LSE’s investment portfolios
Unlike some universities with larger endowments, LSE does not invest directly in companies. Instead LSE invests in funds, across a number of asset classes which are actively managed by external Fund Managers or in passive funds which track a market index. The School’s investment adviser selects these funds to create portfolios aimed at delivering, over the long term, an average annual real return of 4.5% within agreed risk constraints and in harmony with the School’s ESG aims. These investment portfolios are formed by generous donations given to the School to support education and research.
In order to achieve the return target of 4.5% plus consumer price inflation the investment portfolio is predominantly invested in equity funds for growth. These funds represent a worldwide exposure to both large and small cap companies in developed and emerging markets. Despite this growth bias, the endowment is managed prudently so as to ensure that sufficient annual liquidity is available.
More details of the assets held in LSE’s portfolio at 31July can be found below-
Holdings at 31 July 2023
Holdings at 31 July 2022
Holdings at 31 July 2021
Holdings at 31 July 2020
Our Environmental, Social and Governance Policy
LSE adopted a new Environmental, Social and Governance (ESG) Policy in November 2022 which seeks to minimise our investment exposure to companies deriving revenues from:
- Thermal coal; mining of thermal coat (including lignite, bituminous, anthracite and steam coal)
- Tar sands; a highly energy and carbon intensive approach to oil extraction.
- Tobacco manufacture; all companies in the Global Insutry Classification Standard (GICS) tobacco industry classification
- Controversial weapons; all companies producing landmines, cluster bombs and their launch systems as identified by Morgan Stanley Capital International (MSCI).
Additionally, under the ESG policy, the School pursues an investment policy to support companies that are aligned to climate change targets and divest from those that are not. Using the Grantham Research Institute's Transition Pathway Initiative (TPI) tool, the School further divests from the worst performers (as rated by TPI) in the Oil and Gas sectors.
LSE’s ESG policy involves selecting externally managed funds that minimise indirect investments exposure in the four sectors mentioned above. Since 2016, the exposure of our investments in those areas has reduced by over 85 per cent from 3.4 per cent of total assets to 0.5 per cent in 2022-23.
Transition Pathway Initiative- Annual Analysis of portfolios
The School’s holdings at 31 July 2022 have been analysed to determine the proportion which has been rated by the Grantham Institute Transition Pathway Initiative. Those stocks which have been rated are shown below in the categories of rating as detailed on the TPI website. Overall, a total of 13% of stocks have been rated by the TPI tool (compared to 9% at July 2021).
This 13% has been further analysed below based on the TPI tool’s Management Quality (MQ) ratings and Carbon Performance (CP) ratings.
Since July 2021, we can see an increase in the portion of the portfolio that has been TPI rated due to additional stock ratings published by TPI over the year (13% at July 2022 compared to 9% at July 2021). There have been slight improvements in the TPI rated portion of the portfolio as follows-
- The portion of the portfolio given a 4* or 4 Management Quality rating increased to 52% in July 2022 (compared to 44% at July 2021)
- The portion of the portfolio that was given a level A rating in Carbon Performance (i.e. commitment made to 1.5 degrees) increased to 17% in July 2022 (compared to 4% at July 2021).
Our plans for the future
We are committed to strengthening our approach to responsible investment and continue to review our policies and consider further steps and actions we can take.
In October 2020 LSE published its new Sustainability Strategic Plan, aimed at maximising the School's impact in creating a sustainable world. Investment is one of six strategic themes, with a commitment to Making sustainability a key part of our investment decisions. Explore the Investment section of the Plan for details of our commitments and supporting initiatives.
Governance
LSE’s Investment Sub-Committee and Sustainability Leadership Board play an important role in our approach to responsible investment. Furthermore, LSE’s ESG Policy is approved by Council on the recommendation of the Finance and Estates Committee.
The Investments Sub-Committee is responsible for governing the investment of School funds and to review the School's Investment Policy and Strategy. The committee is responsible for applying the School’s Socially Responsible Investment Policy and the implementation of the Investment section of the Sustainability Strategic Plan.
The Sustainability Leadership Board is chaired by the LSE Director and is responsible for monitoring the delivery of the School’s Sustainability Strategic Plan, including its Investment theme.