Graces and Divestment

Graces and Divestment - an explainer

What can you do?

 I’ll get straight to the point. We need as many academics as possible to sign this Grace. The link to sign it is here (accessible only to members of the Regent House): https://universityofcambridgecloud.sharepoint.com/:u:/r/sites/RegentHousePetitions/SitePages/HG01-Initiated-Grace-arms-divestment.aspx?csf=1&web=1&e=GvdmwT. The more academics who sign, the stronger the message we send to Council. Please do send this to all the academics you know, and encourage them to support it as it passes through the long and complex University governance processes.

What is a Grace, and how will this trigger divestment?

Now for a bit of background…

 A Grace is an official act of the Regent House (the University’s parliament, made up of all 7000 academics). They can do lots of different things - Graces are used to approve everything from a new building project to the list of people who graduate each year. Importantly, they’re also used to amend the Statutes and Ordinances (the rules that govern how the University operates). Cambridge retains a strong tradition of “bottom-up” governance. The Regent House is the governing body of this University, not the University Council (the Board of Trustees) as it is at many other universities.

 I've drafted this Grace alongside Professor Henning Grosse Ruse-Khan (Professor of Law at King’s College) and it works by amending an Ordinance which sets out who is responsible for looking after the University’s investments. It places a binding duty on them to ensure we progressively divest from arms companies. You can see the full background and formal text of the amendment below, if you’re interested.

- Matthew

Grace for submission to the Regent House under Special Ordinance A (ii) 5 (on divestment from the arms industry and the terms of reference of the CUETB)

Background

• The University Council has so far refused to make a public decision on whether or not the University will continue to invest in arms companies, as required by a Grace of the Regent House.

• In a Notice providing its response to the Grace, the Council claimed that it was not binding on the Council, as it has ultimate decision-making authority on the question of the University’s investments.

Governance of the Endowment Fund

• The University’s endowment fund (the CUEF) is managed by a wholly-owned subsidiary company of the University (UCIM). UCIM is overseen by a trustee body (CUETB) who have the final say on which investments are acceptable.

• The Council would ordinarily have authority to manage investments under Statute F I 1(a). However, this responsibility may be committed to another University body (in this case to the CUETB) under Statute F II 2.

• In accordance with the Statute, this commitment may only occur by an Ordinance enacted by the Regent House. Regent House approval is therefore implicitly required as a sensible check and balance on the ability for unelected bodies to manage the University’s resources.

• Fundamentally, the CUETB exists solely because of an Ordinance enacted by the Regent House, and its remit is defined by the Regent House in this Ordinance. As a result, its remit can be changed by the Regent House by amending the Ordinance.

Effect of the Grace

• This Grace, if approved, is binding on the CUETB, reminding them that the CUEF is an ethical collective investment scheme, and requiring them to oversee the  progressive divestment from both conventional and controversial arms companies. It also gives the CUETB and Council the opportunity to define arms companies to ensure the sustainability of the current investment model.

• Should the CUETB ignore this Grace as the Council has done previously, their membership could be changed or even dissolved entirely in a separate Grace if the Regent House wanted to take action.

• Part 1 creates a duty for the CUETB to oversee divestment from fossil fuel and arms companies, and to report on this annually to the Council and Regent House (see Annex A).

• Part 2 allows the Council to propose suitable definitions of these companies such that divestment is workable within the current investment model. An initial definition must be proposed to the Regent House by 31st July, and approved by the Regent House.

• Part 3 provides a “backstop” definition of these companies, in the case where the Regent House and the Council fail to agree on a definition by 1st January 2027.

• Part 4 ensures that all parts of this Grace are considered separately binding.

Formal Text of the Grace
That:

1. Regulation 5 of the Ordinance for the Cambridge University Endowment Trustee Body (Statutes and Ordinances, p124) be amended as follows:

   • Replace (c) with: “to ensure the Cambridge University Endowment Fund is an environmentally, ethically, and socially responsible investment scheme and oversee its approach to responsible investment;”

   • Below (c) insert:

“(d) to ensure, as part of its approach to responsible investment, a progressive decline in direct and indirect exposure to fossil fuel companies and arms companies, as defined by Ordinance, towards no exposure; and

(e) to report annually to the Regent House and the Council on its activities, including on progress against (c) and (d) above.”

• Consequentially, remove “and” from the end of (b).

1. The Council, in consultation with the Cambridge University Endowment Trustee Body, is ordered to provide a definition of fossil fuels companies and arms companies (which must encompass both conventional and controversial arms manufacturing companies). Such a definition shall be provided by way of a Report to the Regent House, not later than 31st July 2026, proposing a new Ordinance for this definition.

2. Fossil fuels and arms companies shall be defined by the following new Ordinance, with effect from 1st January 2027, unless otherwise agreed in accordance with part 2 of this Grace above:

   • “Definition of Fossil Fuels and Arms Companies

For the purposes of these Ordinances, fossil fuels and arms companies shall be defined as those companies or investments that are or would be excluded from the FTSE TPI Climate Transition Custom Developed ex Weapons ex Fossil Fuels Reserves (>50%) ex Tobacco index.”

1. If any part of this Grace is found to be non-binding on any party, all other parts of this Grace shall stand as separately binding.

Annex A: Current and Proposed Ordinance for the CUETB

Current Regulation 5

1. The duties of the Cambridge University Endowment Trustee Body shall be:

   • to represent the University in its role as sole trustee of the Cambridge University Endowment Fund representing the interests of unitholders as a whole;

   • to represent the University in its role as sole member of University of Cambridge Investment Management Limited; and

   • to report annually to the Regent House on its activities.

Proposed Regulation 5

1. The duties of the Cambridge University Endowment Trustee Body shall be:

   • to represent the University in its role as sole trustee of the Cambridge University Endowment Fund representing the interests of unitholders as a whole;

   • to represent the University in its role as sole member of University of Cambridge Investment Management Limited;

   • to ensure the Cambridge University Endowment Fund is an environmentally, ethically, and socially responsible investment scheme and oversee its approach to responsible investment;

   • to ensure, as part of its approach to responsible investment, a progressive decline in direct and indirect exposure to fossil fuel companies and arms companies, as defined by Ordinance, towards no exposure; and

   • to report annually to the Regent House and the Council on its activities, including on progress against (c) and (d) above.