Meeting documents

Investments and Contracts Committee – the charity funds are now administered by the private registered charity, Y Gymdeithas, and the County Council is no longer the trustee
Tuesday, 9th February, 2010

ISLE OF ANGLESEY CHARITABLE TRUST

 

INVESTMENT AND CONTRACTS COMMITTEE

 

Minutes of the meeting held on 9 February, 2010

 

PRESENT:

 

Mr. Aled Morris Jones - Chairman

 

Messrs. R. Dylan Jones, Bob Parry OBE, Elwyn Schofield.

 

HSBC Global Asset Management (UK) Limited

 

Mr. Gareth Watts - Client Director

Mr. Angus Parker - Head of European Equities, Halbis

 

 

 

IN ATTENDANCE:

 

Treasurer,

Committee Officer (MEH).

 

 

 

APOLOGIES:

 

Messrs. E.G. Davies, H. Eifion Jones, J.V. Owen, G.W. Roberts OBE.

 

 

 

ALSO PRESENT:

 

Mr. C.Ll. Everett - In respect of Item 4

 

1

DECLARATION OF INTEREST

 

No declaration of interest was received by any Member or Officer in respect of any item of business.

 

2

MINUTES

 

The minutes of the meeting held on 3 December, 2009 were confirmed.

 

3

INVESTMENT MANAGEMENT

 

Submitted - the HSBC Global Asset Management (UK) Limited Quarterly Report for the period up to the end of December 2009.

 

The Investment Management reported that the portfolio showed a return of +4.1%, benchmark of +3.7%.  The closing value of the fund on 31 December, 2009 was £13,007,687.  The value of the fund at present was £12,534,000.  The fund outperformed its benchmark this quarter by +0.4%.

 

Mr. Gareth Watts, Client Director reported that there has been some improvement in the global markets but recovery is expected to be subdued.  He noted that equity markets again rose sharply in the fourth quarter, having started their upward move in early March.  Global Emerging markets were amongst the strongest, rising 8.6% over the quarter followed by the US, the UK and European markets which rose 6.0%, 5.5% and 3.1% respectively.  There has been doubts about the timing and strength of the economic recovery in the UK given the size of the budget deficit.  

 

 

Mr. Angus Parker gave an insight to the Committee on the UK and European Stock Markets selection over the last year.  He noted that at the beginning of 2009 the markets continued to be volatile i.e. credit was not flowing at all, politicians were realising that they were helpless to do anything to alleviate the problems.  At the end of the year everything seemed to stabilise and the immediate crisis cooled off and markets started to broaden out.  He noted that HSBC have been cautious in their stock selection in respect of the Trust fund as the long term goal is to have a yearly income of over £400,000.

 

 

 

Following a question and answer session it was RESOLVED to accept the report.

 

 

 

4

ETHICAL INVESTMENT

 

 

 

Submitted - a report by the Treasurer in relation to the above.

 

 

 

The Treasurer reported that correspondence has been received, via Mr. C. Everett from a member of the public (copies attached to the report).  Mr. Everett, as a member of the Trust, requested that the matter be discussed by the Charitable Trust.  It was agreed that the matter should be referred to this Committee for discussion.  Mr. Everett was invited to attend the meeting.

 

 

 

The main issue raised in the correspondence and background information is ethical investment.  The term is generally used to mean the selection of investments on ethical grounds - i.e. avoiding companies judged to be unethical.  An individual may well do so with his/her money to avoid profiting from activities he considers abhorrent.   However, a trustee must act in the best interest of the beneficiaries of the Trust.  Ethics can be a matter of personal belief and opinion, and there is a potential conflict between the trustee relying on his own sense of ethics against his duty to do his best for the beneficiaries of the Trust.  The ‘Bishop of Oxford’ case is the leading case law on ethical investment by charities (Appendix 4, attached to the report, reproduces Charity Commission guidance).  Following this guidance, it can be proper for a charity to follow ethical guidelines if it is related to its objectives i.e. a charity whose objectives are to alleviate suffering from cancer can legitimately avoid investing in tobacco manufacture, because there is a proven link with cancer.  It would be shaky ground in avoiding investments in gambling or armaments, which although unethical to many, have not been shown to cause cancer.  In the absence of a clear link to the charity’s mission the trustee’s objective must be to maximise return.

 

 

 

A well diversified portfolio of investments, such as that of the Isle of Anglesey Charitable Trust, will include a very small share in a large number of global companies.  It is inevitable that some of those companies, some of the time, will become involved in controversy; this cannot be easily predicted or avoided.  

 

 

 

The Treasurer further noted that the issue of ethical investment was given consideration several years ago, but no particular ethical policy was adopted.  The review of investment policy in 2006 briefly touched on the issue, but made no change.  However, the Charitable Trust, through the Investment Managers, is involved in Company Engagement, through which institutional shareholders engage with companies, and exercise voting rights, with a view to improving standard of corporate governance in the companies owned.  This trend follows a series of reports into high-profile corporate governance failings at companies, which in turn had led to unacceptable business practices or loss of value.  Although the influence of individual shareholders is minuscule, the combined effort of institutions engaging in a similar direction over a period of time should result in better corporate behaviour, which may help reduce unethical practices.  Company engagement activities are reported back to the committee as part of the quarterly reports.

 

 

 

There is potential to take shareholder voting further.  Often termed ‘responsible investment’, some shareholder activists combine to campaign against specific activities being undertaken by companies, while remaining shareholders.  For example it has been reported that an alliance of Co-operative Asset Management and 141 other institutional shareholders have forced a resolution onto Shell’s Annual General Meeting in May 2010, protesting against their involvement in the exploitation of tar sands in Canada.  They have ethical concerns about the environmental harm it will do, but are also questioning whether involvement in such activities adds value to the company.  The Trust has not so far engaged in supporting such campaigns.

 

 

 

The Treasurer referred Members of the Committee to Appendix 4 - Section F - Ethical and Socially responsible investment (Charity Commission Document) which was attached to the report.  He referred to 91. ‘The key here is for charities to make a judgement in the light of their own circumstances, rather than trying to conform to a supposedly homogeneous ‘public opinion’,  

 

Mr. C.Ll. Everett noted that he was shocked that some of the companies that the Charitable Trust invest in allegedly use ‘force labour’ and various other things; this should be a cause of concern for HSBC Investments and the Isle of Anglesey Charitable Trust as to what some of these companies are involved in.  The Treasurer noted that this Committee deals with the investment of the Trust and receives documentation from the Fund Managers on a quarterly basis.  

 

 

 

Mr. Angus Parker, Halbis reported that investment companies have corporate governance departments; and ethical investment committees to address these issues.  HSBC have signed up to the United Nations Principles on Responsible Investing in 2006 which entails that the company must prove that they conform with legislation.  The primary responsibility of HSBC is to invest the Charitable Trust money to get the best possible investment for the charity.  He noted that if the Trust does not want the investment mangers to invest in certain companies, then they must instruct them to exclude from investing in that company.  He further noted that the policy of engagement with companies is paramount.    Mr. Everett responded that the Charitable Trust should consider that they should not be investing in any company which has discredited activities i.e. forced labour.  The HSBC Investment Management responded that they are ‘brand’ cautious and consider that if a company which they invest with starts to have discredited activities, HSBC would rather try and influence that particular company to change its activities than ‘walk away’ from investing with the company.

 

 

 

Mr. E. Schofield welcomed the report on ethical investment and noted that a report is required from HSBC showing clearly the engagement the Charitable Trust is involved in and the care they take in handling the fund.  Mr. Angus Parker responded that HSBC can provide the written declaration on how there procedures, in terms of corporate governance, is dealt with.  

 

 

 

RESOLVED :-

 

 

 

Ÿ

to note the report.

 

 

 

Ÿ

to make it known that Charitable Trust are aware of proper ethical investment and that engagement policies by HSBC Asset Management have served the Trust very well up to now.

 

 

 

Ÿ

that a commitment to safeguard the objectives of ethical investment be reviewed.    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MR. ALED MORRIS JONES

 

CHAIRMAN