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Asset Management CultureApril 16, 2021

Willis Towers Watson to Halve Carbon Emissions in OCIO Portfolios by 2030

Clients in the $166 billion discretionary business will see the firm incorporate climate-related opportunities and risks, it said.

By Sarah Min

Institutional clients in Willis Towers Watson’s $166 billion outsourced chief investment officer (OCIO) business will find carbon emissions in their portfolios halved within the next decade and reduced to net-zero by 2050.

About 385 discretionary clients globally will be affected by the strategic change. Leaders at the consulting firm said Thursday that the decision will generate additional alpha for portfolios by managing risks and enhancing returns related to climate change. (Discretionary clients give the consulting firm authority over their trades).

“We think that understanding this transition will be one of the biggest sources of alpha across all asset classes and that this alpha opportunity is likely to be greatest in the next few years,” Craig Baker, Willis’ global chief investment officer, said in a statement.

The consulting firm said the halving of emissions by 2030 will be based on a 2015 baseline, aligning with the goals of the Paris Agreement.

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Among the positive climate-related opportunities the consulting firm plans to invest more in are renewable energy holdings, including solar panels and wind farms, according to Willis’ US Delegated Investment Solutions Head Clint Cary. The consulting firm has already explored those investments in its equity and real asset portfolios.

“The projections for how energy growth will be achieved throughout the world are pointing to renewables as really the sole source of growth going forward,” Cary said. “And so we see that as a very large opportunity set for our investors to capture outsized returns.”

The consulting firm is also tilting assets toward companies with lower carbon footprints. Willis has a strong tech sector weighting in its portfolios, Cary said.

However, it will continue working with heavy carbon emitters that are improving their greenhouse gas emissions, Cary added. Examples theoretically would include energy sector companies that are working to pivot their businesses to a net-zero economy.

Ultimately, that investing discretion will lie with third-party managers that are overseeing mandates for Willis’ OCIO business. The consulting firm will work closely with them to identify risks and opportunities.

“We are looking at managers that tend to incorporate climate risk into their portfolios and outperform,” Cary said.

Willis is also reviewing physical risks in its assets related to climate change. The firm is investing heavily in climate-related analytics. In November, it bought climate change analytics firm Acclimatise. In January, it brought in-house an energy finance team from the Climate Policy Initiative, an advisory organization, of economists, analysts, and financial and energy industry professionals.

Willis will also explore transitioning portfolios to net-zero with non-discretionary clients who opt into the firm’s Carbon Journey Plan. Overall, Willis Towers Watson as of 2019 (the most recent figures available) had about $3.5 trillion in assets under advisement (AUA).

Lisa Howie Tapped as Smith College’s First CIO

Howie leaves Yale University after 12 years to lead the $2 billion women’s college endowment.

By Michael Katz

Lisa Howie

Smith College has named Lisa Howie as the first chief investment officer of its $2 billion endowment. Howie, who is currently a director at the Yale Investments Office, which manages Yale University’s $31.2 billion endowment, will start her new role at the women’s college on June 28.

Kathleen McCartney, president of Smith College, said Howie’s appointment is a major part of the college’s goal of moving its endowment’s management in-house. Smith announced in December that it would start looking for its inaugural CIO. At the time, McCartney and Smith College Board of Trustees Chair Alison Overseth said the school had “become an outlier among higher education institutions that outsource their endowment management.”

“I am thrilled to be appointed as Smith’s first chief investment officer,” Howie said in a statement. “This is a fantastic opportunity to build a team and a portfolio in service of Smith’s mission of educating and empowering women.”

Howie, who joined Yale Investments Office in 2008, has been responsible for managing Yale’s foreign public and private equity portfolios. She was also a significant part of the endowment’s recruiting and staffing efforts and diversity and inclusion initiatives. She received a bachelor of science degree in molecular biophysics and biochemistry from Yale and an Master of Business Administration from the Yale School of Management.

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Howie is also on the investment committees of the New York Public Library, the Ohio State University, and Integrated Refugee & Immigrant Services, and is on MakeHaven Inc.’s board of directors.

In her new role, Howie will report to McCartney and to the board of trustees’ investment committee. She will be responsible for building from scratch an investment team as well as an investment office.

“Her performance has been exceptional at Yale, where she has developed a great network, both globally and in the US,” McCartney said in a statement. “Importantly, she knows how to recruit and develop talented teammates, which will be one of her first tasks as she builds Smith’s investment office team.”

Howie will be taking over from Charlottesville, Virginia-based Investure, which has managed the Smith College endowment for the past 17 years. The firm also serves as the investment office for Middlebury College, Dickinson College, and the University of Tulsa, among other foundations and endowments.

“We have valued Investure’s partnership and look forward to working with them on the transition as we bring the management of the college’s endowment in-house under Lisa Howie’s leadership,” said Deborah Farrington, chair of Smith’s Investment Committee.

Yale CIO David Swensen said in a statement that “from working closely with Lisa for more than a decade, I know she will bring intelligence, dedication, compassion, hard work, and investment prowess to her efforts every day.”

Howie will work out of offices in Boston and Northampton, Massachusetts.