In November, the UBC Faculty Pension Plan (FPP) Board of Trustees approved the addition of a new Fossil Fuel Free Balanced Fund to the UBC FPP investment options. Although there is still a process required to implement this new investment fund, it is expected that the fund will be available in the first half of 2020. We will communicate further information over the coming months as the timing and details become known.
The following summarizes the process that the Board of Trustees has completed in deciding to move forward with the new Fossil Fuel Free investment option.
Member survey indicated sufficient interest in a new Fossil Fuel Free Balanced Fund
In March, a survey was sent to members to gauge interest and commitment towards investing in a Fossil Fuel Free Balanced Fund option. Based on the positive member response rate, the Trustees proceeded with investigating whether this new fund could be made available.
Key issues addressed prior to the decision to add the new fund
As part of their investigation, the Trustees addressed the following key issues:
- Clearly defined the parameters of a fossil fuel free fund in order to properly benchmark and monitor the fund’s results; and
- Satisfying their fiduciary concern that the fund option is compatible with their legal duty to administer the UBC FPP in the best financial interest of the members.
The Trustees also confirmed that the operational requirements of adding a new fossil fuel free fund to the FPP record-keeping platform with Sun Life can be met.
Decision making process
In assessing a potential new fossil fuel free fund, the Trustees agreed that the most important metric to focus on was to provide a significant lowering of the fund’s carbon footprint versus a similar non-screened fund. The focus of our analysis has been on:
- Assessing what fossil fuel free funds are available;
- The fossil fuel free screening methodology; and
- How the results have been (or are expected to be) in terms of both lowering the fund’s carbon footprint while achieving reasonable expected risk and return measures.
As part of the process, the Trustees hired a third party consulting firm to assist with:
- Reviewing the literature/studies in this area;
- Clarifying a meaningful definition of a fossil fuel free fund;
- Assessing the available fossil fuel free funds in the market; and
- Providing historical performance analysis based on screening out different definitions of fossil fuel free stocks and/or industry sectors.
The Trustees also engaged a leading index provider firm (MSCI) to provide analysis on different combinations of negative screening exclusions (e.g. excluding the Energy and Utilities sectors) from the broader stock and bond indices to help assess both the risk/return metrics as well as the impact on the fund’s carbon footprint under different screening definition scenarios.
The Trustees have identified an investment firm with fossil fuel free funds that we believe will meet our fossil fuel free mandate very well. They have indicated the investment fees will be very competitive with our existing Balanced Fund option even though the new Fossil Fuel Free Balanced Fund option will start with no assets. Our next steps are to work with the new investment firm and Sun Life to integrate the new fund into the UBC FPP investment options and update the administration system, web tools and member communication to reflect the change.
The following are links to the March 2019 member survey results and the two education articles that were published in the February 2019 Faculty Pension Plan Update newsletter.
Member Survey Results: Potential Fossil Fuel Free Balanced Fund Option
Environmental, Social, and Governance Investing and the UBC Faculty Pension Plan
Potential Fossil Fuel Free Balanced Fund option and member survey