February 20, 2020
To: The Yale Community
From: David F. Swensen, Chief Investment Officer
Climate change poses a grave threat to human existence and society must transition to cleaner energy sources. This is a formidable task that requires swift and dramatic action on a global scale. The solution involves a combination of government policy, technological innovation and changes in individual behavior.
- 2014 Letter on Climate Change
- 2016 Update on Climate Change
- New York Times Article on 2014 Letter
- New York Times Article on 2016 Update
- ACIR Homepage
- 2014 CCIR Statement
- Social Responsibility — Yale Investments Office
As a premier research institution, Yale will have its greatest impact by doing what it does best: research, scholarship and education. With respect to its substantial operations, the University is committed to reduce its own carbon footprint and to encourage environmental stewardship among the tens of thousands of individuals within its community.
Yale’s Endowment provides critical support for all of the University’s endeavors. In fact, well more than half of the budget for the Faculty of Arts and Sciences comes from Endowment distributions. Prudent stewardship of the Endowment underpins substantial, stable financial support both for today’s scholars and for generations of scholars to come.
In 2014, I wrote to Yale’s active external investment managers, outlining Yale’s investment policy regarding climate change. In 2016, I updated the Yale community on the impact of Yale’s policies. Today, I am writing to provide a further update.
Yale’s Role as an Institutional Investor
In 2014, the Yale Investments Office developed a plan to address climate change risks in the Endowment portfolio. The plan has been implemented through Yale’s external managers, who collectively are responsible for managing nearly all of the University’s Endowment assets. Engagement with Yale’s managers is a powerful tool through which the University influences the character of the Endowment. Yale’s managers make critical decisions about what investments are selected for Yale’s portfolio and what issues are raised with company management teams. Given the nature of Yale’s investment strategy, direct dialogue with its managers is the most effective means of addressing climate change risks in the portfolio. 
Yale’s investment policy regarding climate change asks that external managers:
- the greenhouse gas (GHG) footprint of prospective investments
- the direct costs of the consequences of climate change on expected returns
- the financial costs of policies (such as a carbon tax) aimed at reducing GHG emissions on expected returns
Discuss with company managements:
- the financial risks of climate change
- the financial implications of prospective, well-crafted government policies to reduce GHG emissions
Encourage company managements:
- to mitigate financial risks and increase financial returns by reducing GHG emissions
- companies that refuse to acknowledge the social and financial costs of climate change and that fail to take economically sensible steps to reduce GHG emissions
Members of my staff speak with each manager about Yale’s policies and how they apply to the manager’s portfolio. This process communicates Yale’s position in a clear and consistent manner and gives Yale and the manager an opportunity to discuss the principles underpinning Yale’s policies. Investments Office staff regularly engage managers regarding the risks associated with climate change.
- Swensen reaffirms climate change as a guiding factor in investment policy | YaleNews
- Firing Line Debate: Do Fossil Fuel Divestments Work for Universities?