Uniting Financial Services Debt Investor Presentation ... · Feb 18 12.94 Aug 18 12.76 Feb 19 12.85...

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


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.


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.


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

6


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


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


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)


Church Structure in NSW and ACT

Synod Property trust

Uniting resources

Mission & education Uniting

TIS/UCTAL

Presbyteries – 13

Congregations and parish missions – 400+


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


2. UFS and sustainability


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


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


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 5 | 9

UCTAL investments aligned to SDG

Mapping of SDG to each principle refer to UFS SDG Bond Framework


3. The SDG Bond Framework


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


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-


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


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


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


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


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


4. Performance and reporting


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*


% 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


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


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.

Debt Investor Presentation November 2019

5. Summary of the proposed issue

29


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


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


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.

Uniting Financial Services Debt Investor Presentation ... · Feb 18 12.94 Aug 18 12.76 Feb 19 12.85...

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