The IMS Board of Directors recently decided to move the IMS endowment fully into environmental, social, and governance, or ESG, funds. Here, board Vice President and Finance Committee member Salma Abdulla speaks with IMS Staff Writer Raquel Baetz about why the board decided to make this change.
Please explain what ESG funds are and how they work.
ESG investing stands for “environmental, social, and governance” investing. Traditionally, endowments have had the broad capability to invest in any kinds of stocks or bonds. IMS, for instance, has focused on index investing to diversify. However, one of the drawbacks to index investing for organizations with specific focuses is that you are investing in a large portfolio, and anything can be in it. Most people are familiar with the Dow or the S&P 500 as an index, and these are what IMS was using. When you do that though, you don’t get to choose what is in your portfolio, which can end up including stocks and bonds of oil companies, tobacco companies, firearm manufacturers, etc.
Now, investors have started to ask that certain types of corporate practices be excluded. This is how ESG index investing came about. These are indexes that are diversified but take into consideration environmental, social, and governance ideas to align what an organization is doing in terms of its investments with certain core principles.
Environmental components would include carbon emissions, water usage, and deforestation, while social considerations would include equitable pay, fair labor practices, and customer satisfaction. And then governance issues are diversity of board members, political contributions, executive pay, lobbying, etc.
This shift is not only altruistic. There’s research now that shows that if a company has, for example, only white men on its board, they’re not going to make decisions as well as they would if they had a broader point of view. So including people from different industries, and different backgrounds, is beneficial to the performance of the organization. And that is why ESG investing makes good sense.
Why was the decision made to move the IMS endowment into ESG funds?
For the past several years, there has been more interest in aligning the mission and values of IMS with how its endowment is being managed. Part of the Buddhist principles include the idea that we do no harm and that we are ultimately connected to all beings and to the environment, so we need to look out for other people, treat them right, treat them respectfully, and do the same for the environment. When we think about that as one of the core principles of this organization, we can’t be doing one thing with the organization and another with the endowment, e.g., investing in a tobacco company or a company that does not allow women on its board or isn’t engaged in equitable pay practices.
Over the past few years, we’ve been exploring how we can responsibly move the endowment towards an ESG framework. We’ve been able to make that happen because there’s a lot more interest in the financial industry about this, so it’s easier than ever to invest this way. Vanguard, IMS’s financial advisor, is now able to support a 100% ESG strategy. Prior to this year, IMS had been partially invested in ESG funds, but not 100%. Now we’re moving to a 100% ESG investment strategy for the endowment.
How does this move align with IMS’s values as an organization?
IMS’s mission is to promote the values that we hold so dear to our hearts. Our job is to bring these values out into the world. How do we do that? We need our endowment to fund the organization. It provides some annual support to this organization. With this shift, the way that we earn money in our endowment will more fully align with what the organization is trying to put forth into the world.
How does this move show our donors that we’ve accomplished this?
Donors want to support organizations that share their values. That’s why they’re there. That’s why they want to give to IMS. This move aligns our donors’ values with the organization’s values. It puts the ducks in a row, making it easier for someone to give because they know where their money is going and how it’s being used.
This is why it is important to go 100% ESG because it allows IMS’s values to be in harmony with its investing. It shows we are living our values—putting them into practice.
Is there anything else that’s important for a donor to know?
It can be difficult to talk about money within a Buddhist organization, but the IMS endowment must make money to help sustain and grow the organization. We need to grow the endowment so the organization can continue to do its work, but we want to grow in accordance with our principles. And now, we are growing in alignment with what we hold dear as donors, employees, teachers, and board members.
