The Russell Family Foundation is a regional small fry among the giant pension, insurance and sovereign wealth funds in the Net-Zero Asset Owner Alliance, which represents more than $9 trillion in assets.
Russell, based in Gig Harbor, Wash., near Seattle, accounts for only about $100 million of that total.
“We can move a little bit faster,” Kathleen Simpson, CEO of the foundation, says on ImpactAlpha’s Agents of Impact podcast. That includes the use of grants, higher-risk “aspirational” investments and the foundation’s convening power. The foundation is the legacy of Jane and George Russell, who sold their investment firm – famous for the Russell 2000 index – to Northwestern Mutual Life in 1999.
“We can be doing some of the modeling that can then, for more regulated funds, smooth the path, perhaps, or be more innovative where they may not have that flexibility.”
The asset owners alliance is the biggest survivor among the industry groupings that formed back in 2019, when ambitions for climate action were high and still climbing. With many corporations and asset managers, not to mention policy makers, in retreat from their climate commitments, The Russell Family Foundation is instead strengthening its 2021 commitment to climate as its “north star.”
“We are honest that temperature rise will exceed two degrees Celsius, and that’s a clear signal that we need to keep pushing,” says Simpson. “We have decided that addressing climate as a key component of our work is really where we need to stay the course, and that now is not the time to be shifting.”
Carbon value of time
For the three years through 2027, for example, the foundation’s board has approved spending at 10% of the size of the assets, or roughly double the legal minimum. Simpson acknowledged that such a high bar does create challenges for the investment portfolio.
“But we also are thinking about, ‘What are the opportunities that we have at this moment in time?’” she says. “It’s the carbon value of time. If we invest now, versus waiting until later, will we have a better return on those dollars in terms of the climate impacts that we’re trying to have?”
The Russell Family Foundation has long been an investor in Ecotrust Forest Management, or EFM, a sustainable timber producer based in Portland, as well as Agriculture Capital Management, an investor in farmland and processing for more climate-resilient food production.
A year ago, Russell moved $19.25 million to Breckinridge Capital, Terra Alpha Investments, and Xponance to further strengthen its climate commitments. In public equities, Terra Alpha is among the first investment managers with a portfolio aligned with the Science Based Target Initiative.
In its aspirational portfolio, Russell provided $250,000 to Dirt Capital, which helps regenerative farmers in western Washington expand their land holdings and their businesses with lease-to-own and other innovative arrangements that aim to keep farmland affordable. The aspirational portfolio is managed in-house, rather than by Russell’s outsourced chief investment officer, or OCIO, AlTi Tiedemann Global.
The foundation has committed to reduce the carbon footprint of its own portfolio to “net zero” by 2035, and has been engaging its top 20 portfolio holdings on their net zero plans. It enlisted the assessment firm Carbon Direct to establish a baseline for the portfolio’s carbon intensity, and the impact monitoring firm Clarity AI to identify opportunities for improvement.
The foundation has partnered with the shareholder advocacy organization As You Sow to take a more active role in corporate stewardship, including through shareholder resolutions and elections of corporate directors. It manages such votes through Iconik, a proxy voting service that helps asset owners tailor their voting to their investment policies and mission statements.
Impact LP
Simpson doesn’t shrink from the complexities of carbon accounting and climate investing. With its strategy to help decarbonize hard-to-abate sectors, Russell has invested with Galvanize, which has targeted new approaches to steel, cement and chemical production. In some cases, that means holding companies with high greenhouse gas emissions in order to encourage them to reduce them.
“If we want to have real-world impact, we may need to be willing to have it go up for a while before it will go down, in these hard to abate sectors,” Simpson says.
The Russell Family Foundation is a founding partner of Impact LP, ImpactAlpha’s platform for asset owners for whom LP stands for “Leadership Potential.”
Simply investing in funds aligned with Russell’s mission is not enough, Simpson says.
“I want us to take a step up and think about, ‘What is the system? Who are the partners? How can we all be investing in transparency and in partnership for real solutions, versus just looking at our specific portfolio?” she says.
“And as we’re thinking about our portfolio, and the LPs that we’re working with, that we are all rowing together,” she says. That means about ensuring funds are aligned, “with not only the return targets, but the mission and the impact returns that we’re looking for.”.
