At Cambridge Associates, all client portfolios are constructed in a customized manner, reflecting each client’s specific objectives. Given our focus on helping our clients add long-term value to their portfolios, we recognise that material environmental, social and governance (ESG) factors can impact the performance of investments. We also recognize the importance of aligning investments with the specific values and mission goals of our clients. We therefore view environmental, social, and governance (ESG) considerations as being integral to the future of investing, for risk management, long-term value creation and alignment with values.

ESG and Responsible Investment Integration

The importance we place on ESG and Responsible Investment is reflected in our business offerings. Having been originally founded to serve mission-driven, non-profit organizations, Cambridge Associates has developed expertise here over the last several decades. We therefore offer deep specialized capabilities to help clients pursuing specific ESG and Responsible investment goals while also more broadly integrating ESG across our business offerings.  

We also acknowledge that the field continues to evolve and we aim to be at the forefront of innovation. We are committed to:

• Continuing to expand our ESG resources, with a particular focus on manager research.
• Further embedding ESG analysis across our firm-wide research platform.
• Deepening our subject matter expertise in key impact investing themes, through both thematic and manager research.
• Continuing to evolve our impact and ESG reporting. We have developed a customized approach to such reporting and will continue to upgrade this over time, particularly incorporating any best practices that emerge from the field.

 
Our ESG work is customized and reflects our core principles

Our approach to integrating ESG is not prescriptive and focusses solely on the specific needs of each client. It also reflects the core principle of the firm since its creation over 40 years ago that our interests must be aligned with those of our clients, and we have diligently adhered to that standard ever since by strictly observing the following guidelines:

• We do not accept fees from investment management firms for recommending their products to clients.
• We do not offer any off-the-shelf investment products.
• We do not have any brokerage operations or affiliations.
• We do not charge managers to participate in our databases or client searches.
• We do not allow managers to sponsor our client conferences.

As a firm we do not offer any off-the-shelf investment products. All our work is tailored to the requirements of the specific client. This includes working with clients to develop the above policies to suit their individual needs.

With regards to "Engagement policy" and "Proxy voting policy" sections above, we have no investment fund (or fund of fund) products of our own, nor do we offer engagement or voting services. With regards to these stewardship issues, given we invest through third party managers we analyse the robustness of their stewardship (voting and engagement) policies, implementation and reporting as part of our manager due diligence. For private investments, we consider how ESG initiatives are actively supported in underlying holdings.

This allows us to be completely independent when giving tailored investment advice to our clients on where they should invest. This includes ESG and RI advice. Rather, our work here involves advising clients on developing relevant policies here (e.g. around their minimum requirements from managers on engagement or voting) and then assessing the robustness of manager policies here as part of our ESG investment due diligence during manager research.

As part of our key advisory offerings on ESG/RI, we work closely with our clients on developing and implementing RI/ESG investment programs. This often includes educating stakeholders (including boards/trustees) on key issues here. We are privileged to work with many clients that are true thought leaders in the field and such work is therefore often highly collaborative. We also collaborate in partnerships and networks aiming to drive improved knowledge of ESG/RI issues more generally. Our specialists frequently speak at conferences on a broad range of topics. We also host our own dedicated ESG/RI events for our clients, including an annual Impact Investing Conference.

We also publish numerous research papers for clients and the public providing insights and guidance on key ESG/RI issues.

Recent examples include:

• A Summary of Climate Change Science for Investors (2019)
• Pathways to Sustainable Investing: Insights from Families and Peers (2019)
• Mission-Related Investing — Insights and Perspectives (2018, a deep dive on our survey into ESG and impact investing practices amongst asset owners)
• Social Equity Investing Righting Institutional Wrongs (2018)
• Gender Lens Investing: Impact Opportunities through Gender Equity (2018)
• Navigating the “Alphabet Soup” of Mission-Related Investing (2017)
• Newly Issued Guidance for UK Pension Schemes Emphasizes Need to Consider ESG Factors
• Considerations for ESG Policy Development (2017)
• The Financial Performance of Real Assets Impact Investments: Introducing the Timber, Real Estate, and Infrastructure Impact Benchmarks (2017)
• The Value of ESG Data: Early Evidence for Emerging Markets Equities (2016)
• The Foundation of Good Governance for Family Impact Investors (2016)
• Risks and Opportunities From the Changing Climate: Playbook for the Truly Long-Term Investor (2015)
• Introducing the Impact Investing Benchmark (2015)

Case Study: Recognizing the need for transparency and education in the growing field of impact investing, in 2015 we partnered with the Global Impact Investing Network (GIIN), a nonprofit field building organization for impact investing, to create the first-ever private impact investing performance benchmarks. The goal of this work was to construct the first comprehensive analysis of the financial performance of market-rate private equity and venture capital impact investing funds, while leveraging our long-time experience in creating and managing private investment benchmarks across multiple traditional asset classes. In 2017 we expanded the impact benchmark to include Real Assets Impact Investments (Timber, Real Estate, and Infrastructure). This benchmark data is made available publically, not just to our clients, in order to improve understanding of impact investment returns in the wider ESG/RI community. During 2019 we also used our granular privates investments data to make insights about the evolution of returns in the cleantech investing space.

We will incorporate ESG issues into investment analysis and decision-making processes.

We have substantial dedicated resources incorporating ESG into our investment analysis and decision making processes. This includes the Mission Related Investing Group addressing client ESG/RI investment needs and researching RI/ESG investments (approximately 1,000 ESG/RI strategies tracked). We have also systematically incorporated ESG considerations across our investment research platform for all asset classes, with further enhancements to this a major project of our investment research team in 2018 and 2019. We use a variety of ESG tools for investment analysis, for example, considering climate change we use detailed carbon and climate analytics covering emissions, scenario analysis, value at risk etc. to analyse portfolios.

We will be active owners and incorporate ESG issues into our ownership policies and practices.

Consideration of ESG issues is fully integrated in our investment research and monitoring platform. We frequently work with asset owner clients to drive better stewardship of assets and active ownership policies in the managers our clients use. We actively research and recommend investment managers who are market leading innovators in the field of active ownership and ESG. Where we have seen gaps in the market here, we frequently facilitative the creation of new ESG strategies by managers in order to best serve our client’s ESG/RI needs.

We will seek appropriate disclosure on ESG issues by the entities in which we invest (on behalf of our clients).

Our research and monitoring platform collects data on ESG issues for investment managers across asset classes and we will continue to seek more disclose on these issues going forward on behalf of our clients. We also frequently engage with managers on behalf of our clients to drive better disclose on a range of ESG issues such as voting and engagement policies and activity, ESG integration, climate risk, diversity and social and environmental impact reporting.

Our pioneering work creating the world’s first comprehensive impact investment benchmarks, to provide greater transparency on this growing field, is just one example.

We will promote acceptance and implementation of the principles within the investment industry.

Given our privileged status working with many of the leading asset owners in the field of responsible investment, we have often facilitated the creation of, and helped clients to seed, specific new products from investment managers aligned with the principles. Recent examples include an innovative fossil fuel free, low emission emerging markets equity fund, smart beta tilts to global indices incorporating new ESG data, thematic clean energy ESG funds, and socially responsible share classes in multiple hedge funds.

We have also engaged with investment managers to promote implementation of ESG. For example, we had constructive discussions on improving voting practices on climate change related resolutions during this reporting period. We also used our own ESG data collection efforts to prompt more ESG integration and better reporting from a large number of managers with whom we have strong relationships ibn 2019.

As above, we publish numerous reports promoting the principles of responsible investment, host and participate in numerous industry events, and support our signatory clients wherever possible in their own responsible investment goals.

We will work together to enhance our effectiveness in implementing the principles.

Including the UN PRI, we are members of 9 collaborative responsible investment networks. Through these strategic partnerships, Cambridge Associates works with leading signatories and practitioners to improve the industry’s effectiveness in responsible investment. In addition to being a UN PRI signatory, we are members/signatories of:

• Global Impact Investing Network (GIIN)
• Mission Investors Exchange
• US SIF
• UK SIF
• Asia Venture Philanthropy Network
• Confluence Philanthropy
• Intentional Endowments Network
• Interfaith Center on Corporate Responsibility (ICCR)
• Task Force on Climate-related Financial Disclosures TCFD

We will each report on our activities and progress towards implementing the principles.

While the UN PRI service provider framework is an important step here, we are also proactive on reporting on our activities and initiatives through industry events, our own client events, and our research publications.