Smith College endowment targets agri amid impact push

Agriculture is among a list of sectors the $1.8 billion Smith College endowment will look to increase exposure to following the adoption of recommendations by its Advisory Committee on Investor Responsibility late last month.

In a letter to students, faculty and staff, the college’s president, Kathleen McCartney, and board of trustees chairwoman, Deborah Duncan, wrote that at its meeting on October 21, the institution had approved  four recommendations put forward by the ACIR. Key among those proposals was that the endowment increase its impact investments, defined as “those intended to generate measurable social and environmental change alongside a financial return,” from $9.5 million to $30 million “over time.”

“Examples of such investments might be industries and funds focused on sustainable agriculture, renewable energy, energy efficiency, conservation, affordable and accessible services and sustainable manufacturing processes,” McCartney and Duncan wrote.

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In addition to setting the goal of increasing impact investments, the pair wrote that Smith would instruct Investure, the college’s outsourced investment office, to favor funds adhering to ESG principles, avoid future direct holdings in coal and report regularly on the progress of its socially responsible investments.

Smith College, in Northampton, Massachusetts, and Investure declined to provide more detail.

Joshua Humphreys, president and senior fellow at nonprofit research institution the Croatan Institute, told Agri Investor that as early entrants into the farmland market during the 1990s, endowments were influential in alerting investors to the potential of agriculture as an asset class.

More recently, he said, a movement among endowments to divest from fossil fuels has helped bring increased attention to ESG considerations and impact investing more broadly. The conversation about agriculture among endowments has come to focus on what is often referred to as “regenerative agriculture,” meant to include holistic agricultural practices like organic production, a focus on soil health, grass-fed livestock and others, he added.

“Those are the kind of criteria that people are imposing on it and there are fund managers rising to orient strategy around them,” he said, mentioning Farmland LP and other examples.

Performance conundrum

Because many managers pursuing regenerative agricultural practices are often investing from smaller funds than traditional competitors, it will likely take time for university endowments to be able to fully embrace them, Humphreys said. Philanthropic endowments, which often have less stringent return requirements, are more likely to play a role in helping to bring such practices into the mainstream, he argued.

Humphreys expects endowments to continue setting specific goals for increasing their impact investments, though they are more likely to be expressed as percentage targets rather than the numeric goal offered by Smith.

Smith College’s decision to stick with Investure as its consultant is notable, according to Humphreys, given that the firm is reported to have lost other endowment clients recently due to disappointment that it had not moved quickly enough in building sustainable investments as clients demanded reduced fossil fuel exposure.

“It’s interesting that Smith is trying to get them to do what others have not been able to get them to do,” he said.