Report: Business Board - April 28, 2020

Virtual Meeting via ZOOM

April 28, 2020

To the Governing Council,
University of Toronto.

Your Board reports that it held a virtual meeting on Tuesday, April 28, 2020 at 5:00 p.m. with the following members:

Brian D. Lawson (Chair); Bruce Winter (Vice-Chair); Scott Mabury, Vice-President, Operations and Real Estate Partnerships; Kelly Hannah-Moffat, Vice-President, Human Resources and Equity; Sheila Brown, Chief Financial Officer; Preet Banerjee; Robert G. Boeckner; David Bowden; K. Sonu Gaind; Gary D. Goldberg; Sarosh Jamal; Kathryn A. Jenkins; Joan Johnston; Anna Kennedy; Jan K. Mahrt-Smith; Joanne McNamara; Brian A. Miron; John Paul Morgan; Susan Rodgers; Ian Taylor; Chris Thatcher; Keith Thomas; Laurent-Philippe (L.P) Veilleux

Sue Graham-Nutter; Yining (Elin) Gu

Anwar Kazimi, Deputy-Secretary of the Governing Council; Patrick F. McNeill, Secretary, Secretary, Business Board; David Walders, Assistant Secretary

Non-Voting Assessors:
Cheryl Regehr, Vice-President and Provost; David Palmer, Vice-President, Advancement; Anne E. Macdonald, Assistant Vice-President, Ancillary Services; Trevor Rodgers, Assistant Vice-President, Planning and Budget

In Attendance:
Renata Faverin, Director, Procurement Services; Rosalyn Figov, Chief Operations Officer, Office of the Vice-President Human Resources and Equity; Elizabeth Cragg, Director, Office of the Vice President, Operations & Real Estate Partnerships; Jay Pratt, Vice-Dean, Research & Infrastructure, Faculty of Arts and Science; Andrea Russell, Director, Academic Affairs, Office of the Vice-President & Provost; Daren Smith, President and Chief Investment Officer, University of Toronto Asset Management Corporation (UTAM)


Pursuant to section 33(i) of By-Law Number 2,
items 13-14 were considered in camera.

1. Chair’s Remarks

The Chair welcomed members and guests. He reported that Item 2 regarding the incorporation of an Academic Pharmacy at the Leslie Dan Faculty of Pharmacy had been withdrawn by its sponsor.

COVID-19 Update

In light of the circumstances, the Chair invited the Provost to make some comments regarding COVID-19.

Professor Cheryl Regehr, Vice-President and Provost, provided an update as of April 28, 2020 on the COVID-19 pandemic and the efforts underway at the University to respond to the crisis, particularly as U of T moved towards the recovery and reopening phase of the crisis response.

In response to members’ comments and questions, the Provost, as well as the Vice-President, Human Resources and Equity, Professor Kelly Hannah-Moffat, stated the following:

  • Emergency Student Bursary Fund launched in March 2020 designed to assist undergraduate students (including international students) who were facing difficult financial circumstances due to the novel coronavirus; graduate students could also apply for emergency assistance in the form of loans or grants through a separate program;
  • the COVID-19 bursary was needs-based and issued on a first come first served basis – it had provided on average approximately $1,100 financial support per undergraduate student (examples of expenses that the bursary covered included last-minute flights, food needs, overdue rent and other urgent needs);
  • the University was seeking to make additional funds available to students and had launched a fundraising campaign in this regard;
  • matters related to pay continuity of employees continued to be reviewed by all operating units and academic divisions;
  • an institutional committee had struck to look at workforce planning with a view to retaining employees;
  • employees had been flexible and creative with many moving to a home-based work environment;
  • University working hard to keep all teaching and administrative staff active and working, including making re-assignments, drawing down vacation, implementing lieu time, creating shared work arrangements, etc.;
  • understanding that the University would need to make difficult decisions in near future and that it was already limiting new hires – it was working closely with unions and the University of Toronto Faculty Association (UTFA) and that all staff groups had been very helpful; and further announcements regarding staffing would be made.

The Chair thanked Professors Regehr and Hannah-Moffat for their remarks. He noted that an update on COVID-19 would be presented at the next Board meeting.

2. Proposal to establish an Academic Pharmacy at the Leslie Dan Faculty of Pharmacy

The proposal for the incorporation of the Academic Pharmacy at the Leslie Dan Faculty of Pharmacy was withdrawn.

3. Procurement Policy

Sheila Brown, Chief Financial Officer (CFO), provided an overview of the proposed Policy noting that it had been previously revised in 2015 and 2011.

Current revisions were based on a full policy review and incorporation of requirements of a number of trade agreements that had procurement provisions – external legal counsel had also been involved. Ms Brown added that the revised proposed Policy was a complete rewrite of the original Policy, however the code of conduct and authority schedule remained in the document, as well, two of the thresholds in the authority schedule had been updated.

In response to members’ comments and questions, the CFO stated that the $100,000 threshold was a requirement of the government; and that the Policy was intended to be a high level document which outlined other key principles that the University was required to follow.

On motion duly moved, seconded and carried


THAT the University of Toronto Procurement Policy dated April 28, 2020, be approved, replacing the previous Procurement Policy dated June 18, 2015.

4. Ancillary Services: Residential Housing – Operating Plan and Budget, 2020-21

The Chair noted that under its Terms of Reference, the Board reviewed and approved the annual budget of unincorporated business ancillaries and that the St. George Campus Residential Housing Ancillary was one such unincorporated business ancillary.

Professor Mabury stated that as part of ancillary operations, the portfolio offered good quality, attainable housing to help attract and retain outstanding faculty, librarians and senior staff – two additional laneway houses and a single family house would be added to the University’s inventory on St. George campus shortly.

In response to a member’s comment, Anne Macdonald, Assistant Vice-President, Ancillary Services, confirmed that the housing operations were self-funded and that costs associated with capital renewal major maintenance projects were less than expected for the year reported mostly due to timing and cost – the approach to repairs was being reconsidered and reframed.

Ms Macdonald also presented the Ancillary Services: Residential Housing annual budget. There were no further questions from members.

On motion duly moved, seconded and carried


THAT the operating budget for the Residential Housing Ancillary for 2020-21, as contained in the ‘2020-21 Budget’ column of Schedule 1 to the Overview of Operations and Business Plan for 2020-2025, be approved.

5. University of Toronto Asset Management Corporation (UTAM):

The Chair stated that under the Business Board’s Terms of Reference it was responsible for approval of the investment risk and return targets for University funds, but not for pension funds, which were approved by the Pension Committee together with the asset allocation and other elements required to be included in the pension Statement of Investment Policies and Procedures. Asset allocation and other elements of investment strategy for University funds were delegated to the President.

He added that the Business Board was responsible for reviewing annual reports for both University and Pension funds, which included information on asset allocation, an example of which was the UTAM Annual Report, 2019.

The Chair thanked members for submitting written questions prior to the meeting. He stated that some would be addressed as part of the Report and others would be addressed by the administration at a later point because they required more time and deliberation for consideration.

  1. UTAM Annual Report and Financial Statements, 2019

Daren Smith, President and Chief Investment Officer (CIO), University of Toronto Asset Management Corporation (UTAM) presented the UTAM Annual Report and Financial Statements, 2019. He noted that the Report was titled “The 20 Year Advantage” and its release coincided the 20th anniversary of UTAM’s founding on April 25, 2000. In the report UTAM reflected on its journey as an organisation and shared its vision for creating sustainable value over the long term. It also looked at UTAM through the lens of the traditional four P’s – philosophy, people, process and performance – that were the hallmarks of successful investment managers.

Mr. Smith noted that over the past 20 years of managing U of T’s investments, UTAM had never lost sight of its purpose and the deep sense of responsibility that came with it. More than 20,000 members of the University of Toronto Pension Plan – retired, active and deferred – looked to UTAM to help ensure a secure retirement. The donors who had generously contributed to the Endowment expected UTAM to maximize the value of their gifts while following prudent risk management practices. And everyone in the U of T community, including students, faculty and staff, counted on UTAM to build and sustain the solid financial foundation required by a leading global centre of academic excellence and advanced research.

Over the same period, Mr. Smith stated that he was pleased to see all the ways that UTAM had grown and progressed: the deepened expertise across its organization; the systematic enhancement of processes and systems tailored to the priorities of university asset management; and UTAM’s leadership in responsible investing, as it fully integrated environmental, social and governance (ESG) factors into its investment decision-making. UTAM would continue to strive to improve further over the next 20 years.

Mr. Smith stated that 2019 was a good year for the Pension and Endowment portfolios, which delivered returns of 13.0% and 12.9% respectively (net of all fees and expenses). He added that he was also pleased with the longer-term results. The Pension and Endowment portfolios each generated annualized net returns of 7.6% during the past five years and 8.5% over the past 10 years, exceeding both the university’s target returns and the Reference Portfolio benchmarks for the same periods. Mr. Smith highlighted that although UTAM underperformed the Reference Portfolio benchmark of 15.8% in 2019, value added over the longer term remained strong, with an annualized outperformance for the Pension and Endowment portfolios of 1.0% and 1.1% respectively over the last 10 years – representing a cumulative gain of more than $500 million.

Mr. Smith commented on UTAM’s 2019 responsible investing activities and highlighted the following:

  • as a signatory to the UN-supported Principles for Responsible Investment (PRI), UTAM participated in its second annual PRI assessment in 2019, providing data that was used to evaluate UTAM’s responsible investment practices over time, across asset classes and in comparison to national and global peers (UTAM received strong scores for responsible investing activities – five A+ marks and one A – and met or exceeded the median scores of all PRI signatories in all applicable categories);

  • UTAM’s President and CIO became a board member of the Canadian Coalition for Good Governance, which represented the interests of institutional investors in promoting sound corporate governance practices among Canadian public companies. Mr. Smith noted that assuming leadership roles in various responsible investment organizations, that were helping to identify, shape and promote best practices was part of UTAM’s overall responsible investing strategy;

  • In 2019, UTAM continued its involvement in Climate Action 100+, an investor-led initiative to ensure the world’s largest corporate greenhouse gas emitters took necessary action on climate change; and

  • UTAM as a corporation was now substantially carbon neutral. It had continued its program of purchasing carbon offsets to mitigate the carbon footprint of its business travel, electricity and gas consumption, and its use of paper.

Mr. Smith also noted that he would cover a couple of very important responsible investing initiatives that took place in early 2020 when he presented the 2019 carbon footprint report as part of the next agenda item.

Following his formal comments on the 2019 Annual Report, Mr. Smith proceeded with a brief update to members on investment performance given the significant market volatility since the new year. Before providing performance figures, he noted that the Pension and Endowment Portfolios were well diversified and the benchmark for risk and performance purposes was the Reference Portfolio, which was invested 60% in equities and 40% in fixed income.

He stated as of the end of March 2020, the Pension Plan and Endowment portfolios were down by approximately 10% on a calendar year basis. However, performance had improved in April, and he estimated the portfolios were currently down around 5% to 6%.

Mr. Smith closed his comments by stating that UTAM had not made any significant changes to the portfolio as a result of the recent market volatility. He added that UTAM was a long-term investor and its investment process was guided by the Reference Portfolio, which was designed to achieve the university’s target returns over the long-term. He noted that the Reference portfolio was developed jointly by UTAM management and the University’s Investment Committee, and significant changes were expected to be infrequent. Mr. Smith concluded that just like the Reference Portfolio, UTAM would be staying the course through this period of market volatility.

The Chair thanked Mr. Smith for his detailed report.

Discussion followed, during which members posed questions relating to UTAM’s reporting of investments returns and ESG factors. In response, Mr. Smith and Ms Brown stated the following:

  • the reference portfolio was a well-known concept in the investment industry and was used by UTAM as its benchmark for risk and return purposes;

  • the University did not benchmark investment returns against other organizations or universities because of differences in performance objectives and risk tolerances – this matter had been previously discussed at the Board;

  • at the request of the University (and arising from President Gertler’s 2016 report Beyond Divestment: Taking Decisive Action on Climate Change), UTAM had implemented a comprehensive plan integrating Environmental, Social, and Governance (ESG) considerations into investment decision-making;

  • UTAM had adopted a target to reduce the carbon footprint (CO2 emissions per million dollars invested) by 40% from 2017 levels by the end of 2030;

  • UTAM was attempting to follow best practice for responsible investing and appropriately took into account ESG factors, including climate change, when it evaluated its third party managers;

  • UTAM had taken the position that integration would be more effective than divestment, which it believed was consistent with the University’s stance on climate change actions, and accordingly had developed an integration approach to tackle climate change in the investment portfolio;

  • as part of the COVID-19 response, all UTAM staff had been working at home since mid-March. Due to UTAM’s well thought-out business continuity plan, the transition had been seamless;

  • whether UTAM travelled less in the future would depend on how long COVID-19 lasted, how the industry as a whole adapted, and to what extent technology could be used more, etc. – Mr. Smith also noted that UTAM’s activities were carbon-neutral thanks to the purchase of carbon offsets; and

  • when selecting managers, UTAM’s approach to responsible investing considered a number of different dimensions including being a signatory to the Principles for Responsible Investment (PRI), and therefore not being a signatory would not automatically disqualify a manager if they could demonstrate that their approach was satisfactory.

As a general matter, a member expressed the view that the UTAM could both meet its fiduciary responsibilities and comply with the University’s investment directives while simultaneously pursuing an active strategy to divest from fossil fuels. A member also commented that the choice of metrics to measure carbon footprint reductions could result in misleading conclusions in certain circumstances and encouraged UTAM to take this into consideration.

The report was received by the Board for information.

  1. UTAM Carbon Footprint Report, 2019

Mr. Smith presented the UTAM Carbon Footprint Report, 2019 titled “Towards a Greener Future” – the report included the carbon footprint of the Pension portfolio and two significant announcements:

  • UTAM had committed to an ambitious goal of reducing the carbon footprint (carbon dioxide equivalents per million dollars invested) of the Pension and Endowment investment portfolios by 40% or more compared to 2017 levels by the end of 2030; and

  • UTAM was endorsing the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The endorsement made U of T (through UTAM) the first Canadian university to endorse the TCFD recommendations on behalf of its Pension and Endowment funds.

Mr. Smith noted that given the Pension and Endowment portfolios had identical investment mandates, and UTAM managed them the same way, in the Carbon Footprint Report, 2019, the Pension carbon footprint was being used as a proxy for the carbon footprint of the Endowment portfolio. If the two portfolios diverge in the future, UTAM would calculate the footprint for each portfolio separately.

Mr. Smith reported, that as measured by tonnes of carbon dioxide equivalents per million dollars invested, the carbon footprint of the Pension portfolio as of September 30, 2018 was 136.1. This represented a 2.2% decrease from the September 30, 2017 footprint of 139.2. From a sector perspective, Mr. Smith noted that the highest emissions came from the materials (e.g., cement companies) and utilities sectors followed by the energy sector (i.e., oil and gas) and then industrials (e.g., airlines).

Mr. Smith added that since the release of the 2018 carbon footprint, UTAM had calculated the footprint of the Pension portfolio as of December 31, 2019 and it was 21.5% less than the 2017 level, putting UTAM well on its way to achieving the reduction target. Mr. Smith further noted that the majority of the reduction was due to a decrease in carbon emissions in the portfolio as opposed to an increase in the market value of the portfolio.

Mr. Smith concluded his report by noting that the carbon footprint reduction target and supporting the TCFD recommendations were part of UTAM’s comprehensive approach to addressing climate change, which included ESG integration in its investment processes, engagements with companies, advocacy on climate-related issues with regulators, and proxy voting that took climate change into account.

The Chair thanked Mr. Smith for his report.

A member enquired about the carbon reduction figures presented in the Report and urged that further action be taken to reduce carbon emissions, making the University a leader in the sector. The member further stated that in doing so, UTAM and the University would ensure that they were not exposed to the risk of not living up to the expectations that were being set. In response, Mr. Smith stated that he believed UTAM was following best practice for an integration approach and that very few pension and endowments had any type of reduction target. UTAM would continue to evaluate and refine its investment approach as appropriate, and continue its efforts to adopt best practices as they evolved.

The report was received by the Board for information.

6. Reports of the Administrative Assessors

In response to comments by a member regarding the role of the Board and how the University managed the investment portfolio, the Chair stated that perhaps it would be best to defer further discussion until such time that the administration and UTAM could reflect on the issues raised and provide additional information.

There were no other reports of the Administrative Assessors.


On a motion duly moved, seconded, and carried


THAT the consent agenda be adopted.

7. Report of the Previous Meeting

Report Number 251 from the meeting of March 18, 2020 was approved.

8. Business Arising from the Report of the Previous Meeting

There was no business arising from the Report of the previous meeting.

9. Status Report on Debt to March 31, 2020

Members received the Status Report on Debt to March 31, 2020, for information.

10. Health and Safety Requirements: Quarterly Report on Compliance – January 1 to March 31, 2020

Members received the Quarterly Report on Compliance (January 1 to March 31, 2020), for information.


11. Date of the Next Meeting – Thursday, June 18, 2020

The Chair reminded members that the date of the next meeting was Thursday, June 18, 2020 at 5:00 p.m.

12. Other Business

There was no other business.

The Board Moved In Camera

13. Capital Project: Report of the Project Planning Committee for the Centre for Civilizations, Cultures, and Cities:

(a) Financing

On a motion duly moved, seconded and carried


THAT the recommendation of Professor Scott Mabury, Vice-President, Operations and Real Estate Partnerships, as outlined in the memorandum dated April 20, 2020, regarding financing of the Centre for Civilizations, Cultures and Cities capital project, be approved.

(b) Execution of the Project

On a motion duly moved, seconded and carried


The recommendation of Professor Scott Mabury, Vice-President, Operations and Real Estate Partnerships, as outlined in the memorandum dated April 20, 2020, regarding the execution of the Centre for Civilizations, Cultures and Cities Street capital project.

14. In Camera Reports of the Administrative Assessors

The were no in camera reports from the Administrative Assessors.

The Board returned to Open Session.

The Chair thanked members for their attendance and participation in the virtual Board meeting.

The meeting adjourned at 6:59 p.m.

June 3, 2020