Report: Business Board - June 18, 2020

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Via Virtual Meeting Room

REPORT NUMBER 253 OF THE BUSINESS BOARD
Thursday, June 18, 2020

To the Governing Council,
University of Toronto.

Your Board reports that it held a virtual meeting on Thursday, June 18, 2020 at 5:00 p.m. with the following members:

Brian D. Lawson (Chair), Bruce Winter (Vice-Chair), Claire Kennedy (Chair of Governing Council), Meric Gertler (President), 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, Sue Graham-Nutter, 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

Regrets:
Yining (Elin) Gu

Secretariat:
Sheree Drummond (Secretary of the Governing Council), Anwar Kazimi (Deputy-Secretary of the Governing Council), Tracey Gameiro (Assistant Secretary of the Governing Council), Patrick F. McNeill (Secretary, Business Board)

Non-Voting Assessors:
Cheryl Regehr (Vice-President and Provost), David Estok (Vice-President, Communications), David Palmer (Vice-President, Advancement), Anne E. Macdonald (Assistant Vice-President, Ancillary Services), Trevor Rodgers (Assistant Vice-President, Planning and Budget), Saher Fazilat (Chief Administrative Officer, UTM)

In Attendance:

Andrew Szende (Chair, University Affairs Board and Member of Governing Council), Tad Brown (Counsel, Business Affairs and Advancement), 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), Adrienne De Francesco (Executive Director, Capital Projects Group, VPOREP), Nadina Jamison (Chief Strategy Officer, Office of the President), Joshua Mitchell (Director of Real Estate, VPOREP), Pierre Piché (Controller and Director of Financial Services), 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))

ITEMS 9 AND 11; IN CAMERA ITEMS 21 AND 22 WERE APPROVED.
ITEMS 6(a) AND 7 ARE RECOMMENDED TO THE GOVERNING COUNCIL FOR APPROVAL. ALL OTHER ITEMS ARE REPORTED TO THE GOVERNING COUNCIL
FOR INFORMATION.

Pursuant to section 33(i) of By-Law Number 2,
Items 19 through 22 were considered in camera.


OPEN SESSION

1. Chair’s Remarks

The Chair welcomed members and guests to the final meeting of the governance year.

Recognition of the Business Board Chair
Ms Claire Kennedy, Chair of the Governing Council, thanked Brian Lawson for his service to the Board, both as a member and Vice-Chair since 2017 and, in particular, as its Chair for 2019-2020. She stated that Mr. Lawson had been an excellent Chair, managing meetings in an efficient and respectful manner, and encouraging members to ask questions and share their views at meetings. Ms Kennedy added that Mr. Lawson had also provided excellent advice to the senior assessor and voting assessors, and to all the other assessors.

The Chair made special note that Mr. Lawson would continue to serve as incoming Vice-Chair of the Governing Council. 

As a token of appreciation and consistent with tradition, Ms Kennedy presented a chair to Mr. Lawson in recognition of exemplary service and leadership.  Members of the Board applauded Mr. Lawson’s recognition.

2. Annual Report: Senior Appointments and Compensation Committee (SACC)

Ms Kennedy presented the SACC Annual Report covering the period May 1, 2019 to April 30, 2020. She noted that SACC was responsible for attesting to the Governing Council, through the Business Board, that compensation policies and programs for particular categories of employees were appropriate, and that decisions about the compensation of individuals had been made in accordance with established policy and practice.

As part of its role, SACC had reviewed the President’s Annual Activity Report, and the Chair of the Governing Council’s performance evaluation for the President – as well as the performance assessments of the Vice-Presidents prepared by the President. SACC had also reviewed the annual Academic Salary Report and the Administrative Salary Report and had engaged on discussions on related matters including faculty gender pay equity and the merit pay model for professional managerial staff.

The report was received for information.

3. Update: COVID-19

Professor Kelly Hannah-Moffat, Vice-President, Human Resources and Equity reported that COVID-19 had been disruptive to normal annual processes and practices in the HR&S portfolio, but that the division continued to deliver core services across the institution, however job evaluation, workplace investigations, labour relations, equity programming and several annual processes had been delayed.

Professor Hannah-Moffat stated that in partnership with the Institutional Leadership Team (ILT) and other working groups, the University was planning for return back to campus. A number of issues under consideration through all phases, included among others, groups working remotely and formalized flex work arrangements. Managers had started to assess how to cycle staff in and out of physical work spaces while respecting physical distancing. Each department had responsibility to determine who could work from home and who was required on site. HR&S had to consider accommodations, making sure the University was adhering to human rights legislation, and was paying attention to issues as they emerged, including how to accommodate individuals encumbered by childcare, high risk, etc., who were required to continue to work remotely.

Professor Hannah-Moffat reported that an inventory of resources and tools had been developed to support return to campus during phases of return – a general workplace guideline had been created with Environmental Health and Safety and other units of the University to ensure compliance with provincial regulations and employment policies as employees moved back to campus. Both the COVID-19 Employee Toolkit and the COVID-19 Leadership Toolkit were available online.

There were no questions by members.

4. Annual Report: Vice President, Operations & Real Estate Partnerships, 2018-19

Professor Scott Mabury, Vice-President, Operations and Real Estate Partnerships (VPOREP), presented an annual report for 2019-20.

Professor Mabury highlighted key accomplishments for the 2019-20 period including the following:

  • University Planning Design and Construction had developed new secondary plans and campus master plans across the tri-camps;

  • significant work undertaken in specific capital projects such as the Schwartz-Reisman Innovation Centre and 3 new residences and the expansion of the graduate house residence;

  • 4 Corners Real Estate Strategy approved to develop and bring forward projects that add amenities to the University (not specifically academic in nature, support overall University mission);

  • significant area of activity in academic and campus events including overhauling and modernizing classrooms; academic scheduling for fall term delivery of courses; calculated and determined safe seating in classrooms;

  • delivered strategic plan for Facilities & Services in Fall 2019 that would be roadmap for going forward; utilities master plan – renewal of 120 year of energy system;

  • enacted Carbon Commitment Plan & Low Carbon Action Plan closely tied to utilities overall plan with reducing utilities and energy spend;

  • ITS had been busy amidst pandemic; cyber security information systems continually improved; managing overall IT support for division;

  • implemented new strategic plan for ancillary services, included strategy for Huron-Sussex neighbourhood;

  • undertook review of enrolment services - working on scheduling for fall and optimize on-campus experience;

  • benchmarking exercise undertaken to assess every employee across 158 activities – benchmarked across other universities across the world – will go a long way for exceptional service delivery; and

  • completed Risk assessment report – critical element of management of overall risk for institution.

In response to a member’s question concerning the increase in remote work due to COVID-19 and potential noise concerns with local neighborhoods, Professor Mabury stated that the University was not getting any significant public complaints or commentary about the impact of noise and disruption from construction taking place on the tri-campus. He noted that projects like the Robert Street Geothermal Project were more disruptive than expected, but there was general public support for the geothermal project.

In response to a member’s question regarding cyber security, Professor Mabury stated that U of T had yet to suffer a major significant breach compared to other institutions across Canada and had continued to mitigate risks and look for breaches. If there were breaches, central IT worked closely with divisional and unit-level staff (70% of IT staff work out of divisions and departments) as part of an integrated cyber risk strategy.

The Chair thanked Professor Mabury for his detailed presentation. Professor Mabury and his team were congratulated on their excellent work on the many successful initiatives in the VPOREP portfolio.

5. Annual Report: Vice President, Communication, 2019-20

The report from Mr. David Estok, Vice-President, Communication, was received for information. The Chair noted that the report focussed more on COVID-19 related activities and the full annual report would be presented in the Fall.

6. Financial Statements (arising from the meeting of the Audit Committee, June 17, 2020)

a) Audited Financial Statements for the Fiscal Year ended April 30, 2020

In her introduction, Ms Sheila Brown, Chief Financial Officer (CFO), stated that the changes were made to simplify the financial statements to make them easier to read and more explanatory. She noted that the two key themes of the statements were a focus on capital infrastructure and the impacts of COVID-19.

Mr. Chris Thatcher, Chair of the Audit Committee, reported that the Audit Committee had met with the external auditors. The Committee reviewed the audit plan at its December 3 meeting and was satisfied with the areas of audit emphasis that included how the University records its revenues and accounts for its investments, employee future benefits and capital projects to name a few. There were no major deviations from the audit plan and scope during the execution of the audit. The auditors did perform additional procedures to satisfy themselves of the authenticity of documentation provided since this year’s audit was performed remotely. Procedures were also conducted to ensure that the disclosure of the impact of COVID-19 was appropriate.

The CFO then offered a presentation, which provided additional granularity in the following areas:

  • Revenue and Expenses

  • Assets, Liabilities and Net Assets

  • Net Assets

  • Endowments

  • Investment Performance of the Long-Term Capital Appreciation Pool

  • Endowment Cumulative Preservation of Capital compared to Cumulative Inflation

  • Outstanding Debt and Debt Policy Limit

  • Financial Results Compared to Forecast

Mr. Thatcher stated that given the size and the complexity of the University, the CFO and her team, as well as the Internal Audit group, should be commended for their tremendous efforts and exceptional job in the annual preparation of the audited statements, especially during COVID-19 and the challenges it presented to prepare the statements.

The Chair concurred and thanked Ms Brown, Dr. Piché and others for their hard work in the presentation of the audited statements and financial report.

On motion duly made, seconded and carried,

YOUR BOARD RECOMMENDED

THAT the University of Toronto audited financial statements for the fiscal year ended April 30, 2020 be approved.

b) Supplementary Report by Fund April 30, 2020

The Supplementary Report was received by the Board for information.

7. Appointment of the External Auditors

Ms Sheila Brown reminded members that this was sixth audit conducted by Ernst & Young LLP since they had been re-appointed. The University continued to be very satisfied with the work performed by the Ernst & Young LLP team and the relationship that had been fostered between Ernst & Young LLP and the University. The CFO also noted that the Audit Committee and the administration had reviewed the performance of the auditors and that the review had been very favourable. Ms Brown expressed unqualified support for the re-appointment of the external auditors.

Mr. Thatcher reported that Ernst & Young LLP continued to perform well and were proactive in bringing issues and new developments forward. The firm had also met the University’s very tight deadlines and heavy workload requirements for the various audits. As Chair of the Audit Committee, Mr. Thatcher confirmed that at its meeting on June 17, 2020, the Audit Committee had recommended to the Business Board the re-appointment of Ernst & Young LLP.

On motion duly made, seconded and carried,

YOUR BOARD RECOMMENDED

THAT Ernst & Young LLP be re-appointed as external auditors of the University of Toronto for the fiscal year ending April 30, 2021; and

THAT Ernst & Young LLP be re-appointed as external auditors of the University of Toronto pension plan for the fiscal year ending June 30, 2021.

8. Debt Policy Limit, Debt Allocations, Outstanding Debt Issued and Status of the Long Term Borrowing Pool to April 30, 2020

Ms Sheila Brown explained that the Report, which was an annual item presented to the Board for information, provided an update on the total debt policy limit; the debt burden ratio and the viability ratio; as well as an update of the status of the long-term borrowing pool. The Long Term Borrowing Pool was a self-imposed sinking fund in which the University was accumulating funds to repay debentures when they matured.

The report was received for information.

9. Establishment of Business Ancillary: University Development and Campus Services

Professor Mabury stated that the establishment of a new business ancillary came out of a desire to address the 4 Corners Strategy and was part of a plan to review the various components of ancillary services (residential, parking operations, etc.) to create a “joint” business ancillary, that would include the real estate portfolio.

Mr. Joshua Mitchell, Director of Real Estate added that the 4 Corners Strategy, a double bottom line real estate strategy, was well-placed to co-exist in same business ancillary where external partnership opportunities could be pursued and coordinated.

Ms Anne Macdonald, Assistant Vice-President, Ancillary Services noted that real estate and ancillary services had already collaborated on many projects and that making the move to combine operations gave a platform to continue to strengthen operations to develop annual business plans and budgets for governance consideration.

On motion duly made, seconded and carried,

YOUR BOARD RESOLVED

THAT the establishment of the University Development and Campus Services Ancillary, as described in the Memorandum from Professor Scott Mabury, Vice-President, Operations and Real Estate Partnerships, dated June 4, 2020, be approved.

10. Reports of the Administrative Assessors

Divestment and governance
As part of a follow-up from discussions and related questions at the previous Board meeting, Ms Brown explained that divestment considerations were dealt with under the approved Policy on Social and Political Issues – this was with respect to University divestment and the procedures established to support it. The Policy was informed by an extensive consultation process at the time which led to the President’s report “Beyond Divestment: Taking Decisive Action on Climate Change”. Recognizing that different organizations take different approaches, for U of T’s process, the University determined an approach based on ESG integration and engagement was a more suitable method for addressing climate change than divestment, and had directed UTAM to follow this approach.

Mr. Daren Smith added that UTAM supported the University’s decision and had worked to develop a comprehensive approach in which climate change was a key component. One of the activities UTAM was pursuing to tackle climate change was the carbon footprint reduction target. Mr. Smith stated that this was an evolving area and there are several different carbon emissions-based metrics that one could use to assess the carbon emissions in a portfolio. The UTAM Board had discussed the benefits and drawbacks of various approaches, and concluded that there was no perfect metric –

it had also reviewed methods used by other universities and investment managers who had adopted a carbon reduction target. Of the few that have outlined a specific target, most used the same measure as UTAM and had adopted a smaller reduction target.

Mr. Smith further stated that UTAM’s Board approved the carbon footprint reduction target knowing that it was not perfect but believing that it was a good start, and that changes would be considered in the future as data and best practices evolve. UTAM’s ultimate aim was to achieve the carbon footprint reduction primarily through a reduction in absolute emissions, rather than through an increase in market value. The carbon footprint of the Pension portfolio as of December 31, 2019 was 21.5% less than the footprint in 2017, the baseline date, and 60% of this was from an absolute decrease in emissions. Mr. Smith stated that as UTAM reports progress against the 40% target in the future, it would continue to disclose how much of this decrease was due to an absolute reduction in carbon emissions. Mr. Smith concluded by noting that although the stated goal was a 40% reduction in the carbon footprint of the Pension and Endowment portfolios, UTAM hoped to exceed this target over the next ten years.

A member commented that they were pleased to hear about the absolute reduction number and that it would continue to be reported whenever the number was discussed by the Board. Another member thanked the Chair, Ms Brown and Mr. Smith for the continuation of the discussion and noted, in their opinion, that although U of T was not really in a leadership position it would have to catch up before it could get to a place where it felt comfortable on the issue.

The Chair agreed that ongoing discussions would be helpful.

OPEN SESSION CONSENT AGENDA

On a motion duly moved, seconded and carried

YOUR BOARD APPROVED

THAT the consent agenda be adopted and items approved.

11. Report of the Previous Meeting

Report Number 252, from the meeting of April 28, 2020, was approved.

12. Business Arising from the Report of the Previous Meeting

There was no other business arising from the report of the previous meeting.

13. Report Number 137 of the Audit Committee, April 27, 2020

The Board received the report for information.

14. Health and Safety Requirements – Quarterly Report on Compliance (April 1 – June 30, 2020)

Members received the Quarterly Report on Compliance for information.

15. Status Report on Debt to May 31, 2020

Members received the status report on debt to May 31, 2020 for information.

16. Report on Capital Projects to May 30, 2020

The Board received the Report on Capital Projects to May 30, 2020 for information.

17. Date of the Next Meeting

The Chair advised Board members that the next meeting was scheduled for Tuesday, October 6, 2020 at 5:00 p.m.

18. Other Business

There were no items of other business (see page 10 on matter raised following in camera session).

The Board Moved In Camera

19. In Camera Reports of the Administrative Assessors (oral reports)

Professor Hannah-Moffat reported on several VPHRE matters.

The were no other in camera reports from the Administrative Assessors.

20. Quarterly Report on Gifts and Pledges over $250,000: February 1, 2020 to April 30, 2020

The Quarterly Report was received by the Board for information.

21. Capital Project: Report of the Project Planning Committee for Trinity College in the University of Toronto New Student Residence & Academic Building - The Lawson Centre for Sustainability – Execution of Project1

On motion duly made, seconded and carried

YOUR BOARD APPROVED

The recommendation of Professor Scott Mabury, Vice-President, Operations and Real Estate Partnership, as outlined in the memorandum dated June 10, 2020, regarding the execution of project for the Trinity College in the University of Toronto New Student Residence and Academic Building - The Lawson Centre for Sustainability, capital project.


[1] Mr. Brian Lawson, Chair, declared a conflict of interest and did not participate in the discussion nor vote on this in camera item. Mr. Bruce Winter, Vice-Chair stepped into the Chair for In Camera Item 21.


22. Report of the Striking Committee: Co-opted Membership of the Business Board and the Audit Committee for 2019-2020

On motion duly made, seconded and carried

YOUR BOARD APPROVED

THAT Ms Susan Rogers be re-appointed to the Business Board as a co-opted administrative staff member for a one-year term from July 1, 2020 to June 30, 2021;

THAT Ms Sue Graham-Nutter be re-appointed to the Business Board as a co-opted lay member for three-year terms from July 1, 2020 to June 30, 2023;

THAT Mr. David Regan be appointed to the Business Board as a co-opted lay member for three-year terms from July 1, 2020 to June 30, 2023;

THAT the following be appointed as co-opted members of the Audit Committee for one-year terms from July 1, 2020 to June 30, 2021: Mr. Robert Boeckner, Ms Sue Graham-Nutter and Ms Kathryn Jenkins; and,

THAT Ms Janet Ecker be appointed Chair of the Audit Committee and Ms Joanne McNamara be appointed Vice-Chair of the Audit Committee for one-year terms from July 1, 2020 to June 30, 2021.

The Board returned to Open Session.

Additional Other Business

A member referred to the announcement of the signing of the “Investing to Address Climate Change” Charter by the University of Toronto and more than a dozen Canadian universities regarding responsible investing practices. The member commented that the use of term “responsible” in this context did not, in his opinion, conform to how it may be traditionally understood – and that it might pose a significant risk to the University. The member argued for the need to raise the bar, expressing caution about being invested financially with firms that were not consistent with what the Universities had committed to, and to global human rights principles. The member also indicated that they were not necessarily advocating for divestment.

Another member stated they would like to hear more in future reports about what was being done on the engagement side and that they did not agree that divestment was the most effective way to change behavior that influences climate change.

President Gertler responded that the field of responsible investing practices was one that was continuing to evolve – and the University’s practices would continue to evolve accordingly. Other institutions had signed onto the Charter and an advisory committee had been established and was comprised of esteemed individuals from the sector across the country. The President commented that the signatory universities would benefit from excellent input from experts and would continue in the spirit of learning and continuous improvement in monitoring the state of the art.

Chair’s Closing Remarks

The Chair thanked members for their attendance, diligence and participation in the Board meetings, offering special thanks to the Vice-Chair, Senior Assessor, Voting Assessors, outgoing Board members and the Secretariat. He recognized Mr. Chris Thatcher, Mr. Keith Thomas and Mr. Gary Goldberg for their past leadership roles and service to the Board.

The meeting adjourned at 7:00 p.m.

June 22, 2020