As the Chief Investment Officer at Saint Paul & Minnesota Foundation, Shannon
O’Leary oversees an investment team and is responsible for important aspects of the foundation’s approximately $2 billion portfolio.
Since joining the foundation in 2019, O’Leary has implemented an investment approach that both quantifies and gives preference to sustainable, values-based investments that incorporate Environmental, Social, and Governance (ESG) and Diversity, Equity, and Inclusion (DEI) factors.
O’Leary previously spent seven years as the manager of wealth planning and investments for a large family office and served as a member of its investment committee. She began her career as an analyst at Dearborn Partners in Chicago.
Alternatives Watch asked O’Leary to share a few of her thoughts on the foundation, her investment approach, and how the current investment environment is impacting her investment outlook.
AW: What is Saint Paul & Minnesota Foundation’s raison d’etre?
O’Leary: The Saint Paul & Minnesota Foundation is a state-wide community foundation that serves all of Minnesota. We got our start in Saint Paul in 1940, and today we steward more than $1.9 billion in charitable assets for community good. Each year, together with our donors, we make more than 8,500 grants to communities across the state and nation. We also collaborate with communities in identifying, convening around, and advocating for critical issues that affect the world today. In this work, we aspire to create an equitable, just and vibrant Minnesota where all people and communities thrive.
AW: What is your and your investment team’s role and responsibilities? And what level of portfolio returns are you seeking for the foundation?
O’Leary: My job as CIO is to collaborate with the Saint Paul & Minnesota Foundation’s Investment Committee and Board of Directors to create a long-term investment strategy that allows us to fulfill our mission as an organization and ensure that the Foundation has funds to invest in community grants in perpetuity. Our goal is to create a diversified portfolio that meets or exceeds our spending policy of 5% plus inflation. I am supported by a talented team of analysts who help me put each potential investment through a rigorous due diligence process to ensure that it meets our requirements.
AW: As CIO, what is your number one priority/objective over your next fiscal year?
O’Leary: We have worked through several phases to re-align our investment assets with our revised long-term strategic allocation and to be more reflective of our mission and values as an organization. Over the next year, I am focused on moving into the third phase of the allocation shift, while working with the board and investment committee to further develop our approach to investing for both community impact and returns.
AW: Since joining Saint Paul & Minnesota Foundation you have developed a program that measures the foundation’s diversity, inclusion, and equity and its ESG impact across all assets under management. Can you succinctly describe this program and its objectives?
O’Leary: The Foundation recognizes that we need to ensure that we are not investing in structures and systems that create the problems our community partners are trying to solve. We also recognize that fund managers who have strong commitments to and are fluent in ESG & DEI generally outperform their counterparts. We created our ESG and DEI due diligence program to engage with fund managers to determine their level of commitment and capacity to make significant improvements in their ESG and DEI operations. We put our existing and potential investments through a transparent program where we assign a values-alignment score. This exercise allows us to have frank conversations with asset managers about their performance in these areas and our expectation for improvement. Once we have a benchmark, we have regular check-ins with managers to track progress. If a fund manager isn’t showing a clear commitment to improving their ESG and DEI programs over time, we will exit the relationship to pursue fund managers who are taking these topics seriously. I believe we can make a bigger impact in the institutional investment community by creating strong relationships with fund managers and working with them, rather than creating an arbitrary litmus test.
AW: What should stakeholders (and other institutions) take away from the way your team analyses ESG scoring together with your diversity survey?
O’Leary: Our data continues to show that improving ESG and DEI metrics is an excellent way to increase alpha and manage risk. At the foundation, we have been able to use our ESG and DEI due diligence evaluation as a tool that inspires change in the way institutional asset managers more intentionally integrate ESG and DEI into their management policies and procedures. We see our responsible investing process as an opportunity to generate competitive returns within the portfolio while improving the communities in which these investments operate.
AW: What has been the biggest challenge you have faced so far in your role as CIO at the Foundation?
O’Leary: The sheer number of market and community-impacting events in the past three years has been challenging: global pandemic, economic shutdowns, murder of George Floyd, social unrest, elections, inflation, broken supply chains, rising interest rates, etcetera I’ve worked hard to carve out time and space for myself and my team to process events and re-focus on what actions we can take to drive positive change, even in very dark moments or uncertain markets. Being a part of a team and an organization that inspires me is what keeps me motivated.
AW: What was the last book that you read, and how did it grab you?
O’Leary: The House of Morgan by Ron Chernow. Superbly written and well-researched (of course, it’s Chernow), and I’m a banking history super-fan so this is right up my alley. There’s something of a ceiling on the amount of excitement one can inject into a book about banking heirs, so I recommend reading this one during the day and not right before bed!
