How we invest

Car y Mor

We aim to align our investments with our charitable objectives, whilst maintaining a consistent real value for the endowment over the longer term.

Our portfolio is diversified across a broad range of asset classes, geographies, investment managers and investment strategies. All of our portfolio is invested via pooled funds, which means that we invest in a large range of companies that change from day to day.

Our investment advisors, Cambridge Associates, manage the day to day running of our investment portfolio, under instruction of our Investment Committee, working with our staff.

This page summarises our guiding philosophy for how we invest. You can find more detail in our Investment Policy Statement.

Guiding philosophy

How we define investment risk

We define investment risk principally as the danger of failing to meet its prime objective i.e. to ensure consistent funding of the Esmée’s mission for decades to come (by preserving the real value after spending). It is exposed to both:

  • uncertainty - no-one knows what the best investments will be over the next 20 years; and also to
  • volatility - shorter term fluctuations in asset values.

Volatility is a threat to preserving value only if Esmée becomes a forced seller of assets at unfavourable prices.

Long-term and independent investing

We are a long-term independent investor willing, where necessary, to be different from the crowd. It is of a size (neither too big nor too small) at which it can take advantage of the additional returns and diversification available from unusual, complex or illiquid strategies; these are not available to investors with a shorter horizon or greater focus on managing short term benchmark risk.

Transparency

We are aware that our mission or our credibility may be undermined if we invest in businesses whose activities undermine our values and impact objectives. Given this, transparency is very important in identifying where conflicts may arise. We will seek to avoid narrowly focused strategies which may have meaningful exposure to such controversial areas. And we are committed to involvement in strategies with enhanced environmental, social or governance (ESG) impact.

Alignment with our funding

We are willing to engage with businesses and asset managers to align outcomes with our grant-making priorities but will avoid excess complexity or devaluing its impact by untargeted, unrealistic or numerous initiatives.

Strategic oversight

Our core expertise is in funding. Therefore we have chosen to seek external advice in the areas of endowment strategy, asset allocation, manager selection and due diligence. However, we retain final decision rights - it remains essential that we have both Trustee and Executive investment expertise in order to provide effective strategic oversight of the adviser(s). It is also important for all Trustees to have a broad understanding of the investment strategy and its implications.

Climate Change and Diversity, Equity and Inclusion

Climate change and Diversity, Equity and Inclusion are key parts of Esmée’s 2020-2027 strategy. We are interested in identifying managers who are taking action in these areas and demonstrating leadership. We support initiatives which aim to increase alignment between the investment services industry and the Paris climate change accord.

Investing sustainably

We signed the funder commitment on climate change in 2019, committing to steward our investments for a post-carbon future. We recognise climate change as a high-level risk to our investments, and therefore to our mission.

We aim to be proactive asset owners by engaging on issues that are aligned with our impact goals. We work with other foundations and investors through the Charities Responsible Investment Network and look for opportunities to promote corporate and investment behaviour which is in the interests of long term shareholders. Examples include becoming joint signatories with other investors to an initiative asking global food producers to focus on sustainability in their sourcing practices and another initiative asking corporates to commit to renewable energy sources over time.

In 2021, we committed to ensuring our investment portfolio will be net zero by 2040 at the latest. Learn more about our approach to reaching net zero and our progress so far.

Working with our advisors, we are transitioning our portfolio towards environmental, social and corporate governance (ESG) factors, and becoming a more challenging shareholder. We will not invest in new funds that are directly in conflict with our impact outcomes and will continue reporting, monitoring and challenging investment managers on their ESG performance.

The Foundation is also a signatory to the United Nations’ Principles for Responsible Investment.

Learn more about our range of approaches to sustainable investing.

Learn more

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