& Chief Investment OfficerConcordia University
Concordia University’s Impact Investing, Governance and Innovation
Concordia University Foundation is a signatory of the UN Principles for Responsible Investment since 2018, which has made Concordia among the first universities to incorporate environmental, social and corporate governance factors into its investment decision-making. The University was also the first, among Canadian universities, to issue a sustainable bond to the capital market. Institutional Connect recently spoke with Marc Gauthier, University Treasurer and Chief Investment Officer, on impact investments, governance, innovation at both foundation and pension fund fronts.
Institutional Connect: Concordia University Foundation has set ambitious goals known as 100%-0%-10%: 100% invested in responsible investment strategies, 0% in the oil and gas sectors and 10% in impact investment by 2025. How has the journey come along?
Marc: Back in 2017, we restructured the foundation, which included implementation of responsible and impact investing policy. When the new president came in, making Concordia a leader in sustainability was a strategic goal and a core institutional value of the University. The foundation is the University’s investment arm for its operational activities; hence he committed the foundation to be 100% sustainable. This evolution of our Foundation allows us to rethink about portfolio construction, driven by sustainability objectives within the investment program as opposed to vice versa. We have since structured the sub-committee to do the review of the investment policy, in order to define and move towards 100%, and introduced the notion of a new way of portfolio construction. The discussions are thorough as not only the credibility of the current state of responsible investments is being challenged but also the concept of rethinking portfolio construction and the traditional efficient portfolio frontier framework are being introduced. However, the depth level of discussions has led to a progression and we are hopeful to have a finalized process sometime in the fall, to have new way of thinking, to define what 100% sustainability means and go that route. Essentially for me it’s about high conviction, driven by sustainability, and finding investment program that fit with it.
Institutional Connect: Concordia recently was awarded recognition for investment and governance innovation. Good governance structure and support from board are crucial in achieving the goals. How do you work with the board?
Marc: Having an efficient and effective governance process is essential to evolve as an entity. The key to the governance process is that it is a very much engaging one. Even though I introduced them (board members) a very different approach about investment, ultimately whatever you can scheme up, they must be comfortable with the approach in order to approved it. It’s really about engaging them in the whole process, which itself took 5 years to do. At the end the board owned it. What you want from governance perspective is to have the board own the strategy and process, as opposed to continuing questioning management. The governance process was revamped, rethought, currently done very much in an engaging approach. It’s a continuous process of improvement for innovation approach on investment side and governance side.
Institutional Connect: How has Concordia’s pension plan been evolving and how is that different from the approach on the foundation side?
Marc: We have shifted the pension plan’s investment philosophy from relative to an absolute investment focus in recent years. Meanwhile we are also working with pension plan to evolve responsible investing policy. That’s a much different context from the Foundation as the fund belongs to the employees. In this context, the funding and financing impact is of a significant importance that has to be considered in all of this, which adds the 3rd layer of challenge here. The portfolio construction is 100% absolute driven in the pension. The world of responsible investing is not there yet, with respect to multi-asset, multi-strategy, unconstrained dynamic strategy, private investments. We need to define a path to move towards it, alongside with the market. In the meantime, we are looking to evolve our current responsible investment policy with respect to integration, investment, insight and influence. . The key difference between the approach towards the foundation and pension fund stems from the objectives: the foundation reflects the strategic vision of the university; while the pension is about employees and the sustainability, as a whole, of the Plan.
Institutional Connect: What’s the approach you are taking on reporting and measurement?
Marc: Our end goal is to develop an integrated 3-dimensional reporting between managers, returns, sustainable objectives, and themes. There are a couple of ways going about it: the investment managers would have a huge impact in it. We also looking to use independent source, our custodian, to provide some ratings. The combination of top-down and bottom-up approaches would help us with identifying greenwashing. On the measurement side, we are building up my investment division by hiring of dedicating resource for sustainability investment that will definitely work with investment managers
Marc Gauthier spoke at Portfolio Innovation and Resilience Forum in November 2021