Post on 23-Sep-2020
Disciplined ethical investment with a heart for the Church’s mission
Uniting Financial ServicesDebt Investor Presentation November 2019
2Debt Investor Presentation November 2019
Agenda
1. About UFS
2. UFS and sustainability
3. The SDG Bond Framework
4. Performance and reporting
5. Summary of the proposed issue
For more information see the SDG Bond Framework
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The presenters
Warren Bird Executive Director
Warren has been Executive Director of Uniting Financial Services since January 2015. His prior career in fixed income markets included 16 years as Head of Global Fixed Income and Credit at Colonial First State.
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The presenters
Matthew Moore Head of Ethical Investments
Matthew is Head of Ethical Investments at Uniting Financial Services and been with UFS for 19 years. He has been a Director of the Responsible Investment Association of Australasia and a Director of the Uniting Church Superannuation Fund.
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The presenters
Ian Perry
Chief Financial Officer
Ian is the CFO and has been with UFS for 2 years. Previously working in senior finance roles including positions with Magellan Financial Group, BT Investment Management (now Pendal), Treasury Group (now Pacific Current) and MLC.
Debt Investor Presentation November 2019
1. About UFS
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Who is UFSTreasury and Investments arm of the Uniting Church in NSW and ACT
• We manage the Church’s financial assets and provide oversight of the Church’s investment strategy
• “The Church” includes organisations such as local congregations, parish missions (e.g. Wayside Chapel, Parramatta Mission), aged care, early learning, etc.
Managing the funds professionally, ethically and profitably
• To deliver market competitive returns to investors
• We pay a distribution that supports the mission of the Church
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Who is UFSAll investment governed by the Ethical and ESG Investment Policy
• Ethical principles are aligned to the Sustainable Development Goals (SDG’s)
• Actively seek positive investments, as well as avoiding those we regard as negative
• Issue proceeds will be used to invest in SDG aligned assets
Two lines of business under our AFSL
• Balance Sheet – prudentially managed
• Managed Funds for wholesale investors
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Investments
Managed funds
Growth assets ($85m)
Church loans ($111m)
Commercial loans ($493m)
Domestic & global cash & fixed interest ($550m)
Unit holders
Funding
Capital ($140m)
Church members ($118m)
Church organisations ($921m)
Senior debt ($60m)
Managing the Church’s funds1. Balance Sheet ($1.24 bn)
31 August 2019
• Capital = contributed + retained earnings
• Church investors want a safe, reliable, competitive interest rate return (Avg interest paid over last 12 months was 2.34%)
• Funds invested in a diversified portfolio of assets (Avg return last 12 months 3.94%)
– Excess return covers costs, supports distribution and builds capital
• Asset allocation aligns portfolio with our liabilities, capital adequacy and liquidity processes (regulatory standards)
2. Ethical Diversified Fund and Equity Fund ($0.4 bn)
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Church Structure in NSW and ACT
Synod Property trust
Uniting resources
Mission & education Uniting
TIS/UCTAL
Presbyteries – 13
Congregations and parish missions – 400+
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UCTAL organisation chart
EXECUTIVE DIRECTOR
Warren Bird COMPANY SECRETARY
Mary Kapota
STRATEGY PROJECTS & OPERATIONS
John McComb
Total staff count 30 Investment management 11 Client services 9 Corporate & executive 10
RISK & COMPLIANCE
Michael Noakes
CRO
ETHICAL INVESTMENTS
Matthew Moore
PARTNER SOLUTIONS & SUPPORT
Linda Johnson
FINANCE
Ian PerryCFO
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2. UFS and sustainability
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History of ethical policy
PRI reporting framework
UFS has a score of A+ for Strategy and Governance
Uniting Church formed
Policy review Further reviews
PRI signatory
Fossil fuel divestment
strategy
Review to enhance positive elements of policy
SDG alignment project commenced
Portfolio scoring
across all asset classes
1977 1980 1999 2000 2010 2012 2013 2016 2018 2019
Ethical Investment Policy established
Work commenced
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Fossil fuel divestment
Staged approach over 3 years – now fully implemented
STAGE 140% net revenue
STAGE 2 25% net revenue
STAGE 310% net revenue
STAGE 40% Exposure
2014
2015
20162017 onwards
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Principle 1 | 4 | 5
Principle 1
Principle 3 | 5 | 6 | 8
Principle 1 | 2 | 4 | 6
Principle 2 | 7
Principle 1
Principle 7 |11 | 12
Principle 2
Principle 5
Principle 1 | 2 | 9
Principle 5
Principle 3
Principle 10 | 11 | 12
Principle 10 | 11 | 12
Principle 10 | 11 | 12
Principle 9 | 13 | 14
Principle 5 | 9
UCTAL investments aligned to SDG
Mapping of SDG to each principle refer to UFS SDG Bond Framework
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3. The SDG Bond Framework
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Use of proceeds – diversified portfolioFunding
Capital ($140m)
Church members ($118m)
Church organisations ($921m)
Senior debt ($60m)
0% 20% 40% 60%
Loans Asset allocation range 45–65%
48.73%
44.37%
6.90%
Asset allocation range 35–45%
Asset allocation range 0–10%
ESG Score
ESG Score
ESG Score
Treasury assets
Growth assets
Commercial/church lending B
Internally managed B
Externally managed B+
Equities B
Infrastructure/property A-
Upper limit Current Lower limit
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Governance of the policy – evaluation of investmentsEthical Investment Monitoring Committee has policy oversight
• UFS and Uniting (social services arm of the Church) committee representation
Research of individual investments and portfolios of Church bodies
• Conducted by ISS CAER (Global Ethical and ESG consultant) and UFS
• Methodology – ESG Scoring portfolio holdings A+ to D-
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Governance of the policy – evaluation of investmentsMember of RIAA
• Modern Slavery working group
• Engagement working group
Direct engagement by
• UFS direct
• Via Investment Management partners
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ESG scoring methodology• ISS CAER 12 rating bands D- to A+
• UFS Methodology linked to ISS CAER scoring style
• Equities and Fixed Interest – ISS CAER methodology
• Property, Infrastructure and Lending (Church and Commercial) - UFS methodology linked to ISS CAER Scoring Style
• Individual security, portfolio and total balance sheet scoring
• B- and above represents an activity which is neutral or positive according to our Ethical and ESG principles
- 98% of UFS portfolio is B- and above
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Treasury assets• Green Bond Market has developed significantly over past 10 years
• Green Bonds in mandates -Internal and Externally managed
• Seeded Domestic Sustainable Bond Fund (Lonsec Innovation Award 2016)
• International credit fund mandate
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Lending• Commercial and Church lending
• Asset specific and tenancy assessment
• Loan portfolio assessed on an individual basis for SDG specific alignment and outcomes
• Score each individual loan and any SDG specific alignment
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Growth assets• External managers have a mandate to implement our policy
• Active engagement by our equity managers
• Strategic uplift of NABERS ratings in Commercial Office Buildings
• Capital Expenditure on individual asset with Sustainability Outcomes in mind – Cladding removal
• Infrastructure assets looking to implement solar and waste management strategies
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4. Performance and reporting
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Financials August 2019
UFS risk weighted capital %
■ UFS Capital ■ Tier 1 Capital (4 majors average)**
Feb 17
13.57
Aug 17
13.41
Feb 18
12.94
Aug 18
12.76
Feb 19
12.85
Aug 19
13.15
% 14
13
12
11
10
9
8
$m Feb17 Aug 17 Feb18 Aug18 Feb19 Aug19
UFS assets 1,222 1,355 1,348 1,284 1,217 1,253
UFS liabilities 1,111 1,234 1,223 1,153 1,086 1,113
UFS capital 111 121 125 131 131 140
* Includes small non-investment balance sheet items such as receivables/payables, provisions, intangibles and prepayments.** www.apra.gov.au/quarterly-authorised-deposit-taking-institution-statistics
Assets and liabilities*
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% UFS
Australian mutual ADI’s*
YTD Aug 19 annualised
12 months to Jun 19
Net interest income to assets 1.31 2.08
Profit margin 53.48 21.00
ROE (before tax) 12.19 6.84
Cost to income ratio 46.52 77.68
% Feb17 Aug 17 Feb18 Aug18 Feb19 Aug19
UFS total performance**
4.55 4.11 3.88 3.56 3.53 3.94
Treasury 3.99 3.62 3.39 2.74 2.76 3.42
Loans 4.98 4.94 4.82 4.78 4.82 4.65
Growth 6.91 5.70 4.13 7.37 3.13 3.33
Financials August 2019
UFS cost of funds %Performance ratios %
%
2
1
0Feb 17
2.48
Aug 17
2.30
Feb 18
2.34
Aug 18
2.40
Feb 19
2.41
Aug 19
2.34
* www.apra.gov.au/quarterly-authorised-deposit-taking-institution-statistics** 12 month rolling performance
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Disclosure and reporting• UFS recognizes the importance of being transparent and making
publically available the following reporting information for investors on the UFS website: www.unitingfinancial.com.au
• Framework – at time of first issuance under this Framework (and as updated or amended)
• Assurance statements – at initial issuance and subsequent to issuance (within a year from issuance date), and annually thereafter
• Use of Proceeds Report – annually (this will be in line with UFS financial reporting)
• Consolidated Impact reporting where applicable, e.g. at least twice throughout the life of the bonds on issue
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EY AssuranceAssurance conclusion
Based on our reasonable assurance procedures, as described in this statement as of 14 October 2019, in our opinion UFS’ bond pre-issuance process in relation to its 2019 Sustainable Development Goal (SDG) Bond meets the requirements of the Sustainanbility Bond Guidelines 2018 and associated Social Bond Principles 2018, in all material respects.
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5. Summary of the proposed issue
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The Proposed Issue*UFS intends to issue a Sustainability Bond in line with the UN SDG (SDG Bond)
Issuer UCTAL
Issuer Rating Unrated
Deal Size [A$30m – $50m]
Tenor 10 Year
First Call Date 5 Years
Coupon Step 0.75%
Format [FRN]
Frequency of Rate Set Quarterly
Sustainable Bond Framework/ Assurance Statement
www.unitingfinancial.com.au
* Please see the Information Memorandum and Pricing Supplement for more information
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Summary• First Sustainable AUD Bond issued by a not-for-profit
• Use of proceeds will be to invest in assets on the UCTAL balance sheet according to the Ethical and ESG Investment Policy and which support the Sustainable Development Goals
• Profits from UFS investments will assist in the payment of a distribution to the Synod of the Uniting Church in NSW and ACT
• PRI signatory since 2010
• PRI reporting framework - UFS received a score of A+ for Strategy and Governance
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Disclaimer• All materials, views, and opinions contained in this presentation are distributed by Uniting
Financial Services and are for information only. They are not to be considered professional financial investment advice.
• The presentation and its contents are provided on an ‘as is’ basis with no guarantee of completeness, accuracy, usefulness or timeliness, and without warranties of any kind whatsoever, express or implied. Uniting Financial Services assume no responsibility or liability for any errors or omissions.
• Financial services are provided by The Uniting Church (NSW) Trust Association Limited ACN 000 022 480, ABN 89 725 654 978, AFSL 292186 (“UCTAL”) and by The Uniting Church in Australia Property Trust (NSW) ABN 77 005 284 605 (“UCAPT”) (together and separately “Uniting Financial Services”), for The Uniting Church in Australia, Synod of NSW and the ACT (“Synod”), under s.911A Corporations Act 2001 (Cth) authorisation and pursuant to APRA Banking Exemption No. 1 of 2017 and ASIC Regulatory Guide 87 and ASIC Corporations (Charitable Investment Fundraising) Instrument 2016/813 exemptions. Uniting Financial Services® is a registered trademark of UCTAL used with permission by UCAPT. None of The Uniting Church in Australia, UCAPT and UCTAL is prudentially supervised by APRA. Therefore, investments with and contributions to these Uniting Church organisations will not receive the benefit of the financial claims scheme or the depositor protection provisions in the Banking Act 1959 (Cth.). All financial services and products are designed for investors who wish to promote the religious and charitable purposes of Uniting Financial Services and The Uniting Church in Australia and for whom profit considerations are not of primary importance in their decision to invest.