Type: Aligned Investments
Topic: Clean Transportation, Energy Efficiency
Status: Current
This non-US developed market growth portfolio reflects Baillie Gifford’s assertion that it is “not in the business of rehabilitating the bad or the average, choosing instead to invest great effort identifying the extraordinary.”
Investment
$60 million; originated in 2010
Rationale
Since we first invested in this fund, Baillie Gifford has embedded evaluation of environmental, social and governance (ESG) risks and opportunities across its investment process and now has a team of 13 focusing on governance and sustainability. In 2017, we recognized that this manager was thoughtful about nontraditional business risks and aligned with McKnight’s mission.
Benchmark
MSCI EAFE
Returns
Financial Returns: Excellent risk-adjusted returns; portfolio of $97 million as of Q2: 2018.
Social & Environmental Impact: Baillie Gifford emphasizes close contact with company management, coupling active proxy voting with dialogue about social and environmental issues. Topics include the electrification of transportation with car companies, the energy efficiency of products with industrial companies and more. This portfolio has avoided oil and gas companies since 2013, and its companies emit far less greenhouse gases per dollar of sales than companies in the benchmark.
Lessons Learned
An ESG process yields different results for different fund managers. We may scratch our heads over specific stock names that are not aligned with McKnight’s particular priorities, like Ferrari. However, as an investor in public equities, we want managers who understand the complexities of sustainability. Recently the fund sold Aggrekko, a company that manufactured temporary generators (which are often polluting diesel), and added Umicore whose core business is recycling metals and electrification of equipment. The diversity of thought in ESG produces diverse investments, which is good for our endowment.
Disclaimer of Endorsement: The McKnight Foundation does not endorse or recommend any commercial products, processes, or service providers.
Last updated 3/2020