A number of clients and prospects have asked how their Investment Policy Statement (IPS) can be amended to accommodate responsible investing strategies.
In response, we have prepared a rider which can be inserted into the IPS of institutions that are seeking to engage in Socially Responsible Investing (SRI), Environmental, Social and Governance (ESG) investing, Impact investing or total or partial divestment of fossil fuel-related investments.
The rider requires that the institution’s Board demonstrate that the particular responsible investing strategy being pursued is consistent with (i) the institution’s charter; (ii) other Board resolutions and actions; and (iii) in the case of donor-restricted funds, donor intent as expressed in a gift instrument.
The Board must also take action to demonstrate that it has behaved prudently according to the standards set forth in UPMIFA, which require examination and discussion of, among other things, (i) donor intent (in the case of donor-restricted funds); (ii) costs; and (iii) other relevant facts relating to the particular responsible investing practice or practices being pursued.
For institutions located in Pennsylvania, which is a non-UPMIFA jurisdiction, the rider attempts to be broadly consistent with the requirements of the Uniform Prudent Investor Act, which is in effect there. The rider is not intended to be used by public or private pension funds, although they may desire to examine it as an informational matter.
We hope that institutions will find the rider useful, bearing in mind that Commonfund is not a law firm and the rider is not legal advice. Institutions should consult their own legal counsel in determining whether, and how, to incorporate the rider into their own investment policy and practice.
