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Ethical Investment

UCL’s Investment Policy

The investment of funds is controlled by UCL’s Investments Committee, which appoints investment managers. The Committee normally meets four times a year and reports through Finance Committee to Council, UCL’s governing body. The investment managers are required to attend meetings of the Investments Committee. Income returns are agreed each year and are monitored by the Investments Committee. The Investments Committee decides on the broad proportions of funds to be invested in bonds, UK equities, overseas equities and cash. The investment policy objective is to obtain at least the minimum returns set by the Investments Committee, having regard to market benchmarks, for the forthcoming year and also to maintain the value of the portfolio in real terms so far as practical. Policy text can be found here.

UCL’s Socially Responsible Investment Policy

To ensure that UCL’s investments match our founding principles of addressing world problems and instilling ethical values, the University has adopted a Socially Responsible Investment Policy, approved by UCL Council in October 2018.  The policy commits UCL to investing its funds on a responsible basis with due regard to ethical, social and environmental, governance (ESG) issues. UCL will appoint fund managers that demonstrate rigorous implementation of the Principles for Responsible Investment supported by the United Nations.

The University will review this Policy for Socially Responsible Investment every two years. The policy can be found here.

Investment Committee

The ethical principles outlined in UCL’s Investment Policy and Socially Responsible Investment (SRI) Policy are upheld and reviewed through UCL’s Investment Committee, which reports through Finance Committee to Council, UCL’s governing body.

The Committee includes student representation with the current UCL Union Democracy, Operations and Community Sabbatical Officer in attendance, who voices any concerns raised by the wider student community, including Fossil Free UCL. Current members and reporting structure are presented here.

Investment Commitments

UCL has appointed two fund management firms, both of which follow the requirements of UCL’ Socially Responsible Investment Policy.

Both firms are signatories of the UN Six Principles for Responsible Investment. While the two firms apply their own ethical investment restrictions which are not necessarily identical, both must be compliant with our SRI Policy, and follow additional restrictions chosen by UCL.

The University will adopt investment strategies that seek to minimise and ideally eliminate irresponsible corporate behaviour. Some of the ethical, social, environmental and governance issues which it will focus on include:

  • Environmental degradation
  • Armament sales to military regimes
  • Human rights violations
  • Institutionalisation of poverty through discriminatory market practices
  • Racial or sexual discrimination
  • Tobacco production and manufacture

Specifically UCL will take these investment stances:

  • No investment in companies involved in tobacco manufacture or production.
  • No investment in companies with more than 10% of turnover in mining thermal coal or tar sands.
  • Where a company in which the University currently holds shares does not respond positively to concerns about its practices and is deemed to be in fundamental breach of acceptable standards of ethical and/or environmental practice, the University will divest itself of shares in that company and require the investment manager to inform the company of its reasons for doing so.
  • Investment managers will be instructed to monitor the performance of companies and to bring recommendations for divestment strategies to the Investment Committee for a decision.
Reporting on Socially Responsible Investment

UCL’s fund managers are required to report on ethical investment in their routine (quarterly) valuation reports. Additionally, UCL Investment Committee has arranged a committee meeting in February 2019, solely to discuss socially responsible investment. A decision will be made on whether this will become an annual review following this meeting.

Fund managers will be required to produce an annual report on their socially responsible investment performance for Finance Committee upon request.

Active Engagement

UCL will retain some control over investment choices while following these socially responsible and active engagement principles. This means taking a holistic approach to ethical investment, addressing a broad range of matters including taking an active stance in respect of climate change. UCL recognises that companies with business models based in a carbon economy, which are not transitioning to a low carbon economy, do not represent sound financial and ethical investments. As an investor, the University has three means of bringing pressure to bear on corporate behaviour:

Acquisition

  • The University will require investment managers to incorporate environmental, social and governance (ESG) factors into their selection criteria.
  • The University will seek to identify and promote low or zero carbon investments where available without detrimental impact to investment risks and returns.

Divestment

  • Where a company in which the University currently holds shares does not respond positively to concerns about its practices and is deemed to be in fundamental breach of acceptable standards of ethical and/or environmental practice, the University will divest itself of shares in that company and require the investment manager to inform the company of its reasons for doing so.
  • Investment managers will be instructed to monitor the performance of companies and to bring recommendations for divestment strategies to the Investment Committee for a decision.

Engagement

  • The University will expect investment managers to engage with companies where ESG issues are a concern, provide proxy voting on ESG issues and report to the University on their engagement activities.
  • Where the University invests in any company that does not appear to be pursuing sound ethical business practices and/or displaying appropriate environmental responsibility, the investment managers will seek to persuade that company to operate in a more socially and environmentally responsible manner, both informally and formally (raising issues at Annual General Meeting and exercising its shareholder’s right to vote).
Fund Breakdown

UCL will communicate annually the breakdown of investments by sector. Below shows the % of money invested in different sectors, calculated by combining both of UCL’s fund manager’s holdings, as per September 2018 reports:

UCL investments by sector

Note: this is a snapshot of the % of money investested by sector in September 2018, and cannot be considered an accurate presentation as the funds are always subject to changes.

The breakdown from individual investment management firms can be viewed here and here.