Dorchester United Church


For a printable PDF of this policy Click Here

DORCHESTER UNITED CHURCH

INVESTMENT POLICY


Preface

As a requirement of the Congregational Board of Trustees Handbook, published in 2004, the task of managing investments has been assigned to the Board of Trustees. In governing how the Trustees manage the investments of the charge, the laws of Ontario (Ontario Trustee Act) use the "prudent investor" rule which places a general duty on trustees to make reasonable investment decisions without undue risk.

The guidelines set down in the Trustee's handbook specify that gifts, legacies, and such are to be decided by the Church Board whether the gift is to be invested or used immediately. If the gift is to be invested, the investment must be made in the name of the Trustees and the revenue used as the Church Board may direct.

If the gift is to be used immediately, it must be turned over to the Treasurer with instructions from the Church Board as to its use.

Prudent Investor Approach to Investments

In investing trust property, trustees must exercise the care, skill, diligence, and judgment that a prudent investor would exercise in making investments and may invest trust property in any form of property in which a prudent investor might invest.

The Ontario Trustee Act sets out seven criteria that must be considered in planning the investments of trust property. They are:

  1. General economic conditions,
  2. The possible effective of inflation or deflation,
  3. The expected tax consequences of investment decisions or strategies,
  4. The role that each investment or course of action plays within the overall trust portfolio,
  5. The expected total return from income and the appreciation of capital,
  6. Needs for liquidity, regularity of income, and preservation or appreciation of capital, and
  7. An asset's special relationship or special value, if any, to the purposes of the trust or to one or more of the beneficiaries.

Official Board Approval

Although individual investment decisions are the responsibility of the Board of trustees, the investment policy should be considered and approved by the Official Board.

Protection from Liability

  1. Dorchester United Church will indemnify and save harmless the members of the Board of Trustees against and from any and all losses, liability, claims or demands by reason of their acting as members of the Board of Trustees except in respect of liability, claims or demands arising out of their own willful misconduct or gross negligence.
  2. Notwithstanding (1) above, members of the Board of Trustees must exercise the care, skill, diligence and judgement that a prudent investor would exercise in making investments.

STATEMENT OF OBJECTIVES

The investment portfolio will be managed in such a way as to optimize total return as the key to the trust's long-term viability. The primary goal is to provide a predictable stream of income growing in line with inflation, while trying to grow the principal over time. The Trustees will target a return objective to maximize return without taking undue risk as set out in the investment policy. The preservation of capital from the proceeds of the sale of the manse must be ensured. The maintenance of an adequate level of liquidity to meet anticipated funding requirements are necessary, as well as maximizing long term growth.

To ensure these objectives and goals are satisfied, the Board of Trustees will report at least annually to the Church Board. Monthly statements will be forwarded to the Treasurer for review.

Liquidity

Except for investment purposes and periodic payment of accumulated income,the fund requires a liquidity capability that meets the requirements of the Church Board.

INVESTMENT POLICY

The trust fund should be structured using asset allocations structured to meet the requirements of income and long-term growth and satisfying the risk tolerance established within this document. The portfolio must allow for flexibility to react to changing economic, business and investment market conditions. A long-term discipline approach must be promoted to discourage random revisions based on panic, emotion or overconfidence.

Asset Class Characteristics

The portfolio will combine asset classes in such a way as to provide the highest expected return for a given level of risk. Economic conditions, changes in interest rates, and price inflation will be considered as part of the asset class allocations.

Investment Guideline

  1. Eligible Investment Classes: The portfolio may be invested in any of the following asset categories, subject to qualitative and quantitative constraints as noted below.
    1. Equities:Common or preferred shares of publicly traded Corporations.
    2. Fixed Income: Bonds, debentures, notes or other debt instruments of all Canadian government agencies (including Provinces and Municipalities) or corporations.
    3. Cash: Cash, or money market securities issued by governments or corporations.
    4. Mutual Funds or Electronic Traded Funds whose underlying assets are based on any combination of 1, 2, or 3.
  2. Asset Class Allocation: The asset class weighting will be targeted to be within the ranges and restrictions as follows. These allocations and the portfolio's risk tolerance will be reviewed at least annually by the Trustees in concert with the Church Board.
  3. Equities: 0% to 50%:

    • To include common and preferred shares of publicly traded corporations. No more than 20% of the equity portfolio will be invested in any one company.

    Fixed Income: 50% to 100%:

    • No more than the Canadian Deposit Insurance Corporation (CDIC) coverage limit shall be invested in any one GIC provider. In 2012, for example, this is $100,000.
    • No more than 20% of the bond part of the portfolio at the time of purchase shall be invested in any one company. No bonds will be included in the portfolio with a credit rating by a major Canadian rating agency below BBB at purchase.

    Cash: 0% to 30%

    • All Cash Deposits shall be made in accordance with the Canada Deposit Insurance Corporation (CDIC) coverage limits.

Return Objectives

The return objectives can only be pursued in accordance with the designated tolerance for risk. As there will always be some degree of uncertainty concerning the amount and pattern of future investment returns, investors must know how much certainty they are willing to sacrifice in exchange for the promise of higher returns. To distinguish between longer-term realities, short-term risk can be thought of as how often, and to what extent, you may experience a loss of capital over periods such as a few quarters of a year. In the long-term, risk is the possibility that growth and/or income generated by the portfolio may not meet your expectations, or more critically, your needs. In general, the greater the ability to assume short-term risks, the more likely that the assets will generate sufficient long-term growth and/or a higher average level of income.

Time Horizon

The trust fund's time horizon is long as the funds are expected to be invested in perpetuity.

Geographical Orientation and Ethical Considerations

Since we are living in a global economy, restrictions to specific countries need to be considered.

It is acknowledged that the definition of "ethical" in the investment environment is highly subjective. With their responsibility of managing investments, the Board of Trustees will interpret the definition of unethical investments using the Social and Environmental Screening Criteria included in this document.

Social and Environmental Screening Criteria

Introduction:

This document presents a set of screening criteria to be applied to Investments in the Portfolio. The criteria are designed to be practical enough to provide clear guidance to the Board of Trustees. The criteria are intended to honour the Church's desire to invest its funds in a manner consistent with its values and mission, as well as the fiduciary responsibilities of the members of the Board of Trustees.

Dorchester United Church instructs the Board of Trustees to decline investment opportunities in the following categories at a minimum:

  1. Tobacco
  2. Alcohol
  3. Weapons
  4. Pornography
  5. Gaming/Gambling

Companies that engage in these business activities, in a regular, continuous and substantial basis are not to be considered.

The Church Board and the Congregation of the Dorchester United Church,through its planning process, may choose to allocate funds for investment purposes in support of the Congregation's Mission Statement commitment to social justice and The United Church of Canada policy with respect to corporate social responsibility, whereby funds may be directed to categories of investment considered to be more socially desirable than financially attractive. These decisions would be discussed with the Board of Trustees to determine their impact on the overall portfolio.

Sunset Provision

The Policy shall be reviewed jointly by the Board of Trustees and the Church Board at no longer than 5-year intervals.

REFERENCES

  1. Congregational Board of Trustees Handbook, The United Church of Canada, 2004 edition
  2. The United Church of Canada Responsible Investing Guiding Principals, May 2018
  3. Riverside United Church Investment Policy Statement, Ottawa ON, 2015
  4. Investment Policy Nelson United Church, Nelson BC, March 2015
  5. Investment Policy of City View United Church, Version 1.0, Ottawa ON, April 2012

2004 Original issue

  • Robert Morris

2018 Revision No. 1

  • Glenn Baskerville
  • Carla Dos Santos
  • William Greason
  • Robert Holland