commit it to the energy transition, so a voice in favor of reducing emissions is not heard if it withdraws from this industry.

Furthermore, the simple exclusion might seem incoherent in view of the efforts made by members of the INRS community to work with companies on scientific research to support them in innovation for the energy transition, for example.

It is therefore important to find more comprehensive and sustainable solutions to combat the greenhouse gas emissions that cause climate change.

 
Why might other university foundations opt to exclude fossil fuel companies?

Thanks to the size of their holdings, many major university foundations in Quebec and elsewhere in the country have access to a wider and more varied range of financial products, enabling them to select or exclude particular issuers of securities according to a variety of criteria.

Although growing rapidly, the young INRS Foundation is not yet at this stage of development. As a result, its investment options are much more limited, and do not put this kind of exclusion within its reach.

Nevertheless, the Foundation will give preference to investments that exclude fossil fuel investments in the cases and to the extent provided for in its responsible investment policy.

 

Helping INRS make the world a better place is at the heart of the INRS Foundation’s mission. Its endowment funds, both in the way they are invested responsibly and sustainably, and in the way they are used, are a tool to provide members of the INRS student and scientific community with the means to realize their aspirations to change the world through research.

 Do you have any further questions? Write to us at fondation@inrs.ca.