Nurturing Well-Being Through Sustainable Investing

Nancy Klavans is hardly a newcomer to the idea of backing projects that improve the lives of others. Since 1991 the Germeshausen Foundation created by Nancy’s parents, Polly and Ken Germeshausen, has made innovative grants linking different fields including education, the arts, sustainability, religion and peace- building.

In 2001, Nancy* decided to bring the same focus to the foundation’s investment portfolio. Only a few of the investments were aligned with environmental stewardship and other value-based goals. As her investment counselors, we started by helping the Klavans use screening to curtail their investments in companies tied to fossil fuels, gambling and weapons production. With our guidance they also invested in a group of strategies that use environmental, social and governance research to identify companies that could outperform over the long-term, or what we call sustainable alpha.

Nancy and her family decided to go further by backing innovative, forward-looking leaders who are willing to take risks as they strive to build a stronger sense of community and improve people’s lives. The foundation’s investment return is focused on advancing many of the same philanthropic goals as its grant making. For example, some initiatives are impact investments targeting early-stage companies, including the use of advanced technology and distribution systems to build a supply chain for localized food production.

To date, the Klavans have aligned more than 85% of their portfolio to sustainable investing and nearly 100% is fossil-fuel free. While deploying their assets to benefit the environment and society, the family has not compromised on returns. Since January 2014, their foundation’s portfolio has outperformed the 4.7% average annual gain by its benchmark of bonds and stocks. The Klavans show the success possible when a family takes a step-by-step approach to putting their investments and grant making on parallel tracks.

*We are grateful to the Klavans for allowing us to share their journey in sustainability.

Unity Through Sustainability

We have found that leaders of an institution grow closer together as they work to align their investment decisions with their organization’s values. Through detailed give and take, they clarify their core objectives and achieve stronger unity around common goals.

For example, we advise an agency that is devoted to creating jobs and protecting the environment by expanding the use of renewable energy. During an eight month period, we helped its investment committee draw up a policy statement fully synchronizing the organization’s mission and portfolio holdings.

Committee members tackled some tough questions. Should the institution hold stock in companies with fossil fuel reserves? Should the endowment reject mutual funds with any exposure to the fossil fuel industry? After several extended discussions, the committee decided against holding shares in the fossil fuel sector and limited its holdings to mutual funds with no more than 10% exposure to the industry.

Today, the institution’s diversified portfolio includes equities and fixed income, and we are helping to identify sustainable investments outside the U.S., including in emerging markets.

By clarifying its goals and rallying behind a long-term plan for a sustainable portfolio, the institution set some of the essential building blocks for successful investing.



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