Part One: Introduction and General Principles

1. Introduction to the University, and our Principles and Ambitions

Founding in 1926, the University of Reading is a top 200 world University (169^th in the QS 2024 World University Rankings), situated in the Thames Valley, England.  With over 23,000 students globally, it has additional campuses in Malaysia and South Africa, and a very successful business school (Henley Business School).  Its research focuses on a number of key themes: agriculture, food and health; environment; heritage and creativity; and prosperity and resilience. 

The University’s strategy as at time of writing (December 2024) has four principles.  These are community, excellence, sustainability, and being an engaged University.  All four of these principles inform how we use our investments. 

 

2. What are the University’s investment assets, and why does the University have them?

The University owns over £300m of investment assets, which we collectively call our Investment Fund.  Roughly 40% of this is in portfolios of shares and bonds.  The rest is held in buildings and land, mainly in the local area.  These assets are split across a number of charitable trusts and separate portfolios. Some of these trusts or portfolios have restrictions on their use, as they have been gifted to the University over its history for very specific purposes, such as funding academic posts or research in specific subjects.

Taken as a whole, our Investment Fund has three broad purposes:

• They provide a secure financial return to support the University’s academic aims.
• They can be an emergency source of funds to manage risk in a changing world, and protect us from temporary shocks. When needed or desired the fund’s capital can used to support the aims of the University, in general or to support specific projects.
• They help us influence the wider world and do good: this is what being an engaged University means in practice.

We do not accept that using our funds in an ethical way is incompatible with getting good financial returns, so we work hard to balance these two goals. 

 

3. In what practical ways does the fund help our core business: teaching and research?

We recognise that we need to have the fund make cash, to be returned to the University regularly so it can be put to good use.  So we set broad targets for our fund, which include:

• The entire Investment Fund should give us back 3% annually – so that is cash returned to the University to invest in its operations.
• We have segmented up to1% as an Innovation Fund – so 1% of the fund is earmarked for novel and cutting edge activities.This allows us to promote academic excellence and reward imagination.

 

4. How does the University use its assets in order to fulfil its wider aims, principles, and strategy?

We are committed to being an engaged University, and one rooted in our local community.  We will keep the following principles in mind in using our Investments:

• We will use our land and buildings wisely and responsibly in the local community.Practically this means that we will talk to local residents regularly, and that any land development decisions are made in dialogue with local councils and a wide range of stakeholders.
• We will engage with companies we own to further what we think is right. Our fund managers can act on our behalf to make our voice heard.
• We will work towards allocating 10% of our fund to “Impact Investments” to make sure it is doing good.Currently these assets include investments in sustainable energy production, such as wind farms and solar energy.

 

5. Who looks after the University’s assets, and how does the University make sure they are being looked after in the right way?

• We regularly tender for external fund managers to look after our assets.As part of this tender process we assign a high weighting to sustainability and ethical investing.We use Cazenove Capital as our manager, and we meet them regularly to scrutinise their performance and do horizon scanning.
• Our Property and Land assets are managed in-house.They are subject to relevant performance indicators.
• We have a robust Investment and Development Committee which has ultimate responsibility for looking after the Investment Fund.The Committee has both external lay membership and student and stakeholder representation, so we get wider views; we try hard not to exist in an “echo chamber”.
• We publish our main shareholdings so the wider world can see what we are doing.

 

6. What are our specific ethical principles?

The detailed policy following sets out specific things we exclude from our investments, but the more important side of this is our broad ethical outline:

• Engagement over divestment where possible.We will expect our asset managers to be very active indeed in engaging with the companies we hold investments in, and we ask them to report on this regularly.
• There are some activities we will not invest in.This includes direct fossil fuel extraction, and the biggest banks who fund this activity.
• Where appropriate, we will screen out harmful activity, and review this annually.This means we sometimes have to sell investments which no longer conform to our values.
• We believe we can be part of the solution to the climate emergency, and try to use our assets to do this, through investing in companies and funds promoting sustainable energy.
• We will listen to our stakeholders where they come to use with concerns about our investments.Student representation is included on the Investments and Development Committee.

 

7. How do we check we are doing the right thing with our investments, and we are looking after them properly?

• We review this policy annually, and we publish it online alongside a list of our investments, so we are as transparent as we can be.
• We get our investment managers and property managers to tell us regularly how we are doing, both in terms of financial return and in terms of active engagement with the local community and the wider world.
• We measure our carbon footprint from the investments as well as we can, and compare this to suitable benchmarks.We use this information as part our net zero journey.
• We try to be upfront and open about the tensions between making a financial return and behaving ethically.
• We will update our ethical screens if necessary in response to events, as the world is always changing, but only if this accords with our core principles and our mission as a University.

 

Part Two: Detailed Operations of the Investment Fund

 

1. Introduction & Scope

 

Royal Charter

 

The University of Reading is an exempt charity, established by Royal Charter, whose purpose is the advancement of knowledge.

The Royal Charter sets out the objects of the University: for the public benefit to advance education, learning and research through the provision, support and maintenance of a University. The property and funds of the University shall be used only for promoting the objects.

Specifically, this policy covers:

1. the University’s group endowment portfolios, including for its connected charitable trusts;
2. the Investment property held within the University and any trusts of which the University is trustee (such as the NIRD trust), including any land classified as held for investment purposes;
3. The University’s operational landholdings which may have a long term development potential (such as farmland). This policy therefore covers all the University Group’s investment assets. The scope is designed to allow a holistic view to be taken across these assets in respect of optimal mix, risk, liquidity, annual returns and long term value appreciation.

It does not cover the core operational estate (e.g. Whiteknights and London Road Campuses).

The endowment portfolios are those funds invested with external investment managers, rather than any investments held directly by the University or related Trust. They are held at market value in the University’s financial statements.

Investment properties are residential and commercial properties, or land, which are not in operational use, and are either rented out for a return to a third party and/or held for future development potential. These assets, as mandated by accounting standards, are valued at current market value (using qualified surveyors) in the University’s financial statements.

The University, for management terms, calls the assets covered by this policy the “Investment Fund”.  It is not a separate fund in a legal sense, but naming it such encourages a holistic approach.

The University’s management of its operational cash balances is contained within a separate Treasury policy.

 

2. Objectives

 

The University’s overall investment objective is to preserve and grow capital in real terms and to generate returns that support the activities of the University. The University seeks to produce a suitable financial return within an acceptable level of risk, as well as a sustainable level of cash that may be returned to the University regularly to fund its operations, without eroding the long-term value of the Investment Fund.  The policy recognises that the pursuit of an optimal financial return is not the sole aim of the University’s investments – rather that they exist to further the University’s academic, commercial and social aims. The University will seek therefore to use its investments to make a real impact both at a local and a global level.

 

The University wishes to ensure that decisions around all its different classes of asset are complementary, and in particular to help the investment manager distribute risk by looking across the asset classes and mix in the investment property portfolio.

 

 

3. Risk, Liquidity and time horizons

 

The University believes in diversification to mitigate risk so its assets may be invested widely and should be diversified by asset class and security. The Investments and Development Committee, working on advice from the Executive Team and external experts, is responsible for agreeing a suitable asset allocation for all funds placed with the investment managers.

The University accepts that longer term investment are subject to a higher degree of risk and that the value of these assets will fluctuate.

The University seeks to manage the risks of permanent loss of capital and/or the erosion of purchasing power via inflation.

The University will agree a suitable risk strategy through Investments and Development Committee and in collaboration with third parties (e.g. investment managers).

The University will ensure that part of the portfolio is available as a source of emergency liquidity funding, to cope with unexpected issues and ebbs and flows in cash receipts.

 

 

 

4. Responsible Investment Policy

 

The University will assess the impact of its investments in three areas: environmental, social and governance (ESG). The University will recognise it should use its investments in a responsible manner, and that this has both a negative and positive dimension. It will look to avoid investments which are seen as promoting obvious harms, and choose investments which have a positive impact. It will also expect the investment manager to exercise influence through active ownership – both engagement and voting at AGMs.

The University seeks to avoid harm and has explicit exclusionary screens as well as ensuring ESG factors are integrated into all investment decisions. The University will also screen out all corporations complicit in the violation of international law.

Companies involved in the following activities are excluded from the University’s portfolios:

• alcohol (>10% revenues)
• armaments (>10% revenues)
• fossil fuels: extraction, production and refining of coal, oil and gas (no tolerance)
• tar sands and thermal coal (no tolerance)
• gambling (>5% revenues)
• high-interest rate lending (>5% revenues)
• indiscriminate weaponry (no tolerance)
• pornography (>3% revenues)
• tobacco (>5% revenues)
• -non-medical animal testing (no tolerance to companies that do not support alternatives, do not have an animal testing policy, or do not treat animals humanely)

The University will continue to monitor other areas of concern as they develop and consider imposing exclusions in these areas.

 

The University recognises the climate emergency as a key challenge facing society and the students of the future. As such the University seeks to align with the Paris Agreement on climate change, encouraging our fund managers to reduce the carbon emissions of the investments, and advancing a just transition through engagement and investment in solutions (e.g. renewable energy and infrastructure). The screening policy excludes fossil fuels and has been updated to include the largest financers of fossil fuel activities based on the Banking on Climate Chaos (BOCC) dataset. Any future investments in energy assets will be in renewable energy, low carbon energy, community renewable energy, or renewable energy projects on campus.

The University will choose investments in agreement with the University’s overall strategy and community obligations.

Active ownership: Investment managers are expected to actively engage and vote in order to encourage businesses to make progress towards the UN Sustainable Development Goals. Where there are specific topics that impact the beneficiaries, the University will seek to represent their views. This may involve collaboration with the student body and other like-minded asset owners. Investments and Development Committee’s terms of reference will include an ex-officio right of attendance for the Reading Students’ Union.

The University seeks to understand the impact of the investments on people and planet, and will ask the investment managers to measure and report relevant sustainability metrics and active ownership activities at least annually. The Investments and Development Committee will review regularly their investment managers’ policies and performance on environmental, social and governance issues, and report on this to its stakeholders regularly. The University expects the investment managers to be signatories to the UK Stewardship Code and UN Principles for Responsible Investing. The University also incorporates the Taskforce Climate Related Financial Disclosures (TCFD) in its annual financial statements

The University expects its investment managers to keep track of progress against its climate ambitions by monitoring the carbon emissions and emissions reduction targets of its investments over time, encompassing Scopes 1, 2 and 3 as data allows.

The Investments and Development Committee will also ensure that the commercial operation of the University’s Investment Properties is also consistent with the University’s ethical, environmental and social responsibilities.

 

5. Governance, Management, Reporting and Monitoring

The Investments and Development Committee is the key tool the University has to monitor its diverse portfolio, and to protect the University against the risk of erosion of asset value. Scrutiny and Finance Committee is responsible for setting the overall return targets and risk profile for the University; Investments and Development Committee is responsible for implementation and monitoring. The full Terms of Reference of Investments and Development Committee can be found on the University’s website.

For management purposes the assets are divided into two main sections: investments held and managed by the currently appointed investment manager Cazenove Capital (the “endowment funds”), and assets managed directly (Investment property, mainly residential properties and land).Together these make up the Investment Fund as outlined above.

The assets managed by the investment manager are divided into a number of separate portfolios, including those owned by the University’s charitable trusts.  These have different aims, risk profiles and return requirements. Investments and Development Committee will decide upon the risk and target returns for each portfolio, and the broad asset classes allowable. Within these parameters the Investment Manager is responsible for the choice of individual investments.

Investments and Development Committee will meet regularly to review the performance of each portfolio against targets and suitable benchmarks. Internally managed assets will be subject to the same reporting and monitoring by Investments and Development Committee.

Annually Investments and Development Committee will report to the wider University community how it is approaching responsible investment, and request feedback. To this end any relevant minutes from Investment and Development Committee on these issues will be published on the University website (redacted where necessary for commercially sensitive issues).  Any staff and/or students who wish to raise concerns about this policy, or the current or future investments of the university, should contact the Secretary of IDC. They will then raise the concern(s) with the Chair and other members of the committee, who will determine actions to be taken, which may include further formal or informal consultation with the concerned staff and/or students.

 

6. Approval & Review

 

The policy represents the aims of the University’s investments, how the investments are controlled, and how they are monitored to ensure they deliver the stated objectives. The key features of the policy are:

• The policy is a living document which must be updated annually
• The policy sets out how the Investments and Development Committee ensures the delivery of the long term capital returns and income requirements as set by the Council of the University through Scrutiny and Finance Committee

 

 

Approved by Investments and Development Committee 

17 February 2025; 6 June 2025 (minor modifications)

Since 2016 the University has agreed to publish the details of its main endowment fund.