Yale University’s hired money managers, facing a climate-change investment challenge, went to an old playbook.
They invoked a tried-and-true criterion — risk. Creatively.
Rather than selling stocks in companies perceived to contribute to climate change, as did other schools — or thoughtfully maintaining such holdings — Yale decided on a “third way”. The university asked firms managing its $20.8 billion endowment to avoid stocks that didn’t show evidence of commitment to reducing greenhouse gasses.
Rationale: Investments should now give considerable weight to the financial risks of climate change, especially if governments impose carbon taxes. Since implementing this investment policy — based on how each energy position in its portfolio would likely be affected by stringent emissions regulations — the endowment has sold several stocks related to this risk assessment and demurred on taking a position in another.
Call it enviro/eco hedging.
Largely as a response to student protests, it may well be studied by other schools facing similar challenges.