Beyond Fossil Fuels Fund
We will continue the vital work of speaking environmental truths and pressing for immediate improvements in fossil fuel companies, using our position as shareholders through our traditional equity funds. The Beyond Fossil Fuels funds give investors just one more way to respond to the call to climate action.
Kathryn McCkloskey, Director of Social Responsibility
Expanding UCF’s action to address climate change through investment
In less than 18 months, following the General Synod Resolution, United Church Funds announced the opening of the Beyond Fossil Fuels Fund — a domestic core equity fund free of investment in US companies exploring for or producing fossil fuels. The fund launched on November 1, 2014 with an initial $21 million from 11 founding investors. As with all separately managed UCF funds, the Beyond Fossil Fuels Fund will also remain free of investments in tobacco, alcohol, gambling and military weapons companies.
What elements do the Beyond Fossil Fuels funds comprise?
An Enhanced Index Strategy
Enhanced indexing combines positive elements of passive management and active management. The strategy resembles passive management because enhanced index managers do not differ significantly from the commercially available index — in this case the S&P 500. However, enhanced indexing allows managers the latitude to vary position holdings from the underlying index in order to capture attractive quantitative characteristics — adjustments that can lead to positive performance versus the index over time. Enhanced indexing strategies also enjoy the benefit of lower turnover and lower fees than actively managed portfolios.
A Domestic Core Equity Alternative
The primary investment objective of the Beyond Fossil Fuels Fund is to generate a gross rate of return that exceeds the S&P 500 Index re-weighted after excluding the restricted stocks. Therefore, the fund aims to mirror United Church Funds’ traditional core equity fund, while providing an alternative for investors seeking to invest without exposure to most fossil fuel companies. Other than the limitations expressed by the restricted positions, there are no strict limitations on portfolio characteristics such as beta or dividend yield. Nevertheless, the portfolio will be managed in such a manner that tracking error is expected to be approximately 2% over a full market cycle.
A Balanced Fund Option
Because over 90% of UCF’s investors choose the Moderate Balanced Fund for the classic asset allocation the fund offers, the Beyond Fossil Fuels Balanced Fund gives investors an additional fossil-fuel-free choice. This balanced fund will replicate the allocations of UCF’s traditional Moderate Balanced Fund, substituting the Beyond Fossil Fuels Fund for the traditional Domestic Core Equity allocation. Investors in this fund enjoy the additional advantage of participating in the range of UCF’s social responsibility work.