Applied Learning and Sustainable Value Creation: The Haas SRI Fund at 10 Years
Ten years ago, the Haas Socially Responsible Investment Fund (HSRIF) was established with a visionary mission: to give students the unique opportunity to run a fund that makes investments using a social-responsibility screen. The fund was the first and is largest of its kind at the time of its launch in 2008. HSRIF is a success story both in terms of the unique learning opportunity it offers, as well as the financial return it delivers.
Founding of the Fund
After an initial investment of $250,000 from Charlie Michaels, BS ’78, the fund received front-page coverage in the Wall Street Journal. Following this donation, other committed alums (Al Johnson, BS ‘62 and MBA ‘69, and his wife Marguerite and Larry Johnson, BS ‘72, and his wife Victoria) also provided generous gifts, allowing Haas to launch the fund. In 2014, a crowd-funding campaign further bolstered the fund with an additional $250,000 in donations for student principals to manage.
“It is clear, if companies don’t pollute our environment, do treat their staff and communities well, and do have excellent corporate governance, they will prosper in the long run and generate higher returns and profit growth.”– Charles Michaels, BS ’78
Creativity and innovation were built into the foundation of the fund––starting with the founding documents: “The Fund is a mechanism to generate new ideas that will ultimately contribute to the field of Socially Responsible Investing.” Each cohort of portfolio managers dating back the past ten years has uniquely taken those values in stride. The fund evolved from a 100% concentrated equity portfolio of fewer than 20 holdings to a diversified endowment fund.
The fund’s initial structure was to place five M.B.A.s as portfolio analysts and managers. They were responsible for researching companies; making investment recommendations with the help and oversight of Haas faculty, a committee of investment professionals and Haas alumni; and then monitoring the investments. Two Berkeley haas M.F.E. students also ran quantitative modeling and analysis, looking at portfolio-optimization models.
An Outward Example of Berkeley Haas Values
Today, the fund has developed a robust curriculum of prerequisites allowing the incoming portfolio managers to explore fundamental business analysis, investment-decision making, and bridging theory and practice through applied innovation. The scope of students eligible to join the fund has expanded, reaching other parts of Berkeley campus including the Master of Development Practice program. Executives from high-profile organizations in the impact investing space have been guest lecturers, reaching from the Sustainable Accounting Standards Board (SASB), Double Bottom Line (DBL) Partners, Global Reporting Initiative (GRI), CalPERS, MSCI, and others. Keen to emulate Berkeley-Haas, other top business schools have followed the example of the fund including Wharton, Columbia, and Harvard.
Each cohort of student principals leaves its unique legacy to the fund as innovations continue year after year. In its tenth year, the HSRIF Principals wanted to ensure that the Fund continued to be a vehicle not only through which students could learn about the principles of socially responsible investing, but that would also be an outward example to the business world of the Berkeley Haas values. Learning from the journey of other leaders in ESG and fund management, the HSRIF undertook the process of clarifying the components of the Investment Beliefs that will stand as a guide for future HSRIF Principals.
Their Investment Beliefs draw directly from the values of a Berkeley Haas Leader and the four Defining Principles that are so thoroughly engrained in the students who are educated here at Haas: Beyond Yourself, Question the Status Quo, Confidence Without Attitude, and Students Always. The following descriptions of how the Defining Leadership Principles will guide the Fund going forward come from their 2017-2018 Annual Report:
- Beyond Yourself – As a fund, we commit to investing in companies that go “beyond themselves” to integrate a wider group of stakeholders into their management beliefs. (e.g. Starbucks)
- Question the Status Quo – HSRIF seeks to incorporate analysis of the environmental effect of a company’s activity as a more accurate assessment of the holding’s long-term value.
- Confidence Without Attitude – With strong governance and leaders that embody “confidence without attitude” we believe companies will not only hold themselves to more ethical standards, but also perform better financially.
- Students Always – As investors, we look for companies that are actively managing their ESG and continually looking to improve the long-term viability and impact of their company.
Along with establishing a strong SRI presence at Haas and other campuses, the fund also produces strong financial returns that contribute to Center for Responsible Business (CRB). Ten years after its founding with initial donations, the student principals have more than doubled the initial investment to +$3M, learning through experience about SRI and ESG investment strategies and practices. The HSRIF has provided almost $500,000 in cumulative support to the CRB budget, and ten years of HSRIF alumni have gone on to serve in influential investment industry roles.
“This academic year the HSRIF has well met its purpose of providing a rich, uncommon learning experience… The Principals have made impressive progress to determine how the HSRIF will be run like a professional ESG investment organization in future years. I believe that each of the Principals will finish the HSRIF course with a much better practical understanding of ESG portfolio management and the modern integration of financial and ESG analysis.”– Sam Olesky, HSRIF Co-instructor
Looking forward, the Haas Socially Responsible Investment Fund will maintain its focus on building student knowledge and responsibly managing assets on behalf of the Center for Responsible Business. Sound “sustainable investing” must first be sound investing, and a combination of practitioner and theoretical knowledge are important components to a curriculum for students in the area of sustainable finance. Now a decade into existence, the Fund has fully brought to fruition its primary goals of providing resources to the Center for Responsible Business while offering a hands-on learning experience for graduate students.
Read the 2008 through 2019 HSRIF Annual Reports at: https://redefiningbusiness.org/responsible-business/curriculum/hsrif/