Stanford became the first college or university in the United States to issue bonds with a dual climate and sustainability designation to finance campus construction and renovation projects.
The links are rooted in the university’s commitment to standards of environmental stewardship and social responsibility over years of grassroots work to expand the university’s transition to renewable energy sources and programs to balance social equity.
The result is a vast array of initiatives aimed at addressing critical challenges – from energy management projects that put the institution on a zero emission path, to presidential initiatives that boost diversity in education and research – which are now helping to shape how campus projects can be funded.
On April 7, 2021, Stanford entered the market selling $ 375 million in public market debt to help fund or refinance various projects included in the university’s capital plan.
The securities belong to the new ESG investment category (Environment, Social and Governance). Two ESG designations were verified externally: the sustainable bond designation from the International Capital Markets Association and the even more rigorous verification of climate bonds, reflecting alignment with the Paris climate agreement. Both are based on the United Nations Sustainable Development Goals.
Increase the impact of social responsibility initiatives
Stanford President Marc Tessier-Lavigne said the bond issue underscored the university’s work to address environmental challenges and promote access and inclusion.
“This combination of bond designations is a first, not only for Stanford but for American higher education. Such a realization could only happen through our persistent and deliberate actions – in every corner of our university community – to reduce our carbon footprint and reduce social inequalities, ”said Tessier-Lavigne. “Since our founding grant, Stanford has always strived to benefit the world around us. We recognize that we must operate to the same exacting standards that we apply to research and scholarship, as we work to advance solutions to the pressing needs of our planet and our society.
Lead by example
Projects on other university campuses meeting ESG, sustainability and climate standards create investment opportunities for the emerging class of funds whose portfolios and strategies prioritize social and environmental responsibility.
Stanford bonds have also received sustainability and climate certifications – a step that state treasurer Fiona Ma says marks a new era in higher education bond funding.
“ESG funding offers the multi-faceted benefits of greenhouse gas reduction, health equity research, affordable housing, and systemic and academic equity,” said Treasurer Ma “I hope other California colleges will follow Stanford’s lead.”
Rigorous standards and external review
Like most universities, Stanford regularly issues debt as needed to fund capital projects such as buildings and campus space. These fixed income securities are repaid with interest to investors over a fixed number of years. “We wanted our ESG designation to demonstrate a more rigorous level of scrutiny than self-regulated bonds. This is why we have chosen to submit to an external review through an independent party, ”said Randy Livingston, vice president of business affairs, chief financial officer and liaison with Stanford Medicine University.
“Because we were able to meet very high standards,” Livingston said. “Stanford qualified for this emerging asset class that recognizes the university’s continued efforts in campus-wide sustainability and social responsibility.”
Kestral Verifiers conducted an independent review that determined how Stanford’s programs meet the standards required for bond designations.
“The projects Stanford will fund with the bonds clearly support the advancement of health equity, improve access to housing in an under-supplied market, and support diversity and equity goals across the University.” . They also enable Stanford’s growth while reducing GHG emissions at a rate that exceeds internationally recognized climate action targets, ”said Monica Reed, CEO of Kestral. “Stanford is exemplary in its leadership in comprehensive emission monitoring and reduction for a higher education and research institution.”
University Treasurer Karen Kearney, whose office initiated and directed the funding, said securing the designations added complexity to the process, as Stanford chose, for example, to obtain an external ESG certification. of its offer by a certified verifier. Bank of America led the underwriting team responsible for the sale. It included Wells Fargo, Morgan Stanley and Siebert, Williams, Shank & Co, a women-owned and minority-owned company based in Oakland.
“This market shift, coupled with a review of the Stanford Annual Sustainability Report, has been an unforgettable moment for me,” said Kearney. “We had been considering green bonds for some time, and now we could identify a noticeable price advantage by pairing a bond issue with Stanford’s long-standing focus on the environment, access to education and social responsibility. The search for ESG designations promised both financial benefits and the opportunity to extend Stanford’s environmental and social stewardship into the realm of finance. “
Ongoing efforts on campus
When it comes to environmental sustainability requirements, Stanford has demonstrated efforts in both buildings and infrastructure and in broader policies and plans that together accelerate the university’s transition to net gas emissions. greenhouse effect by 2050.
Among these initiatives is a new school that will focus on climate and sustainability and sustainability at Stanford, which is leading the university-wide effort to reduce environmental impact, conserve resources and lead by example in sustainability. It also administers the My Cardinal Green sustainability incentive program and provides visibility into these efforts through metric reports.
For the social responsibility designation, Stanford rated the inter-campus IDEAL (inclusion, diversity, equity, access in a learning environment) among a range of initiatives to improve diversity, equity and inclusion. . The initiatives advance affordable housing on and off campus; access to health care for marginalized populations in the United States and around the world; and increasing diversity and opportunities for medical students and healthcare professionals.
Provost Persis Drell, director of studies and director of the university’s budget, said the bond issuance shows the added value that social responsibility initiatives can create.
“Diversity is essential to advancing Stanford’s mission in a rapidly changing world. Our community is stronger when our students, faculty, staff and postdoctoral fellows reflect an inclusive society, ”said Drell, who oversees IDEAL. “This imperative requires continued commitment and investment at all levels, in the people we bring to campus, in the initiatives that support them, and in the spaces where they learn, work and live.