Terms of Reference for Ad Hoc Working Group on Responsible Investing
In recent years there has been increasing interest in the practice of “responsible investing” especially for organizations with large holdings of investments held for endowment or similar purposes. Many universities now have adopted policies that recognize various types of actions that can be used to engage in “responsible investing”.
Most recognize and rely on the following description of RI from the “Principles for Responsible Investing” (PRI), part of an initiative involving the UNEP Finance Initiative and UN Global Compact:
“Responsible investment is an approach to investment that explicitly acknowledges the relevance to the investor of environmental, social and governance (ESG) factors, and the long-term health and stability of the market as a whole. It recognizes that the generation of long-term sustainable returns is dependent on stable, well-functioning and well governed social, environmental and economic systems. Responsible investment requires investors and companies to take a wider view, acknowledging the full spectrum of risks and opportunities facing them, in order to allocate capital in a manner that is aligned with the short and long-term interests of their client and beneficiaries.”
There is also mounting evidence that consideration of ESG factors is not inconsistent with the achievement of strong long-term financial portfolio returns.
In this context, the Board of Governors wishes to consider development of a policy on responsible investment for the University’s Endowment Fund portfolio. To this end, it is recommended that an ad hoc Working Group on Responsible Investing be established with the following mandate.
The mandate of the ad hoc Working Group on Responsible Investing (WGRI) is to facilitate the Board of Governors’ desire to consider a policy on Responsible Investing (RI) that will be applied to the University’s Endowment Fund. The specific objective of the WGRI will be to prepare a report on RI for consideration by the Finance Committee that includes recommendations on options for a RI policy
The Finance Committee will have the responsibility to make a recommendation to the Board of Governors on any changes to relevant University policies and procedures affecting the University’s Endowment Fund. Final decisions on any recommendations emerging from the process will be made by the Board of Governors.
In arriving at this outcome the WGRI will undertake a process of investigating existing policies in other jurisdictions with particular focus on universities in Canada. In exploring options, the WGRI may consider policy and process options that are considered among ‘best practices’ among major North American or Canadian universities and/or organizations in the not-for-profit sector in regards to RI.
In its deliberations the WGRI must consider the following factors as paramount in developing recommendations on any RI policy for the University’ Endowment Fund:
- The members of the Board of Governors have a legal responsibility to act in a prudent and effective manner in the oversight of managing the Endowment Fund portfolio. A major test of this responsibility includes ensuring policies and procedures provide for the highest return for the Endowment Funds and are subject to acceptable levels of risk.
- The Endowment Fund must be managed in the best interests of the beneficiaries of the Fund and the policies and operational procedures regarding the investment of the Endowment Fund must reflect the University’s fiduciary responsibilities and related expectations of donors to the University.
- Any RI policy recommendations must complement the mission, aims, values and governance culture of the University. While it is helpful to look at the “best practices” in RI polices, there is no ‘one-size-fits-all’ model and the feasibility of any policy recommendations must be based on University of Guelph’s current investment objectives, existing policies, and related procedures for the University’s Endowment Fund.