Northwest School moving toward socially responsible investing

The Northwest School board president Kathleen Wareham says the independent school is teaching by example with its plans to fully transition its $10.4 million endowment to socially and environmentally responsible funds.

“It’s been an exciting conversation,” she said. “It feels 100-percent right for us to be doing what we’re doing.”

The Northwest School attempted to apply Environmental, Social, and Governance (ESG) filters to its investments several years ago through its previous financial advisor, Wareham said.

“The furthest we could get the needle to move was 30 percent,” she said, “so we decided we needed a change.”

Northwest School has turned management of its investment portfolio over to California-based Bailard Inc., an institutional asset management firm with experience in ESG filtering, which will ensure the Capitol Hill private school isn’t investing in harmful industries and companies. The school wants to complete the transition by the end of the third quarter of 2018.

“I think that the Northwest School was able to identify the issues that they care about, was able to identify the values that they care about in the portfolio,” said Bailard senior vice president Blaine Townsend.

That includes avoiding investing in fossil fuels, alcohol, tobacco, gaming, weapons, nuclear energy and adult entertainment.

Wareham said the Northwest School also wants to ensure the companies in its investment portfolio promote a healthy environment for their workers when it comes to equity and human rights. That includes companies with no women on their boards; she says they’re looking for companies with at least three.

Townsend said colleges and universities have faced a lot of pressure to divest from fossil fuel investments since 2012, and more firms are offering ESG-filtered management now due to a push by engaged millennials.

The Northwest School reports it is among the first independent schools to move toward 100-percent socially responsible investing, the practice not yet common among middle and high school institutions.

“I don’t think it made it harder,” Wareham said. “This school is filled with mission-driven people.”

Beyond a “cursory avoidance screen” that would tap the obvious companies to avoid, Bailard also conducts in-house social research and uses a proprietary model to score companies on everything from corporate governance to environmental performance, Townsend said.

It is critical for The Northwest School to not only switch to sustainable, socially responsible impact investing, but also to make sure it isn’t negatively affecting its returns. Ninety percent of the endowment goes toward financial aid funding, Wareham said.

Townsend said using ESG filters can reduce risks in the long-term. With fossil fuels, the opinion regarding carbon emissions can make investing in an oil company risky for the future value of assets, he said.

“And if that carbon never gets out of the ground, you’re probably paying more for that oil company,” Townsend said.

Companies that pay attention to environmental performance and fostering a safe and inclusive workplace also tend to experience fewer fines and lawsuits, he said, and also see efficiency savings.

“If you pay attention to those things from the long-term, your portfolio should be higher quality,” Townsend said.

Wareham said Bailard will also be educating students, parents and the rest of the Northwest School community about its investment strategies.

“I personally know that The Northwest School walks its talk,” she said.