The UBC endowment responsible investment policy commits UBC to incorporate environmental, social, and governance (ESG) factors in its investment choices. This means that UBC will ensure its fund managers incorporate these factors in the management of their portfolios.
The policy also outlines options to engage with companies or industries that are of concern to the UBC community, while maintaining the university’s obligation to its donors.
Honouring Fiduciary Responsibility
Fiduciary responsibility refers to UBC’s responsibility to manage trust funds in accordance with common law investment standards. All stakeholders expect UBC to provide investment returns over the long term to fulfil their intentions.
By investing in pooled funds, UBC is able to diversify its investments, thus reducing risk and minimizing fees and administrative costs. This approach allows the endowment to achieve the investment returns that a) meet or exceed the university’s existing spending needs, and b) ensure the preservation and growth of the endowment for future generations of students, faculty, and staff.
Considering Environmental, Social & Governance Performance
UBC commits to incorporate ESG factors in its investments in the following ways:
1. Manager Selection
When selecting and evaluating investment managers, UBC commits to integrate ESG factors. The university will expect all of their public equity managers to incorporate ESG principles in their portfolios within the next three years.
2. Investor Engagement
UBC does not invest in companies directly, but rather through pooled funds, managed by external fund managers. Wherever possible, UBC will encourage its fund managers to use their proxy votes to encourage transparency on ESG policies, procedures, and other activities.
3. Direct Engagement
While direct engagement with individual companies is not a practical option (as UBC does not invest directly in specific companies), where there is significant exposure to a company, industry, or nation that is facing a considerable ESG issue, UBC will encourage their investment managers to engage directly through available channels.
4. Collective Engagement
On a selective basis, UBC will engage issuers, regulators, and industry groups (through third parties) where it is believed that a collective approach to engagement will be more effective than direct engagement.
In developing the new strategy, UBC’s Board task group had many discussions with representatives of peer institutions and with leaders in the responsible investment field. It was widely agreed by leaders in responsible investing that engaging with companies and making decisions based on ESG principles is an effective way of positively influencing long-term change and options such as divestment were not favoured for a number of reasons.
One of the important features of the new policy is that it defines a clear framework for the university to decide when divestment will be considered. A new responsible investment advisory committee will examine such requests for action, using the following criteria:
- Proven social, political, economic, or environmental rationale.
- Reasonable evidence that divestment is an effective way to achieve the desired outcome.
- Absence of alternative policies.
- Consistency with the university’s legal obligations as trustee.
- Consistency with its other university relationships.
Responsible Investment Background
In 2010, the UBC Board of Governors’ Responsible Investment Committee for the Endowment began discussions with external experts and other universities, as well as a review of best practices, to determine an effective approach to responsible investment for UBC’s endowment.
An initial strategy was adopted in June 2013. The strategy identified ongoing investment in campus environmental and social projects, committed UBC to join the Canadian Coalition for Good Governance, and appointed a task group to recommend further policy changes to the Board.
After discussion with industry experts and peer institutions, the task group made a number of recommendations outlining options for incorporating ESG factors in the investment process. The UBC Board of Governors approved the policy on April 14, 2014.