The Municipal Investment Policy Statement
The Municipal Investment Policy Statement (IPS) is the responsibility of Council and is best undertaken with expert advice. Its objective is to lay down parameters for investing municipal funds and it is intended to be valid for a policy-type timeframe, say five years or more. Of course, it should be reviewed annually for appropriateness, in accordance with regulations. The IPS provides direction to internal and external staff investing funds, and focuses specifically on defining municipal risk tolerance.
The IPS may address the parameters for both short- and long-term investments. Regulations require the IPS to take into account:
- General economic conditions;
- The effect of inflation;
- The role that each investment or course of action plays within the total portfolio;
- The expected total return; and,
- Needs for liquidity, regularity of income and preservation or appreciation of capital.
The IPS may also provide for investment procedures, such as who is authorized to make decisions and how reporting must be done.
It is crucial that Council and staff have a clear understanding of their risk tolerance before investing money. Normally, coming to this understanding takes several discussions that define risk tolerance based on needs for liquidity, the adequacy of capital funding for investment needs, the ability to delay targeted spending and personal comfort with downturns, among other issues.
ONE Investment has a investment manager to advise staff and Council on risk tolerance and translating it into an IPS. ONE Investment is dedicated to developing a range of tools and templates to support municipal finance leaders through the process, whether they choose prudent investing or stay on the legal list. This includes templates for investment policy statements and other regulatory requirements. ONE’s new service team of finance experts will also be supporting municipal investors. The goal is to provide all municipalities, regardless of staff capacity, the ability to benefit from the long-term financial benefits of investment revenues.
|Investments are subject to many risks and best practice is to take Environmental, Social and Governance factors (ESG) into consideration when selecting and reviewing managers. Also, investment policies should integrate the recommendations of the international Taskforce on Climate Related Financial Disclosures to ensure that information about (growing) climate-related risks is taken into account. TAF’s recommendations for updating the Toronto Investment Board’s IPS can be found here. Investments are subject to many risks and best practice is to take Environmental, Social and Governance factors (ESG) into consideration when selecting and reviewing managers. Also, investment policies should integrate the recommendations of the international Taskforce on Climate Related Financial Disclosures (TCFD) to ensure that information about (growing) climate-related risks is taken into account. TAF’s recommendations for updating the Toronto Investment Board’s IPS can be found at https://www.toronto.ca/legdocs/mmis/2019/ib/bgrd/backgroundfile-132451.pdf
Hi Julia, thanks for responding!
At ONE Investment we take ESG considerations seriously and we expect investment managers to be proactive on this front. Environmental reporting is a positive step in the right direction but it a small part of the overall responsibilities that are involved with ESG.
We tend to place emphasis on actions that firms can take to affect change. Management/directors of firms can directly influence behavior of their firm and as such we believe better environmental reporting is but one step in the right direction.
Shareholders can often express their view on environmental related issues as they relate to listed firms via proxy voting. We encourage our investment managers to make these proxy votes count as they influence policy at listed firms, and are a way to directly influence behavior.
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