Anti-ESG Movement

A new term was added to our vocabulary this year: anti-ESG. The definition of this word is clear and means opposed to ESG investing. The anti-ESG movement has occurred at the intersection of politics and investment. For example, Florida adopted a resolution barring the consideration of ESG factors in its investment management practices. Also, Texas blacklisted ten asset managers, including BlackRock, for allegedly “boycotting” the fossil fuel industry.

Recently, Senate Banking Committee Republicans released a report titled “The New Emperors: Responding to the Growing Influence of the Big Three Asset Managers,” taking direct aim at BlackRock, State Street, and Vanguard, which manage the majority of index funds and exchange-traded funds (“ETFs”). In this paper, committee Republicans argue that these three big firms use their influence to drive changes at various companies. This is problematic because the law requires that an owner company with at least a 5% stake in another company disclose any attempts to alter said company. BlackRock, State Street, and Vanguard are considered passive investors in the companies they own, so they have only been required to file abbreviated disclosures. This report questions if the big three firms are, in fact, passive investors. If they are not, the report’s authors argue they should be required to file full and complete disclosures.

The paper also claims that firms’ participation in the Net Zero Asset Manager’s Initiative (i.e., net zero emissions by 2050) supports the case that companies are active investors seeking to influence the direction in which their funds are invested. Interestingly, after this report was released, Vanguard withdrew its name from the Net Zero Asset Manager’s Initiative.

According to Piper Sandler, headline risk, not regulatory risk, is the most likely consequence of this report in the near term. I value ESG investing because these factors have a material impact on price, and I want to know about everything that materially impacts the cost of our investments. Furthermore, ESG investing facilitates the tracking and measurement of non-financial goals, a priority for The Gambrell Foundation’s portfolio. Although my personal and professional views differ from those represented in the above-summarized report, I think reading and understanding divergent perspectives is essential to strengthening our own.


NCFP hosts The National Forum on Family Philanthropy every two years. While at this year’s symposium in San Francisco, I took the advice of our wise leader to lean into topics you would normally not choose when selecting breakout sessions. As a result, I wound up sitting in a session about climate change since it is not explicitly one of The Gambrell Foundation’s strategic priorities. The following is a summary of NCFP’s climate session.

The speakers that led the discussion around climate included:

  • Armando Castellano – Trustee of Castellano Family Foundation and Board Chair of Donors of Color Network
  • Jennifer Kitt – President of Climate Leadership Initiative
  • Susan Packard Orr – Co-founder and Chairman of Arreva LLC
  • Walt Reid – Vice President for Environment and Science at the David and Lucile Packard Foundation
  • Jeff Sobrato – Development Manager of the Sobrato Organization

The goal of the Paris Agreement, a legally binding international treaty on climate change signed by 175 countries, including the U.S., is to limit global warming to 1.5 degrees Celsius. To attain this goal, we must cut carbon emissions in half by 2030, achieving net-zero or maintaining a balance between greenhouse gases produced and taken out of the atmosphere.

First, let’s understand the main sources of emissions. In 2018, greenhouse gas emissions totaled approximately 52 billion tons worldwide. Below is the breakdown of the primary contributors to greenhouse gas emissions:

  • Burning coal/gas in power plants to produce electricity and generate heat produced 25% of global emissions.
  • Deforestation contributes 24% of emissions.
  • Manufacturing of steel, cement, plastics, and oil/gas refining are particularly polluting, causing 21% of emissions.
  • Road transportation relying on fossil fuels and airplanes, ships, and trains generate 14% of emissions.

Moving forward, the path to net-zero entails multiple avenues:

  • Eliminate emissions through the use of clean energy.
  • Protect and enhance nature, which naturally removes 40% of emissions.
  • Remove existing carbon dioxide from the air using technology.
  • Ensure equity and justice, which is necessary for lasting and transformative climate change (e.g., within the U.S., only 13% of funding from 12 of the largest environmental funders went to BIPOC organizations).

The session closed by reminding us that climate transitions are economical, while the impact from future climate overheating is personal. Seems like a fitting place for family foundations to get involved and be effective.

CFA Institute: The DEI Code

Established 75 years ago, the CFA Institute (“CFAI”) is a global association of investment professionals that sets the standard for professional excellence and credentials. The organization is a champion of ethical behavior in investment markets and a respected source of knowledge in the global financial community. There are more than 180,000 CFA® charterholders spanning over 160 countries worldwide. 

Although late to the game, CFAI released The DEI Code this year, a comprehensive voluntary Code aiming to foster commitment from institutions to DEI action. This commitment will lead to greater inclusion of broader viewpoints from the best talent, ultimately leading to better investment outcomes, helping create better working environments, and generating a cycle of positive change for future generations. The DEI Code was created by a highly diverse working group comprised of investment professionals, CFAI members, and DEI practitioners via multiple iterations, including outside feedback on draft versions. 

Outlined below are the core principles of The DEI Code, which will drive greater diversity, equity, and inclusion efforts in a meaningful and measurable way:


1) Pipeline
– Raise awareness primarily among the following groups:

  • Students prior to college, catering to low-income student bodies
  • Historically Black Colleges and Universities (HBCUs)
  • Hispanic-Serving Institutions (HSIs)

– Sustained, systematic effort is the only avenue for real change

2) Talent Acquisition
– Anti-bias and cultural competency training for hiring managers, interviewers, and recruiters
– Combat the misperception that finding underrepresented candidates means lowering criteria

3) Promotion and Retention
– Ensure mentorships, sponsorships, new opportunities, and appraisal processes are equitable

4) Leadership
– To drive progress, leadership must be diverse, inclusive, accountable to stakeholders, and trained to manage and lead diverse teams at all leadership levels within the organization.
– Robust leadership development processes (e.g., understanding root causes of inequities, improving skills, and changing behavior around DEI)

5) Influence
– Motivate others in the industry to also adopt the Principles of this Code
– Regularly review all partners with respect to DEI

6) Measurement
– Provide regular reporting on DEI to leadership and CFAI
– Incorporate individual self-identification in data collection
– Complete Reporting Framework annually
– No finish line, rather an iterative, continuous improvement process that requires commitment from all

There is no cost associated with adopting The DEI Code. Any U.S. or Canadian organization may choose to become a signatory of The DEI Code. CFAI will hold those parties accountable through required annual progress report submissions and associated discussions surrounding progress achieved. As of September 7, 2022, there were 49 signatories of The DEI Code. 

Nuveen Responsible Investing Council 2022

Since 2020, I have been a member of Nuveen’s Responsible Investing Leadership Council, which brings together thought leaders in the investment industry from around the country to discuss – you guessed it – everything about responsible investing. Given the pandemic, the council’s first in-person meeting was in Chicago in June.

The meeting kicked off with an interactive session dissecting a UVA Darden Business School case study on CalPERS’ divestment of tobacco stocks in the early 2000s. Approximately 15 diverse investment professionals attended the meeting, and each member respectfully shared their unique views on whether CalPERS made the right call. I think Jon Hale, Ph.D., CFA, director of sustainability research for the Americas at Sustainalytics, succinctly summarized it best by saying, “If I divest or remove, then I’m the same or worse off.” Another council member took things a step further by sharing a hypothetical scenario to demonstrate the indirect ripple effects of divestment. For instance, if Exxon is financially impaired due to meaningful investor divestment, it’s possible the company could lay off low-income employees in emerging countries to cut expenses. Although investors intend to cause no harm, divestment ultimately contributes to inequality in this scenario.

Throughout the event, my two greatest takeaways from this gathering were:

  • A question – should the U.S. assess gross well-being as opposed to gross domestic product (“GDP”) when measuring the country’s value-added? Simply put, gross well-being expands on GDP by measuring sustainability and happiness.
  • Unlike traditional investing, responsible investing is subjective. For example, what is “green”? The definition of a green investment means something unique to each of us. The inherent subjectivity of sustainable investing necessitates continual education in this space.

As a lifelong learner, I look forward to participating in future meetings with my fellow council members as we work together to elevate the responsible investment industry.

Program Related Investments

Learn about how the Gambrell Foundation worked with the Charlotte Center for legal advocacy to help meet their mission through a Program Related Investment.


The U.S. Securities and Exchange Commission (“SEC”) is an independent agency of the federal government with the primary purpose of enforcing the law against market manipulation. Given that U.S. publicly traded companies are responsible for 40% of emissions, the SEC submitted a formal proposal on March 21, 2022, which states that publicly traded companies report greenhouse-gas emissions from their operations (Scope 1) and energy consumption (Scope 2) in their annual SEC filings. This proposed emissions disclosure would also have to be independently certified to assure accuracy, similar to an auditor’s independent verification of a company’s financial information. Furthermore, the SEC’s proposal stated that companies with material greenhouse-gas emissions would also be required to report Scope 3 emissions, which are greenhouse-gas emissions related to said companies’ suppliers and customers. Lastly, the proposal required that companies include in their annual filings their long-term risks associated with climate change and how they are addressing those concerns.

The proposal submission is the first of many steps, including feedback from the public and an actual vote, before any real-life implications would be felt. Politically, support is divided on this subject matter. The majority of Democrats support the move, whereas the bulk of Republicans oppose it on the basis that the SEC is overstepping. Additionally, this disclosure requirement is not straightforward in that data gathering is challenging, and reporting is not standardized.

As a point of reference, other countries are acting similarly:

  • The largest companies in the U.K. will submit initial climate-related risk reports next month.
  • Swiss companies will begin reporting their climate-related risks in 2024.
  • New Zealand passed corporate climate disclosure requirements last year.

Currently, 1,500 U.S. companies voluntarily disclose climate-related risk information. If the current proposal becomes law, emissions disclosure would no longer be optional and instead be an additional reporting requirement for American publicly traded companies.

How does ESG-Related News Impact Markets?

As investors, corporations, and regulators place greater importance on ESG-related matters, it’s worth understanding which ESG information has the most significant impact on markets. Attempting to address this question, George Serafeim, Charles M. Williams professor of business administration at Harvard Business School, and Aaron Yoon, assistant professor of accounting information and management at the Kellogg School of Management, conducted a study on the effect of ESG-related news on companies’ stock prices.

Enhancing prior research on ESG-related matters, Serafeim and Yoon took a systemic and technology-focused approach by utilizing natural language processing, eliminating selection bias that is present when humans subjectively analyze data. The data source for this research was FactSet TruValue Labs (“TVL”), which tracks daily ESG-related information across thousands of companies and classifies this news as positive or negative. TVL uses artificial intelligence to pull and analyze ESG news from analyst reports, media, and government regulators. Using TVL, Serafeim and Yoon’s research included 109,014 pieces of ESG-related news across 3,109 U.S. companies.

During their research, Serafeim and Yoon concluded it’s unclear whether ESG scores will predict future ESG news because investors may disregard ESG scores. Additionally, Serafeim and Yoon agree with previously published research in that negative ESG news results in adverse equity price reaction, and conversely, positive ESG news produces positive stock price movements. However, Serafeim and Yoon take it one step further, clarifying that the position stock price reaction to positive ESG news is stronger than the negative equity price movement in response to negative ESG news.

In conclusion, Serafeim and Yoon found that companies’ stock prices reacted most to ESG-related news that was unexpected, positive, and material. Furthermore, ESG news that received more coverage and related to social capital issues had a more significant impact on equity prices. For example, on the day positive news was released about product safety, equity prices correspondingly moved 1.55% on average that same day.

Sustainable Infrastructure Investment

Over the years, the foundation has evaluated several environmentally friendly infrastructure funds and has finally approved one for inclusion in its portfolio, further increasing its allocation to Values-Aligned Investments. In addition to desirable financial targets, this investment also generates and tracks its positive non-financial returns, which I’d like to highlight.

When speaking with the fund’s leadership team, they explained that impact is part of their ethos. Naturally, the fund produces a product that meets a fundamental need, like electricity, energy savings, or water, and is cleaner, more resilient, and more cost-efficient than legacy infrastructure.

The fund focuses on solar energy, creating environmental justice, and reducing inequality. For example, solar energy is a renewable alternative to environmentally unfriendly coal, and coal mines are generally found in low-income areas. In 2020, as a result of the firm’s 39 MW of solar projects, 10,274 tons of CO 2 were not emitted. Another example of environmental justice is community solar because it has no income restrictions or credit requirements, which is what has historically contributed to education and housing inequality.

In addition to the impact being at the firm’s core, the investment team qualifies and quantifies the impact generated by each investment. For example, in 2020, the firm estimated that its projects would create 650,000 job hours over their useful lives. In other words, the fund’s sustainable infrastructure investments, like a solar farm, create a variety of new jobs, such as design, engineering, construction, accounting/legal, and operations/maintenance, which combined are forecasted to total 650,000 hours of work over approximately 25 years. In essence, the fund indirectly creates job opportunities even though the fund’s primary purpose is to generate a positive financial return through renewable energy investments.

We are excited about the foundation’s new sustainable infrastructure investment, and we look forward to relaying progress updates over the coming years.

Philanthropy Southeast 2021 Annual Meeting Highlight

Each year, The Gambrell Foundation team attends the annual meeting hosted by Philanthropy Southeast, formerly Southeastern Council of Foundations. My favorite sessions are usually the investment pre-conference and plenary speakers, and this year was no exception. In my recap, I would like to feature the investment panel comprised of three Fund Evaluation Group (“FEG”) female professionals, who advised on how to incorporate Diversity, Equity, and Inclusion (“DE&I”) into an investment strategy.

To begin, the panelists asked that foundations consider their intention to increase their allocation to diverse managers? Specifically, which type of diversity are you targeting, and what does success look like to you? These thought-provoking questions forced the audience to take a step back and think strategically. To set the stage, one speaker qualified the current environment by recalling that firms owned by women and people of color only control 1.1% of the $71.4 trillion U.S. asset management industry, according to a report commissioned by the John S. and James L. Knight Foundation.

Next, the panelists recommended the following tactical approaches for foundations to consider:

Set a minimum threshold for firm ownership diversity (e.g., FEG will not add a manager to their platform unless the firm ownership consists of at least 40% people of color).
Codify goals and definitions, and document in the foundation’s investment policy statement (“IPS”).
Proactively search for diverse investment managers. For example, FEG began tracking demographic information in January 2017 and shared that the breakdown of new full- and part-time employees comprises 49% female, 15% people of color, and 36% white male as of December 2020.
Establish a baseline by assessing the foundation’s current portfolio manager DE&I compositive and compare it to a benchmark, such as the MCSI All Country World Index.
Systematically utilize the Rooney Rule, meaning anytime there is an open position, the organization would interview at least one or more diverse candidates and maintain this approach going forward.
When evaluating an emerging diverse manager, consider previous performance records with a previous reputable firm in conjunction with current performance history at a newly established firm, representing the manager’s true overall performance history and investment capability.

Finally, the panelists closed their remarks by recommending two approaches for building DE&I into the portfolio:

  1. Long-term pool approach establishes a strategic target, such as 15%, that the portfolio will seek to achieve over the long run.
  2. Total portfolio alignment overlays a DE&I strategy across the entire portfolio.

Nuveen Responsible Investing Leadership Council

Nuveen, a global asset manager, began it’s responsible investing (“RI”) journey in 1970 when clients asked them to engage on product safety and social issues. In 2020, Nuveen asked me to join their RI Leadership Council, representing an elite group of professionals identified as thought leaders who come together to share perspectives on RI developments, market opportunities, and ideas to better investor outcomes and the overall RI industry.

Recently, Nuveen hosted our second formal meeting, and the most significant takeaway for me pertained to Nuveen’s stewardship report. Given RI is a core tenant across the firm, Nuveen proactively engages with portfolio companies to enhance the RI industry as a whole. Before Nuveen evaluates a portfolio company, it considers the company’s level of maturity about its unique RI journey.

For example, a company just beginning its RI journey would primarily focus on reporting on environmental, social, and governance (“ESG”) issues. For this company, Nuveen would concentrate on evaluating this company’s transparency, or disclosure of ESG-related issues, such as climate risk.

Over time, as a company fine-tunes its ESG reporting capabilities, then Nuveen would add a layer of assessing a company’s accountability in addition to transparency. For instance, a company launches an initiative focused on its workforce demographics, demonstrating a desire to incorporate ESG into business strategy and culture.

As more time passes and a company’s ESG evolution continues, Nuveen would measure a mature ESG company’s impact in addition to this company’s transparency and accountability, as outlined above. When it comes to impact, an example would be a company that demonstrates it intentionally reduced its carbon emissions in alignment with a commitment to do so.

In summary, Nuveen’s stewardship report has three focus areas: transparency, accountability, and impact. Nuveen evaluates each portfolio company across one, two, or three categories depending on where each company currently stands on its unique ESG journey. Ultimately, Nuveen’s expectation is for all companies to move beyond disclosure to build ESG into all aspects of the business intentionally.