Reports

Report of the Council pursuant to Special Ordinance A (ii) 7 (divestment from fossil fuel and arms companies)

The Council begs leave to report to the University as follows:

1. The Council has received a Grace, which has been initiated under Special Ordinance A (ii) 5 by 155 members of the Regent House.1 The Grace proposes amendments to the Ordinance for the Cambridge University Endowment Trustee Body (CUETB), which represents the University in its role as sole trustee of the University’s Endowment Fund (CUEF). Those amendments seek to direct the CUETB to ensure:

•the CUEF is ‘an environmentally, ethically, and socially responsible investment scheme and oversee its approach to responsible investment’, in revised Regulation 5(c); and

•as part of that approach, there is a ‘progressive decline in direct and indirect exposure to fossil fuel companies and arms companies, as defined by Ordinance, towards no exposure’, in new Regulation 5(d).

Further amendments include a new Ordinance providing a definition of fossil fuel and arms companies, to come into effect if the Regent House does not approve an alternative definition (which the Council is ordered to provide), and a requirement (new Regulation 5(e)) to report on progress on the above matters.

2. The Council has decided, for the reasons set out in paragraphs 11 and 12 below, to withhold authorisation of the initiated Grace and is recommending that the Regent House approve its decision. The main reason is that the amendments require the CUETB to act in a certain way, and it would be unlawful for the CUETB to act contrary to its own judgement. This outcome would be the same if the University were acting as trustee through the Council rather than through the CUETB. The Council has made this decision in accordance with Special Ordinance A (ii) 7 in its capacity as the principal executive and policy‑making body of the University under Statute A IV 1(a).

3. This Grace was initiated in March, shortly before the Council agreed its support for the CUETB adopting a monitoring regime that aims to ensure there is no meaningful exposure to various investment categories in addition to fossil fuels. The Council acknowledges that the Grace may have been prompted by frustration at the pace of its decision-making on this matter. The Grace would be in conflict with the legal framework within which the CUEF operates. By supporting the monitoring regime, the Council has found a way to address the underlying concern of the Grace that works within that framework.

Context

4. The CUEF is a trust fund established by deed. It currently has 25 unitholders (i.e. investors), comprising the University, 18 Colleges and 6 charitable trusts associated with the University. The CUEF operates a fund of funds investment model based on the careful selection of third-party fund managers rather than direct investment. Over the ten years ended 30 June 2025, the CUEF has returned an annualised +8.3%, outperforming a comparable passive portfolio.2 University of Cambridge Investment Management Limited (UCIM) is authorised and regulated by the Financial Conduct Authority as the fund manager of the CUEF. The CUETB was established in 2022 to ensure that UCIM manages the CUEF in accordance with the investment and distribution objectives as well as the Investment Principles set by the CUETB. The CUETB governs the CUEF on behalf of all unitholders, thereby avoiding the potential conflict of interest that previously existed when the Council acted as trustee on behalf of all unitholders. The CUETB’s Investment Principles comply with the University’s Statement of Investment Responsibility as determined by the Council under Statute A IV 1(a). The CUEF’s approach to investment accords with the Investment Principles and is set out in the Trust Deed for the CUEF.

5. The Council welcomes comments from members of the Regent House, students and others on the University’s investment policy and will continue to bring those views to the attention of the CUETB, on behalf of the University as investor in the CUEF. In October 2024, the Council established a working group to consider a Grace and requests from students with a similar focus on arms divestment. Earlier this academic year, the Council reported on its acceptance of the Working Group’s 11 recommendations.3 The Council also considered options concerning investment in companies manufacturing conventional weapons, culminating in its support for a new monitoring regime to be developed in consultation with the CUETB. In this new monitoring regime, if the CUEF’s exposure to companies which primarily manufacture conventional weapons were to exceed a certain threshold as a proportion of its assets, the CUETB would receive a transparency report including details of all relevant companies, which the CUETB would take into account when advising UCIM.4 The CUETB will meet in July to discuss the details, including the setting of the threshold. The Council was able to take the views expressed in this initiated Grace into account when reaching that decision. The Council will keep the monitoring regime under review.

6. In addition, and in support of greater interaction with the CUETB, the Council also endorsed the Working Group’s suggestion that UCIM and CUETB should consider whether more transparent communication about investments is possible. Whilst it recognises that not all information can be shared, it encouraged the CUETB to hold UCIM to account and to be as open as possible with CUEF unitholders. The Council has therefore asked the CUETB to provide greater clarity on the information that it can share with unitholders without compromising the confidentiality undertakings in non-disclosure agreements between UCIM and third-party fund managers. Greater engagement, including through the provision of more detailed reports on investments, will provide the Council with the assurance that its concerns are being taken into consideration by the CUETB. The recent appointment of Council member Dr Pieter van Houten to the membership of the CUETB will support this ongoing interaction.

7. In this way, the Council has sought to establish a path that enables better oversight of the University’s investments in the CUEF while continuing to support the fund of funds model and ensure compliance with legal and regulatory stipulations. This position has been arrived at after careful consideration of differing viewpoints to reach a compromise that delivers meaningful progress within those parameters.

8. The Council further notes that, in 2020, UCIM agreed that the CUEF would aim to have no meaningful exposure to fossil fuel companies by 2030.5 Responding to engagement from staff and students, and the Council’s desire to include investments in its carbon emission reduction strategy, UCIM was able to identify ways of reducing exposure within the existing legal and regulatory framework whilst maintaining the CUEF’s long-term investment objective, which has resulted in significant reductions.

9. Both this previous example of UCIM’s willingness to adapt and the new monitoring regime show that a collaborative approach, working in partnership with the CUETB and UCIM to explore ways to provide more transparent reporting and accountability, has enabled the University to make significant progress. It is also an approach that allows for consultation with the other investors in the CUEF, so that there is consensus on the direction of travel. Setting absolute targets is unlikely to bring about the desired change, given that movement is necessarily achieved by negotiation.

10. The Council acknowledges the strength of feeling that lies behind this initiated Grace. However, irrespective of the validity of the Grace (see below), it does not support the Grace’s proposed progressive decline towards no exposure to investments in all arms companies, instead favouring the monitoring of investment in companies that manufacture conventional weapons alongside an exclusion of investment in companies that manufacture weapons that would be illegal under English law. It believes its current approach (as described in paragraph 5) is a positive outcome at the conclusion of proper consideration of the complexities of this subject, noting the nuances articulated in the Working Group’s report and recommendations. To determine whether members of the Regent House support that approach, the Council is submitting an additional recommendation to endorse the Council’s position on investment in conventional weapons (in paragraph 14).

Reasons for decision

11. The Statutes of the University vest the University with broad powers, including powers to act as trustee. When acting as trustee, the University must comply with the law and properly discharge its trustee responsibilities. It is a well-established principle of trust law that trustees must act in the best interests of beneficiaries. The proposed introduction of new Regulation 5(d) would mandate the CUETB to act in a particular way regardless of its own judgment as to what is in the best interests of the investors in the CUEF as a whole. It may therefore cause the University (through the CUETB) to act unlawfully, i.e. in a way which is contrary to trust law. A provision which has that effect is not a lawful one to include in an Ordinance.

12. Under the Trust Deed for the CUEF, the CUETB may set high-level investment principles relating to responsible investment, but such principles have the status of non-binding guidance – the fund manager must consider them but need not implement them. New Regulation 5(c) seeks to mandate the CUETB to ensure that the CUEF is a particular type of investment scheme in circumstances where the CUETB has no power to impose such a mandate. Consequentially, the proposed new Regulation 5(e) is not effective in so far as it references regulations (i.e. the proposed new Regulations 5(c) and 5(d)) which are themselves invalid and ineffective, and the proposed Order to the Council to provide a new definition of fossil fuel companies and arms companies, and the proposed Ordinance providing the default definitions of those terms, are redundant without Regulation 5(d).

Recommendations

13. For the reasons given in paragraphs 11 and 12, the Council has decided to withhold authorisation of the initiated Grace and recommends that the Regent House approves that decision.

14. The Council recommends that the Regent House endorse its approach to the University’s investment in companies that manufacture conventional weapons, as described in paragraph 5 of this Report.

23 June 2026

Note of dissent

In this Report, the Council has acknowledged that it has no control of the University’s permanent endowment, and is unable to manage or meaningfully influence the vast majority of the University’s investments – £4.6 billion. This means that the six members of the CUETB have more control over the University’s assets than the Council. These members are not trustees of the CUEF, despite the implication otherwise in this Report; the University remains fully liable for the decisions that they make and has no formal mechanism to hold this body to account. It raises serious questions about the ability of the Council to be ‘the principal executive … body of the University’ and responsible for ‘the management of its resources’.

We also have continuing concerns about the transparency regime, for which the threshold for monitoring arms is to be determined by the CUETB. The Council and the University as a whole have been told very little about our investments in arms, but it is understood that they make up less than 1.7% of the endowment. A threshold of even 2% would therefore represent a continuation of the status quo, or indeed an increase in arms investments. Failing to even consider this threshold represents an abdication of responsibility, not a ‘proper consideration of the complexities of this subject’.

The Council was given a proposed amendment of this Grace, fully compliant with trust law, that would have enshrined the transparency regime and a 0% threshold for arms and fossil fuels into Ordinance, thereby addressing the issues raised above. It declined to adopt it.

It is right that, in the absence of direction from the Council, the Regent House takes a view on the University’s investments.

23 June 2026

Note of partial dissent

We agree with the recommendation set out in paragraph 13 of the Report that the submission of the initiated Grace to the Regent House should not be authorized, for the reasons given. However, a modified version of the initiated Grace, apparently compliant with trust law and enshrining in Ordinance a 0% reporting threshold on investment exposure, was put before the Council when it discussed the Report. We would have preferred that the Council give the Regent House the opportunity to decide, as the governing body, whether it wished the University to adopt that approach or the approach recommended by the Council in paragraph 14.

23 June 2026