Ufi VocTech Trust (Ufi), a UK Foundation that focuses on delivering an increase in scale of vocational learning, decided five years ago to review their investment practices to adopt the UN Sustainable Development Goals frameworks.
Although several investors entertain the idea of impact investing, very few actually invest 100% of their capital through an impact lens. Ufi on the other hand has undertaken a major transition in its investment approach by moving from investing a significant portion of its capital for only financial returns to one which also seeks to further its mission via all assets.
Investment Strategy
To achieve this change, the foundation went through a process that ultimately led to a new Investment Policy, Investment Strategy, and selection of a new Investment Service Provider (ISP). Ufi's Investment Policy drew from policies of other groups and went through several iterations over the course of 3 months before finalized in April 2020. The statement of philosophy in the updated policy reads: "Ufi believes all investments have an impact on society and the environment. Ufi believes that its decisions on what to invest in, what not to invest in, and how it exercises its stewardship responsibilities as an investor should where possible contribute to advancing the charity’s mission and purposes and should always be in line with its values, in addition to meeting Ufi’s financial return objectives." The Investment Committee also describes Ufi’s financial objectives in relation to their cash flow requirements rather than by external benchmarks which differentiates their approach from others.
In order to transform their portfolio to meet their financial needs and align their investments with the mission, Ufi decided to look for a new ISP to advise UFI on the implementation of its updated Investment Policy focused on impact contributions. They appointed a new ISP in Autumn 2020. Ufi transitioned their portfolio towards greater liquidity and lower risk over time, starting with an allocation of 50% equity and 50% fixed income.
The equities are invested in thematic funds, mapped to the UN Sustainable Development Goals (SDGs) and the Impact Management Project's Impact Class Matrix. In the fixed income portfolio, the bonds are 100% aligned with their ISP's Sustainable Investment Framework. 100% of their financial assets is invested under the framework that avoids negative impacts and aims to make a positive contribution to Ufi’s mission whilst achieving financial goals.
*They adapted Impact Management Project Investor Contributions to the following classifiers: Purely Financial; Signalling that Impact Matters; Engage Actively; Provides Undersupplied and/or flexible capital.
The five-year (2019 -2024) strategy helped them transform their portfolio to align with their mission and meet their financial need for the next ten years.