Cambridge endowment launches sustainability principles for hedge funds

The University of Cambridge’s investment manager, University of Cambridge Investment Management (UCIM), has introduced sustainability principles for hedge fund managers, aiming to enhance climate engagement and enhance emissions transparency in the university’s £5.5bn endowment. UCIM, responsible for overseeing the endowment, encourages other asset owners to adopt the framework, which outlines expectations for managers based on their investment strategies and ability to influence real-world decarbonisation.

The principles are structured around four key areas: climate expectations, targeted engagement, strategy-specific approaches, and improved emissions disclosure. UCIM is on track to achieve net-zero greenhouse gas emissions across its portfolio by 2038 and intends to eliminate meaningful exposure to fossil fuels by 2030. Absolute-return and credit strategies make up more than a fifth of the endowment.

UCIM's framework adopts a differentiated approach, expecting managers in absolute-return and credit strategies to adopt stronger commitments, such as fossil fuel restrictions and structured engagement programmes. In contrast, for other strategies, the focus is on limiting new funding for fossil fuel activities and improving transparency.

The initiative has received a positive response from managers, although some have requested additional clarification before agreeing to the principles. UCIM intends to prioritize engagement but reserves the right to terminate relationships if progress remains insufficient. The framework seeks to offer institutional investors a practical approach to incorporate climate objectives into hedge fund allocations while acknowledging the differences between various investment strategies.