I am pleased to be able to update the parish that we have incorporated Environmental, Social and Governance (ESG) principles into the portfolios managed on behalf of Epiphany Parish by Garde Management.
By way of background, last year, an ESG policy committee was formed at the request of The Rev. Doyt Conn and Ed Emerson. The purpose of the Committee was “to help Epiphany develop our ESG policy”. The members comprised Desmond Conn, Katie Ewing, Margie Kates, Chris Rodde and Vernon Barback (Chair). After several meetings (mostly virtual, but the last in person) and after taking input and advice from Garde Capital, the Committee made a recommendation to incorporate ESG principles into the portfolios managed by Garde while continuing to maintain a highly diversified portfolio and similar asset allocation to what we had before. The goal of this change is to maintain similar financial outcomes over time while moving the underlying holding to be more aligned with some of Epiphany’s core values:
- Epiphany is inclusive – there is a place for everyone at Epiphany.
- God loves everybody equally.
- Love Thy Neighbor.
- Social justice for everyone.
- Racial reconciliation.
- Care for the environment.
A couple of months ago, the ESG Committee made a formal recommendation to the Finance Committee to implement this change. The Finance Committee endorsed the recommendation with the proviso that the recommendation be revisited annually since it is anticipated that there may be the potential to further refine the management of the portfolio in line with these values (and at lower costs) as the market evolves further. Subsequently, Vernon Barback and I presented the recommendations to the Vestry who approved them and authorized me to instruct Garde to implement the changes, which has now been done.
For those with a more detailed interest in the details of this change, Garde has advised that:
- Expected future volatility/risk will be similar to the previous portfolios.
- Expected future return is similar to the prior portfolios.
- The ESG quality score of the portfolios is now materially higher than the score of the prior portfolios. (The money weighted percentile rank as measured by MSCI improved from about 52% previously to about 84% after the transition).
- Expense ratio is 12 basis points higher for the portfolios now as compared to before. (This is an increase in the expense ratio of the funds, there is no change in Garde’s fee).
- The transaction cost to dispose of the existing holdings and to move to the new holding set was de minimus.
I am delighted to be able to share this change with you. Our goal is to be good stewards of the treasures entrusted to us by the Parish. The intent of the change is to ensure that we continue to be good financial stewards while also ensuring that those monies are invested in ways that are also more aligned to some of our core values. I would like to thank all the Committee members for their work in enabling this, and in particular Vernon for his leading that effort.