The Investment Committee is responsible for the administration of the investments of the Scottish Episcopal Church known as the SEC Unit Trust Pool (‘UTP’), which are used to fund the majority of the central activities of the church in addition to supporting the work of dioceses and many congregations. These responsibilities include setting the investment strategy and liaising with professional fund managers regarding its implementation. The Investment Committee operates under two requirements set by the SEC. One is the statement of investment objectives which sets out the SEC’s expectation that the UTP will be invested in a way that it will both grow in value and provide an income stream that will keep pace with inflation. The other is the ethical investment policy which sets out the various ways in which the SEC addresses ethical issues. One aspect of this is the list of categories of investments excluded on ethical grounds, which is currently applied to about a third of the UTP.
The proposal set out in this consultation arises from the practical difficulties and financial implications of developing an investment strategy that reconciles both of these requirements. With a view to reducing investment risk, increasing the stability of the fund and to provide greater flexibility and cost efficiencies, the Committee wishes to make changes to the strategy which would mean that all the investments would now be in pooled funds, over which the SEC has no ethical control. Specifically, it would mean that the policy of excluding certain categories of investments could no longer be applied to the UTP. Additionally, one of the pooled funds in which the UTP invests currently has a small holding in a major tobacco company, which is one of the categories currently excluded in the SEC’s Ethical Investment Policy.
In one sense the ethical question could be viewed as whether or not the SEC wishes to continue to be able to apply specific ethical criteria to part of the UTP portfolio, or whether the more important consideration is the need to ensure adequate investment income to fund various aspects of the SEC’s work.
The Investment Committee acknowledges that there is likely to be a range of views in relation to the proposed change and recognises that the issue should be discussed by General Synod. The Committee is therefore planning to propose the change to General Synod in 2019 and seek its approval. To help inform both the Committee’s thinking on this issue and General Synod’s discussion of it the Committee is seeking comments on the proposal and, more generally, to gain a greater understanding of what influences congregational and diocesan investment decisions.
The Investment Committee has prepared a paper which sets out basic information about the UTP and attempts to explain both the importance of the income it produces for the SEC and the challenges of reconciling the various investment considerations. The paper seeks to explain the Committee’s reasoning behind the proposed change in investment strategy and to answer questions you may have about it. It recognises the issues that can arise when using pooled funds – such as the small holding in a tobacco company mentioned above. The paper also provides information regarding the ‘engagement’ aspect of the SEC’s Ethical Investment Policy and seeks to provide reassurance that it will not be affected by the proposed change in strategy. The paper can be downloaded here.
The fundamental question is, having considered the reasoning that underlies the proposal and the implications of departing from the SEC’s policy of excluding certain investments on ethical grounds, ‘How comfortable are you with the Investment Committee’s thinking on the proposed changes to the UTP?’ Participants have the option of responding to this question alone, or to submit a more detailed commentary on the proposal.
Should you wish to comment on the proposal please complete the online survey by 15 February 2019. The survey can be found at https://tinyurl.com/SECInvComConsultation.
A copy of the survey questions can be downloaded here.
For further background information regarding the UTP please see: