We are delighted to introduce CCLA, the UK’s largest charity fund manager to The Big Exchange. Driven by the investment thesis of “Act, Access, and Align”, CCLA is well-known for its proactivity in the ESG investment space through its meaningful and global impact.
CCLA was established in 1958 to manage the Church of England Investment Fund and today is the UK’s largest charity fund manager. The firm is in the unique position of being owned by the investment funds of three client groups- churches, charities, and local authorities - and describes itself as being ‘the spirit of a mutual in the body of a commercial private limited company’.
CCLA believes it has a duty to go beyond traditional investor engagement and work with the industry to tackle threats faced by society and the environment. They start with the premise that investment markets will only be as healthy as the communities that support them.
In essence, CCLA is pushing for progress to meet the world’s sustainability challenges and they think the best way to deliver change is through dialogue with companies. Addressing topics ranging from modern slavery to tackling mental ill-health can have a real impact.
Recognizing that the transition to a net-zero economy will take decades, CCLA sets out its objectives for change and measures progress along the way. The firm is a founding signatory to the Net Zero Asset Managers initiative which commits them to set decarbonisation goals to achieve net-zero emissions by 2050 or sooner across all assets under management.
CCLA looks at climate change from a social, as well as environmental perspective and supports the ‘Financing a Just Transition Alliance’. This is a group of financial companies, coordinated by the Grantham Research Institute, who recognise the importance of the energy transition providing positive outcomes for workers and communities.
The firm embraces industry standards such as the PRI (Principles for Responsible Investment) and the UK Stewardship Code. As a PRI signatory, their approach is assessed annually, and the results published on CCLA’s website. This evaluates how well they incorporate ESG (Environmental, Social & Governance) factors into investment decisions whilst the Stewardship Code sets out 12 principles of high stewardship standards for those investing money on behalf of UK savers.
CCLA act as an advocate and catalyst for change by using their share ownership rights to improve the sustainability of their investments. Whilst it is important to avoid companies causing the most damage to our planet and communities, they believe that meaningful dialogue is more likely to drive change than only investing in ESG leaders or ‘SDG (Sustainable Development Goals) aligned businesses’.
The team assess ESG standards since legislation, regulation and changing attitudes are likely to impact negatively on unsustainable business models. This helps them identify, and avoid, companies with poor management and weak corporate governance, an unacceptable social and environmental impact, or lack of willingness to improve through engagement.
The managers invest in a way that aligns with their investors’ values, considering themselves to be guardians, rather than owners, of the assets. This involves reporting on all their work and being transparent about what they do.
In April 2022 CCLA launched the Better World Fund which allows individual investors to benefit from their proven process and expertise. We are delighted to be offering it on The Big Exchange.
This fund aims to provide a total return (a combination of capital growth and income) over the long-term (a rolling period of five years). It is managed in line with CCLA’s ‘Good Investment’ philosophy and their Better World policy which run deeper than solely financial returns.
The fund offers a diversified portfolio of shares (also known as equities) of high-quality companies from around the world. It invests at least 80% of its assets in shares mostly exposed to developed countries but may also invest in Emerging Markets. Up to 20% may be in a range of other investments.
The portfolio has 62% of its assets in North America, 19% in Developed Europe and 8% in the UK. The main sector exposures of the funds are to information technology (28% of the portfolio), healthcare (22%) and financials (16%).1
Portfolio decisions are the responsibility of a tight-knit investment team which adopts a rigorous investment process. They aim to identify trends that are driven by changes in the economy and society, such as evolving consumer behaviour, demographical changes, and the development of new technology. This followed by detailed analysis of every prospective investment to find quality companies trading at attractive valuations.
The managers position the fund to target strong cash-flow based returns over the long-term while being relatively resilient in testing market times. This means finding companies with enduring competitive advantages, plentiful opportunities for future growth, typically operating in areas less affected by short-term trends, and which have acceptable ESG standards.
There is a revenue-based exclusions screen to avoid companies they believe cause harm or that don't comply with the UN Global Compact. They also exclude companies not aligned with CCLA's commitment to "Net Zero" emissions by 2050.
Our analysis found that c.40% of the fund was invested in companies we classify as offering solutions to social and environmental challenges. This is a relatively low proportion; however, a high degree of importance is placed upon engagement and stewardship to improve the sustainability of companies over time.
The exclusions criteria means that the portfolio generally should have lower exposure to controversial activities than a broad-based financial index. Nonetheless, the fund does have some exposure to controversial activities.
CCLA is a member of various organisations and initiatives, including being a founding member of the Transition Pathway Initiative, and have shown leadership with respect to mental health and modern slavery. There is also a close collaboration with the Church Investors Group and CCLA have been involved in seeding several funds committed to climate change among other causes.
The agenda for CCLA's engagement activities are set and acted on centrally rather than at portfolio level. CCLA's Sustainable Investment Outcomes document provides a summary of engagement activities at a firm level. However, this doesn't articulate in detail what the objectives and ideal outcomes for engagement are. The fund scores 2/3 for positive influence.
CCLA produces several aspirational policy documents and a summary of its engagement activity at firm level. However, impact reporting is somewhat limited at fund level with only the fact sheet providing some comparative MSCI Score Analytics and foot-printing against a broad-based index. The fund scores 1/3 for impact evidence.
The fund is most aligned with SDG 1 (No Poverty) which accounts for 4% of the portfolio, SDG 3 (Good Health & Well-Being) at 20% of the portfolio and SDG 9 (Industry, Innovation & Infrastructure) at 5%.2
The limited exposure to companies providing solutions is the main reason the fund is awarded a bronze medal. To improve on this, we would like to see greater exposure to solutions, more in-depth progress monitoring of engagements, and fund focused sustainability reporting. Current fund reporting, although adequate, could be presented in more detail given the group's pedigree.
UnitedHealth provides health care, employer and individual benefit plans, and health insurance. Its mission is to help make the health system work better for everyone by tackling inequalities and improving patient outcomes. This includes assistance for the elderly and vulnerable and those without employer-funded cover to access health care, for example, through insurance offering care at fixed, and often reduced, costs. The firm also promotes healthy lifestyles and preventative care through community programmes. Current goals are for 85% of members to receive preventive care services by 2030, with improved affordability, so 55%+ of outpatient surgeries and radiology services will be at high-quality, cost-efficient sites by 2030. A key environmental target is to reach operational net-zero by 2035 which includes a 60% reduction in Scope 1 and Scope 2 emissions and sourcing 100% of their electricity from renewable sources by 2030. UnitedHealth has committed to providing financial support to more than 10,000 culturally under-represented health care professionals.3
1 Fund factsheet 31/01/2023
2 TBE Impact Assessment February 2023
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