Smith College Investment Club’s Commitment to Sustainable Investing
The Smith College Investment Club (SCIC) has a twofold mission: to provide its members with a unique educational opportunity for hands-on experience with investment management, and to make a positive financial contribution to the Smith community. SCIC student members are responsible for managing and investing an endowment portfolio of over $200,000.
Club members meet on a regular basis to discuss asset allocation, analyze fund performance and decide how to successfully manage a well-diversified portfolio. Weekly workshops and sector-specific training for new members allows students to hone their valuation skills, while bi-monthly stock pitches provide a space for those practical skills to be tested. 80% of quarterly dividends are donated to Smith College Financial Aid (75%) and the Student Government Association (25%) for campus-wide activities. SCIC has been managing Smith's only undergraduate real money investment portfolio consistently for the past 12 years.
In a post-financial crisis world, the resources and guidance SCIC provides its members have never been more important. SCIC aims to continue their prudent management and foster a dedicated membership in the years to come, while providing access to career opportunities in the investment industry. Through its partnership with the Conway Center, SCIC allows students interested in challenging themselves to enrich their financial education while enrolled at Smith.
One of the most recent trends in the world of investments has been a focus on sustainable investing – or investment focus that considers ESG (Environmental, Social, Governance) factors as part of its valuation process. According to Harvard Business School – in the long run, high sustainability companies not only outperform low sustainability companies both in terms of accounting and stock value but also have less volatility. Both investment analysts and SCIC members see the value in socially responsible investing, which is why SCIC has its own sector devoted to ESG Investments.
In December, we sat down with Dayln Gillentine ’21 who is the ESG sector head. Here’s what she had to say about SCIC’s commitment to sustainable investing, recent investments made, and the future of his sector of SCIC’s portfolio.
CIEC: What's the goal/purpose of the Investment Club's (IC) Sustainability Sector? Around how much of IC's portfolio consists of sustainable investments?
Gillentine: The goal of SCIC's (Smith College Investment Club's) Sustainability sector is to use investment funds to support sustainable companies working to better society. This method of investing promotes ideals such as
environmental conservation and protection
social benefits such as equal pay, diverse employment, and good worker benefits
governmental standards including having an open policy concerning strong corporate governance and a more impartial board of directors.
As such, sustainable investing is also called ESG, or Environmental, Social, and Governmental Investing. This sector of the club manages a separate portfolio initially funded with $100,000 allocated by the Vice President of Finance, on the advice of the Smith Study Group on Climate Change. To date, we have invested approximately $30,000 of this separate $100,000 fund and pitched a fourth investment this semester.
CIEC: What are the most recent investments your sector made?
Gillentine: Last spring, through the SCIC Pitch Competition, we invested in United Postal Service (UPS), Tetra Tech, and Xylem. We currently own $10,000 in stocks for each of those companies. This Fall (2018), based on research conducted by the sustainability sector, we pitched JP Morgan as the next sustainability focused investment. Not only does JP Morgan have limited environmental impact, but they also promote good social and governmental standards within their company as well as being a pioneer in sustainable investing.
CIEC: How do you evaluate your investments?
Gillentine: We evaluate our investments in two primary ways. The first way is through monetary statistics, such as their stock price over time, the growth of the company, and valuations such as the price-per-earning, or PE Ratio. This also includes analysis of the companies strengths and weaknesses and comparisons to their competitors. The second way that we evaluate our investments is specific to the sustainability sector. We also evaluate their environmental impact, social initiatives, employee treatment, and independence of the board. Many companies now release yearly overviews of their sustainable initiatives and achievements, and we use these to judge how sustainable a company is.
Using both of these standards and methods helps ensure that our investments are financially sound and supporting sustainable ideas.
But investing is sometimes up to chance, so we’ll continue to monitor the investments and company to determine whether we’ve made a good decision. This ongoing monitoring allows us to evaluate all of the standards and data we reasonably can, in the hopes that the company continues to grow and allows our fund to increase. However, if for some reason, the investment turns out to be a poor one, we can decide to sell the assets hurting our portfolio. Right now, the main goal is to fully invest the cash on hand in assets that lead to a well-diversified ESG portfolio. That takes priority over selling any of the stocks we currently own.