Investment Policy Update

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The decision

2020-06-29 · Toronto City Council · amended

As filed

City Council on June 29 and 30, 2020 adopted the following: 1. City Council approve the following amendments to the City Council-approved Investment Policy (Policy) and adopt the amended Policy as shown in Attachment 1 to the report (January 21, 2020) from the Chief Financial Officer and Treasurer: a. the Investment Beliefs (Section 2.2) be enhanced to include recognition of Environment, Social and Governance factors as material to risk/return outcomes; b.

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the Environmental, Social, and Governance Factors (Section 6.6) be strengthened by having investment managers consider the United Nations' 17 sustainable development goals which includes climate change, and that these investment managers have a process that integrates Environment, Social and Governance in the analysis and on-going review of the assets under management; c. Long Term Fund and Sinking Fund Long Term Constraints (Section 3.2 (b)) to add a subsection named "Investments in Pooled Funds, Mutual Funds, and other similar products", to allow the Chief Financial Officer and Treasurer, at the Chief Financial Officer and Treasurer's discretion, to accept minor variations of the City's Investment Policy when compared to the standard terms in the policies of these funds; d. Asset Mix Guidelines (Section 2.4 (b)) and Real Asset Portfolio Constraints (Section 3.2 (b)(iii)) such that references in the Real Assets sub-category to "Canadian Core" and "Global Core" be replaced with "North American/Global Core"; and e. references to the Chief Financial Officer be updated to reflect the current title of Chief Financial Officer and Treasurer. 2. City Council request the Toronto Investment Board and the Chief Financial Officer and Treasurer to develop a process to monitor and report on whether or not external investment firms hired by the City are compliant with the terms of the Investment Policy governing Environmental, Social, and Governance Factors and that the information and data regarding climate change risk from these reviews be reported to City Council semi-annually. 3. City Council request the Toronto Investment Board to incorporate Environmental, Social and Governance factors into its investment decision-making through its due diligence processes when choosing Investment Managers. 4. City Council request the Chief Financial Officer and Treasurer and the Toronto Investment Board, when considering any changes to the Investment Policy, to consider and incorporate internationally-recognized best practices for Environmental, Social and Governance.

On the agenda

As the city filed it

City Council on January 29, 2020, referred Item CC14.4 to the Executive Committee for further consideration. Provincial legislation requires City Council to review and update the Investment Policy on an annual basis as required. Since January 1, 2018, the City's long-term investments have been managed by the Toronto Investment Board under a new Council adopted Investment Policy which is based on the prudent investor standard.

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Changes to the Investment Policy are reviewed and adopted by Toronto Investment Board before they are brought forward to City Council. This report also responds to Council direction to review and report on sections of the Investment Policy with regard to Environmental, Social, and Governance factors and makes recommendations to enhance these sections. The Chief Financial Officer and Treasurer along with other City staff have consulted with several stakeholders and subject matter experts with regard to Environmental, Social, and Governance and climate change. Additional consultations were made with the Toronto Investment Board and The Atmospheric Fund following the direction by Council in October 2019. This report makes a recommendation to add a section to allow for the Chief Financial Officer and Treasurer to accept minor variations of the City's Investment Policy when compared to the standard terms in the policies of pooled funds (and other types of funds). These funds are allowed by the current legislation and would be reviewed and selected by Toronto Investment Board. The report makes a recommendation to the Real Assets section of the Investment Policy to allow for the Real Estate sub-component to change its geographic focus to a North American/Global basis. This change would provide greater liquidity and transparency. In addition, widening the geographical scope provides more options and flexibility to improve the risk and return profile.

Considered

2020-06-22 · Executive Committee · amended
Decision as filed
The Executive Committee recommends that: 1. City Council approve the following amendments to the City Council-approved Investment Policy (Policy) and adopt the amended Policy as shown in Attachment 1 to the report (January 21, 2020) from the Chief Financial Officer and Treasurer: a. the Investment Beliefs (Section 2.2) be enhanced to include recognition of Environment, Social and Governance factors as material to risk/return outcomes; b.
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the Environmental, Social, and Governance Factors (Section 6.6) be strengthened by having investment managers consider the United Nations' 17 sustainable development goals which includes climate change, and that these investment managers have a process that integrates Environment, Social and Governance in the analysis and on-going review of the assets under management; c. Long Term Fund and Sinking Fund Long Term Constraints (Section 3.2 (b)) to add a subsection named "Investments in Pooled Funds, Mutual Funds, and other similar products", to allow the Chief Financial Officer and Treasurer, at their discretion, to accept minor variations of the City's Investment Policy when compared to the standard terms in the policies of these funds; d. Asset Mix Guidelines (Section 2.4 (b)) and Real Asset Portfolio Constraints (Section 3.2 (b)(iii)) such that references in the Real Assets sub-category to "Canadian Core" and "Global Core" be replaced with "North American/Global Core"; and e. references to the Chief Financial Officer be updated to reflect the current title of Chief Financial Officer and Treasurer. 2. City Council request the Toronto Investment Board and the Chief Financial Officer and Treasurer to develop a process to monitor and report on external investment firms hired by the City are compliant with the terms of the Investment Policy governing Environmental, Social, and Governance Factors and that the information and data regarding climate change risk from these reviews be reported to City Council semi-annually.
2020-06-29 · Toronto City Council · amended

On the record

The item as the City filed it

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