At the School of Management, students will not just count dollars and cents. They will also look at carbon dioxide, methane and nitrous oxide emissions.
In response to growing pressure to reduce the carbon footprint of University endowments, the Yale School of Management (SOM) will host a competition next month that challenges participants to make environmentally responsible investing more attractive.
The first symposium of its kind, the National Low Carbon Case Competition — slated to occur in mid-November — seeks to develop investment policies for corporations and academic institutions that account for social harms. The joint effort between the Yale Responsible Investing Group and the International Center for Finance at the SOM invites MBA and other degree candidates nationwide to enter in teams for a $10,000 grand prize. Students and organizers interviewed said the competition could determine how institutional investors engage in socially responsible investment strategies.
“We decided to come together because there was a lot of press about the pressure to divest at Yale,” said Gavin Fernandes SOM ’15, communications director for YRIG. “[The competition] is about trying to figure out what’s best when it comes to having a low-carbon portfolio. Investment managers are asking, ‘Am I investing in anything unethical that will harm the environment in the future?’ and that’s where our competition comes in.”
In any case competition, participants work to find the best solution to a business or education-related case study — an analysis of a person, group or event — within a specific time frame. In this instance, teams will form strategies that allow an institutional investor to address global warming while also having a profitable stock portfolio. Teams of graduate students studying business and the environment will have six weeks to create a plan, and finalists will give presentations before a panel of judges on Nov. 14.
Specifically, teams will create portfolios for a fictional university whose assets are based on one of the clients of the nonprofit investment firm, Commonfund, which today manages nearly $25 billion for endowments, foundations and pension funds. Each four-person group must be made up of at least two MBA candidates.
Co-director of the competition Logan Yonavjak SOM ’16 FES ’16 said that though the students will work to take high-carbon assets out of their portfolios, the contest also encourages them to think about how to then reinvest those funds.
“Where does the capital go if it’s not going to high-carbon industries of sectors?” Yonavjak said. “[The competition] is both about divestment and also reinvestment. We’re trying to get away from this conversation just about divestment.”
Fernandes said that the goal is to have 12-15 teams enter. Registered teams will receive case materials at the end of October, and four finalist teams will be announced on Nov. 5. Bob Litterman, former head of risk management for Goldman Sachs, will be leading the panel that evaluates the finalists.
Jaan Elias, SOM’s director of case study research, said that there are a few main ways of reducing a portfolio’s carbon footprint. For example, teams could opt to remove all coal and oil companies from their portfolios, or choose to invest in more renewable energy technologies and solar power.
Elias said that the competition is the perfect merger between a hot social topic and investment strategies.
“[The competition] really stretches your ability to analyze,” Elias said. “If there were an easy, no-brainer solution, it wouldn’t be an interesting case, but because of its twist and turns it makes a great case study.”
John Griswold, executive director of Commonfund, put the competition in a broader context, saying that there is growing awareness about sustainability and how it relates to the ethical impacts of investments.
He added, though, that the issue of environmentally conscious investing is highly complex.
“It’s got political factors as well as an economic aspect to it,” Griswold said. “Our interest from Commonfund’s perspective is to support good research in this area so that we all benefit.”
Early registration for the competition ends on Oct. 6.