Trust Funds Investment Strategy

1 Purpose

The purpose of this strategy is to formalise the responsibilities of the Trustees in respect of the management of the Charitable Trusts’ assets held by North Ayrshire Council and to translate these responsibilities into an investment strategy which complies with the Trusts and Succession (Scotland) Act 2024 and incorporates best established practice by:

Ensuring that, when investing Charitable Trusts’ assets, Trustees achieve an appropriate balance for the Trust between the two objectives of:

• Providing an income to help the Trust carry out its purposes effectively in the short term; and
• Maintaining and, if possible, enhancing the value of the invested funds, to enable the Trust to effectively carry out its purposes in the longer term.

Ensuring that the following requirements, as defined in the Trusts and Succession (Scotland) Act 2024, are followed whether they are using the investment powers in the Act or not:

• The trustees shall have regard to the suitability to the Trust of the proposed investment,
• The trustees shall have regard to the need for diversification of investments of the Trust, in so far as is appropriate to the circumstances of the Trust, and
• The trustees take account of ethical, social and environmental consideration in determining which investment to make.

This strategy meets these requirements fully and applies to all staff, trustees and those who are involved in planning or authorising investment of Charitable Trusts’ assets.

2 Aim

The aim is to use the investments of Charitable Trusts’ assets to support the Trust’s values and the aims of prevention or relief of poverty by reason of age, ill-health, disability, financial hardship or other disadvantage.

To this end, the strategy sets out investment principles which support this mission subject to there being no significant impact upon financial risk and returns.

3 Structure and Governance

There are 8 Charitable Trusts currently registered with the Office of Scottish Charity Regulator (OSCR).

The governing documents are:

When considering any action in connection with the Charitable Trusts, the Trustees, and their agents, must act in the interest of the Charitable Trust.

The Trustees of the Charitable Trusts are the elected members of North Ayrshire Council and appointment is by virtue of election to the Council. There is no recruitment process.

The Head of Finance is the designated officer within North Ayrshire Council with responsibility for the proper administration of the Charitable Trusts’ financial affairs.

The Head of Finance is responsible for keeping proper accounting records that are up to date and which ensure that financial statements comply with the Charities Accounts (Scotland) Regulations 2006.

Contact Address

North Ayrshire Council Finance

Cunninghame House, Irvine, KA12 8EE

Auditor

Audit Scotland

4th Floor, South Suite, The Athenaeum Building, 8 Nelson Mandela Place, Glasgow, G2 1BT

4 Objectives and Activities

The Charitable Trusts were originally established for a variety of purposes related to the general purpose of the prevention or relief of poverty by reason of age, ill-health, disability, financial hardship or other disadvantage.

Income received is expended on grant awards and, where necessary, supplemented by revenue reserves.

5 Time Horizon

The time horizon for the investment portfolio is considered to be long term. In investment terms, this is defined as being over ten years.

6 Management of Funds

The Trustees rely on the expertise of finance staff within North Ayrshire Council to advise on investments to ensure the maximum return and the least risk to the Trusts. In this way, the income stream for the long-term future benefit of the Trusts is protected.

The funds of the Charities are deposited with North Ayrshire Council, although do not represent assets available to the Council, or invested in stocks and shares in a variety of companies.

Decisions regarding the management of the Trusts have been delegated by the Council to the relevant Locality Partnership.

7 Minimum Investment Objective

The minimum investment objective is to preserve the capital and income in the investment portfolio in real terms after inflation and distributions. The measure of inflation is the Consumer Price Index.

8 Disbursement

The Charitable Trusts promote their activities and consider applications submitted by individuals and groups who meet the criteria. North Ayrshire Council works within our communities to raise awareness of the financial support available from the Charitable Trusts and encourage appropriate applications from community groups and individuals.

Where any Trusts have been identified as low value or dormant, North Ayrshire Council will continue to identify options for utilising Trust balances, and these will be presented to Trustees when available.

Reserves are held by North Ayrshire Council on behalf of the Trusts and revenue income generated from capital which has not been disbursed at 31 March each year is invested in North Ayrshire Council’s Loans Fund.

9 Investment Principles

North Ayrshire Council is committed to investing funds on a socially responsible basis. The Council believes that to accord with its values when investing funds, regards must be made to Environmental, Social and Governance (ESG) issues.

Environmental, Social and Governance (ESG) considerations are increasingly a factor in global investors’ decision making, but the framework for evaluating investment opportunities is still developing. As a result, the Council’s ESG policy does not currently include ESG scoring or other real-time ESG criteria at an individual investment level.

When investing in banks and funds, the Council will prioritise banks that are signatories to the UN Principles for Responsible Banking and funds operated by managers that are signatories to the UN Principles for Responsible Investment, the Net Zero Asset Managers Alliance and/or the UK Stewardship Code.

A list of ESG Initiative signatories is updated quarterly by the Council’s treasury advisor, Arlingclose, to support the Council’s decision-making process for investing.

The United Nations Global Compact

The Council supports the ten principles of the United Nations Global Compact, which accepts that, as with the Council itself, corporate sustainability starts with a value system and a principles-based approach to doing business. This means operating in ways that, at a minimum, meet fundamental responsibilities in the areas of human rights, labour, environmental and anti-corruption.

Human Rights

Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and

Principle 2: Make sure that they are not complicit in human rights abuses.

Labour

Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining:

Principle 4: The elimination of all forms of forced and compulsory labour;

Principle 5: The effective abolition of child labour; and

Principle 6: The elimination of discrimination in respect of employment and occupation.

Environment

Principle 7: Businesses should support a precautionary approach to environmental challenges;

Principle 8: Undertake initiatives to promote greater environmental responsibility; and

Principle 9: Encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption

Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.

In managing investments, North Ayrshire Council encourages good behaviour and discourages poor behaviour through the screening of investments using the principles above. In doing so, the Council will promote sustainability, good business ethics, good employment practices and the transition to a low carbon economy.

Exclusions

The Council will not knowingly invest directly in businesses whose activities and practices pose a risk of serious harm to individuals or groups, or whose activities are inconsistent with the Council’s values.

The Council will exclude investments from consideration where there are consistent or significant transgressions of the appropriate regulatory framework or a failure to ignore directions of the regulatory body and investments in counterparties which have significant involvement with any of the activities or business practices on the following exclusions list:

Human Rights and Labour

• Breaches of human rights principles
• Breaches of international labour standards
• Supports/are part of oppressive regimes
• Modern slavery
• Poor Health and Safety records

Environment

• Toxic spills and releases
• Negative impact on land use, habitats and biodiversity
• Contributes to carbon intensive industries
• Causes water resource scarcity
• Poor supply chain management
• Animal testing for cosmetic purposes/unnecessary exploitation of animals

Governance

• Bribery/fraud/corruption
• Violation of international intellectual property rights
• Unethical market behaviour and business practices

10 Liquidity Profile

The portfolio has a long-term time horizon. However, sufficient investments in the portfolio should be easily realisable, so that there is sufficient liquidity to meet any obligations and disbursements.

11 Risk Management

North Ayrshire Council’s objective when investing money on behalf of the Charitable Trusts is to strike an appropriate balance between risk and return, minimising the risk of incurring losses from defaults and the risk of receiving unsuitably low investment income.

12 Foreign Currency

North Ayrshire Council does not, on a day-to-day basis, have foreign currency transactions or receipts. Unexpected receipt of foreign currency will be converted to Sterling at the earliest opportunity.

If North Ayrshire Council has a contractual obligation to make a payment in a currency other than Sterling then forward foreign exchange transactions will be considered, with professional advice.

At the present time statute prevents North Ayrshire Council borrowing in currencies other than Sterling. North Ayrshire Council has also determined that all its investments, including those for Charities and Trusts, will be in Sterling.

13 Investment Portfolio

To achieve the desired return without taking excessive risk, the investments are allocated across a range of asset classes.

This includes stocks, fixed assets and investment with North Ayrshire Council.

14 Current Portfolio Position

15 Performance

North Ayrshire Council will monitor the performance of the investment portfolio against the Bank Rate Forecast on a quarterly basis.

Investment decisions will be subject to review on a quarterly basis in response to changes in environmental and social circumstances.

Annual performance updates are received for the investment funds the Charitable Trusts’ funds are currently invested in and such performance will be reported annually within the Trustees’ Annual Report and Financial Statements published by North Ayrshire Council.

16 Monitoring

In order to implement and monitor adherence to this strategy North Ayrshire Council will:

• publish this investment strategy on its website following its approval by Council;
• apply this strategy at the point of investment;
• monitor investments thereafter, to review the operation and the effectiveness of the strategy; and
• report progress annually, including any breaches, within the Trustees’ Annual Report and Financial Statements.

17 Review

The Trustees’ Annual Report and Financial Statements will be reported to Council as soon as practicable after the financial year end, and in all cases, before the end of September.

An administrative review of this policy will be undertaken annually and a full review by Trustees will be carried out every 3 years.