Supporting the future of conservation: How we manage our investments
At WWF-US, we’ve been on a journey shared by many other non-profits, religious organizations, universities, cities and states to better align our investments with our mission. We are very proud of the progress we have made and believe our results are among the best out there.
WWF-US does not invest directly in any single company. We invest in funds, like most people do in their own retirement accounts. The returns from our portfolio and scheduled distributions contribute to funding our core operations, and investments in conservation across the world. We look for managers with a great track record and try to balance our portfolio to weather economic ups and downs.
How is WWF aligning our investments with our mission?
In 2013, we committed to targeting investments that are directly aligned with our mission, including investments in funds with strategies that are focused on sustainability and the shift to renewable energy sources. And as part of our periodic investments reviews, we take a hard look at our portfolio for exposure to oil and gas, coal and tar sands.
WWF does not accept funding from the fossil fuel industry and has never had a direct investment in coal, oil and gas, or tar sands. However, when we began the journey toward better alignment, we saw that a relatively small segment of our portfolio did include investments in those activities, including through diversified funds and partnerships. We wanted to eliminate that exposure while also seeking investments that actively advance our mission.
To accomplish this, we updated our investment strategy to:
- target new funds with managers whose strategies can drive sustainable business and energy transformation,
- wind down and avoid any new funds where managers targeted oil and gas, coal and tar sands, and
- eliminate even incidental gains from oil and gas from funds through an innovative financial instrument – a “derivative for good”, the WWF Stranded Assets Swap.
We are excited about our progress to date. As of May 2018, we’ve moved over 25% of our portfolio to fund managers with strategies for bettering our planet. Our last investment contract in any funds with a fossil fuel focus was in 2010 and the illiquid legacy investments, which total 0.4% of the portfolio, will expire in the next 2 – 3 years. For our remaining legacy funds and any incidental exposure through other funds, we appropriately size our targeted swap annually to offset those amounts.
The WWF Stranded Assets Swap
The WWF Stranded Assets Swap ensures we do not financially benefit from our indirect exposure to fossil fuel investments when they increase in value. For others, it can be a hedge against the stranded assets that fossil fuel reserves create within companies.
The intellectual framework for the swap was developed by Bob Litterman, WWF Investment Committee Chair and former head of Goldman Sachs' risk-management division, who is one of the most vocal advocates for addressing climate risks through financial markets, by pricing carbon. We are particularly proud of the message that our swap has created in financial circles. Through Bob, we’ve shared the cautionary tale of stranded assets with some of the world’s leading economists, alerting them to the financial perils of long-term investments in fossil fuels. Experts have called the swap “an elegant solution” to hedging the risks of fossil fuels and driving conversations in influential publications like Bloomberg News. The Bloomberg article includes a good outline of how the swap works.
Investing for the future
WWF’s investment portfolio provides us the financial certainty that we can continue our conservation work far into the future. It’s funded by returns on our investments and through planned giving and endowments.
100% of annual contributions to WWF are spent within 18 months and none are included in our investment portfolio. Our mission is an urgent one and we utilize those funds immediately for our work.
Investments are just the start
Investments strategies do not equal conservation gains or climate action, however. We recognize our most important work includes partnering with governments, businesses, universities, NGOs and local leaders to bring conservation to a new level and accelerate the global transition to a clean energy economy. Together, we can catalyze the large-scale changes needed to protect the future of nature.