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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.
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Following a question and answer session it was
RESOLVED to accept the report.
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Submitted - a report by the Treasurer in relation to the
above.
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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.
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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.
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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.
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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.
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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.
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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’,
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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.
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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.
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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.
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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.
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that a commitment to safeguard the objectives of
ethical investment be reviewed.
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