Dear King’s Community,
On July 11, 2024, I wrote to you about our compliance with King’s Statement of Responsible Investment Policy and Goals (SRIPG). As a reminder, the policy, approved by the Board of Governors in 2021, states that the university “will play an active role in ensuring our managers divest entirely of investments in companies and industries that clearly do not align with the ethical principles and values of the university, such as weapons manufacturing and tobacco/vaping producers.” It is also important to note that the policy commits King’s to following an Environment, Society and Governance (ESG) approach to investing as outlined in the Principles of Responsible Investment of the United Nations.
When I wrote in July of last year, the published list of all the companies in which King’s was invested included companies doing business in weapons manufacturing. The investment represented 0.75%, or $320,938, of total holdings. I wrote that the percentage of holdings in weapons manufacturing was such a small percentage of overall holdings “because the Responsible Investment Policy was being followed.” Nonetheless, I advised that the university would be selling the holdings in weapons manufacturing to reduce investment in weapons manufacturing to zero. To do this, for reasons explained below, the university had to sell not only the 0.75% of holdings in weapons manufacturing but the university’s holding in the larger investment fund (a commingled fund) that included the shares of those companies that did business in that sector.
In compliance with the SRIPG, today we released a complete listing of all the companies in which King’s was invested as of March 31, 2025. The listing indicates that our overall holdings once again include a small percentage of holdings in business activities that the SRIPG says King’s will not invest in. I am therefore taking this opportunity to provide the following information and explanation.
Since July of 2024, the King’s Investment Committee has been giving careful consideration to the implementation of SRIPG. I thank the Committee for its seriousness and diligence in carrying out this important work.
I recently received a letter from the Chair of the Committee, Stuart Pattillo, explaining the conclusions the committee has reached. This letter was reviewed by the Board of Governors at its meeting on June 26, 2025.
In summary, the committee has determined that it is not advisable for King’s to continue to follow the approach that was taken in 2024, of selling entire holdings in commingled funds if they include a specific company that does business, even a small percentage of business, in lines of business that do not align with SRIPG. The reason is that this could disproportionally harm investment returns and the ability of the university to honour donor intentions by using the income from the principal of donations to fund the purposes for which money has been donated, including scholarships, bursaries and many other purposes that go directly to the student experience.
In the attached letter, Mr. Pattillo explains the committee’s conclusion that, given constraints owing to the size of King’s portfolio, it can only achieve the broader goals of the King’s investment policy, which is to grow the value of the university’s investments, by investing in commingled funds, chosen by the university’s investment manager, TD Asset Management. Such funds include securities of a mix of frequently changing companies. This approach provides King’s with, in the words of Mr. Pattillo and the committee, “the most secure and defensive way for the university to protect and grow the endowment with the most efficiency at the lowest cost.” It is an approach which has resulted in approximately $10 million in endowment growth since the SRIPG was adopted, while the investment in oil and gas, for example, has been significantly reduced.
The commingled funds approach means that, from time to time, investments will be made in companies that King’s has clearly said it does not want to invest in, despite the best efforts of the committee and the university’s investment manager to prevent that from happening. When this occurs, the only way divestment can immediately happen is to divest from the entirety of the commingled fund, which is otherwise in compliance with the SRIPG and balances risk and returns. Selling an entire commingled fund can result in significant negative consequences for the endowment, including immediate losses and the curtailing of the investment options that are then available for the ongoing management of the endowment.
In consequence, it is the view of the committee, as stated in Mr. Pattillo’s letter, that it “is limited to requesting the manager to select commingled funds that are in line with the SRIPG, but with the realistic expectation that not every single holding within each commingled fund will align with all our community members’ approach or definition of Responsible Investing.”
The committee’s further commitment is to continue to monitor the investment manager on how it is evaluating commingled companies and the companies they include through an ESG lens. As stated in Mr. Pattillo’s letter, the committee will be guided in this ongoing process by the statement in the SRIPG that engagement is in most situations a superior approach to divestment in effecting changes on ESG.
Mr. Pattillo’s letter was received by the Board of Governors with the deference the board typically accords to the Investment Committee, in recognition of its specialized expertise. As a member of the board and an ex-officio member of the Investment Committee, my responsibility is also to defer to the expertise of the committee. I know the committee has arrived at its recommended approach after careful deliberation and serious discussion of how to accommodate the goals of the SRIPG with those of the larger investment policy, which requires the committee to ensure investment managers of the endowment preserve and enhance the endowment with prudent investment strategies to both protect principal and grow income.
Therefore, like the committee, my emphasis going forward will be to work with the committee to ensure that the investment manager selects commingled funds that are in line with SRIPG to the full extent possible, including to ensure our investment strategies advance the university’s comprehensive investment goals. My goal will be to see that we maintain a very low percentage of holdings that are contrary to the letter and spirit of the SRIPG. While remaining deeply committed to the SRIPG, that I with many others pushed for, I agree with the committee that it was not the intent to put the university’s goal of increasing the overall value of our endowment in jeopardy.
Our shared desire to achieve full compliance with the responsible investment objectives of SRIPG must be integrated with the fiduciary responsibility of King’s to invest donated money to achieve optimal returns for the benefit of the university and its students, while complying with specified donor wishes. I have confidence that both our Investment Committee and our manager will be vigilant in keeping investments in categories not aligned with the SRIPG to as close to zero as possible, while staying focused on the larger objective of aligning our overall investment management with ESG principles and objectives.
Sincerely,
William Lahey
President and Vice-Chancellor
