TIAA Webinar on Environmental, Social, and Governance Investing Green Investing for Individuals

The Faculty Senate’s May 2020 Resolution on Individual and Institutional Responses of Faculty to the Global Climate Emergency calls upon faculty “to examine our personal retirement investment portfolios in order to align them as closely as possible with our values favoring a radical reduction in greenhouse gas emissions and new business solutions to the climate challenge.”

A simple divestment option is not yet available in the Penn retirement investment portfolio. In response, the Division of Human Resources has arranged an on-demand webinar that will help faculty interested in divesting in fossil fuel companies or in other ESG investing strategies.

Environmental, Social & Governance (“ESG”) Investing:  
Unlocking investment potential while making an enduring impact on our world

Link to view recording and access presentation materials:  https://event.on24.com/wcc/r/3611980/DCD12F759FB62AAD0E66A925B2F70EE3
(Registration required)

The presenters offer additional information, below, in response to questions received during the session (held February 25, 2022).  

1. Academics share concern that 'green' investment actually requires more active management and hence lower returns, and also does not really help the environment. Comment? We believe that responsible investing does not require sacrificing returns, whether implemented through active or passive management.  See below for a handful of studies, both internal and external, which support this view.  Furthermore, within responsible investing, ‘green’ investment can be done in a way that demonstrates direct and measurable positive environmental impact.  For example, see the Nuveen Global Fixed Income Impact Report: https://documents.nuveen.com/Documents/Nuveen/Default.aspx?uniqueId=7434b525-2e91-4c80-ad9d-8f3949cad64d

2. Why isn't natural gas listed as controversial but nuclear is? Both nuclear and, to some extent, natural gas can play a role in the low carbon transition by reducing reliance on more carbon-intensive fossil fuels like coal and oil.  However, nuclear also faces significant public health and waste management challenges, including the potential for major accidents that release harmful radiation into communities, and the lack of a safe, permanent storage solution for radioactive waste from energy generation.  For this reason, we consider nuclear energy as one of several controversial business activities subject to screening criteria in certain Nuveen and TIAA funds.

3. Can you identify some of the bases from which you have determined that ESG investing is associated with better economic performance?  The following studies and reports support the claim the consideration of ESG factors in the investment process may improve long term returns and manage risk:

• Nuveen white paper
• MSCI research: https://www.msci.com/documents/10199/19248715/Foundations-of-ESG-Investing-in-Corporate-Bonds-How-ESG-Affects-Corporate-Credit-Risk-and-Performance+(002).pdf
• Barclays research https://www.cib.barclays/our-insights/ESG-investing-yields-positive-returns-in-select-bond-markets.html
• Ocean Tomo, Ocean Tomo Intangible Asset Market Value Study, 2020
• Ponemon Institute, Intangible Assets Financial Statement Impact Comparison Report, 2019
• World Economic Forum, The Global Risks Report, 2022

4. There are "bad guy" companies that not only pollute but actively work to undermine green legislation. What sense does it make to continue to invest in bad guy companies?  While Nuveen has excluded companies from its portfolio due to ESG risks, its approach to responsible investing centers on other RI principles, such as engagement and ESG integration. We are fundamentally committed to engaging with issuers and integrating material ESG factors into investment analysis and portfolio construction. In our experience, long-term engagement and ESG integration are the most effective and appropriate means of promoting responsible behavior.
   
   Our policy of focusing on engagement and ESG integration over divestment is a matter of principle that is based on several considerations:

• Divestment would be likely to have negligible impact on portfolio holdings or the market;
• Divestment would eliminate our standing and rights as investors and foreclose further engagement;
• Engagement on their ESG policies and practices is critical to unlocking long-term potential for investments by keeping companies, issuers, tenants, farmers and operators accountable;
• ESG integration is fundamental to our being able to make more informed investment decisions and subsequently taking appropriate actions, including underweighting securities or exiting stock, when issues arise.
• For these reasons, we believe that divestment does not offer Nuveen an optimal strategy for changing the policies and practices of issuers we invest in, nor is it the best means to produce long-term value for our participants and shareholders. However, under very rare / extreme circumstances, Nuveen may consider divesting or underweighting an investment from our accounts in cases where we conclude the financial or reputational risks from an issuer’s policies or activities are so great that continued investment is no longer prudent.