ESG engagement
One of OUem’s four ESG Principles is engagement. The Oxford Endowment Fund (OEF) predominantly owns investments indirectly and as such engagement activities are carried out with investment groups, rather than through voting.
At OUem, we integrate sustainability considerations into our investment process, including during due diligence and through continued evaluation of groups following an investment decision. We have a disciplined approach to the number of active relationships with investment groups in the portfolio and an exceptionally high information flow from these groups. We maintain ongoing dialogue with groups to encourage effective sustainability and climate risk awareness and management. This will be both on strategy specific risks and on systemic risks such as net zero, and annually through our ESG and sustainability letter. Engagement is also used to inform our own analysis and measurement of the portfolio’s sustainability.
During due diligence and in ongoing engagement with investment groups, we take time to understand what risks could arise on a case by case basis. These will vary depending on the strategy; however, with respect to climate risk we incorporate the following factors into our dialogue:
ESG activity is registered as part of our ongoing evaluation of groups. We also have daily alerts set up to capture and notify us of any relevant ESG news from the portfolio and underlying holdings. When recording these activities, they can include: engagement with a manager on any aspect of ESG, a new ESG positive investment made by a manager, an initiative set up by a manager, ESG policy development by a manager, or a major development in an underlying holding, whether this be ESG leadership or an issue. Individual activity or engagement can therefore vary greatly in scope and scale. Activity in these areas will vary year-on-year due to a number of factors, including the number of managers in the fund, the mix of manager strategies, the market environment, as well as general levels of activity. If an ESG activity is deemed to pose a material risk to the portfolio, we will engage with our managers to gain a better understanding of the risk and how it can be managed.
During 2023, we recorded 253 instances of ESG leadership activity and 46 ESG issues; this is in line with the four year annualised number of 216 leadership, 51 issues. As an example of activity, one of the Oxford Endowment Fund’s (OEF) Private managers became a founding member of the Venture Climate Alliance, an initiative to encourage early-stage investors to stop greenhouse-gas pollution and help the companies they fund do the same. Additionally, several OEF managers have recently achieved B-Corp status.
We continue to drive sustainability across our direct property estates. This activity includes a peatland restoration project and the completion of a sustainability report for a substantial rural land holding, with the view of rolling this out across other direct property investments. We have also engaged and provided guidance to several managers on formalising their approach to ESG in policies, across the portfolio.
The graph includes activity over 12 months to 31 December 2023 at the Fund level and within the underlying portfolio. In keeping with past data, the greenhouse gas emissions leadership bar is substantial. Contributing to this, several managers engaged with us last year on net zero planning and emissions data, alongside a number of climate positive investments in clean power, carbon data providers, and carbon capture and storage.
