TRANSMITTAL LETTER FOR BOARD MEETING OF DECEMBER 19, 2019
COMMITTEE ON FINANCE
Mr. Brian A. Perkovich, Executive Director
Title
Revised Investment Policy for the Metropolitan Water Reclamation District of Greater Chicago dated as of December 19, 2019
Body
Dear Sir:
Attached for the Board’s consideration and adoption is the revised Investment Policy for the Metropolitan Water Reclamation District of Greater Chicago.
The revised Policy institutes recommendations from Treasury staff in response to a recent change to the Public Funds Investment Act (30 ILCS 235), section (12)(a-5), which requires that the District include a statement in its Investment Policy that sustainability factors are regularly considered in its investment decisions. This statement commits the District to consider environmental, social, governance/leadership (ESG), human capital, and business model/innovation factors in addition to financial factors when evaluating investments. This statement does not modify the District’s existing priorities and evaluation methods; the District will continue to protect public funds against risk, ensure liquidity, and maximize yield through stringent assessment and benchmarking practices, with sustainability factors incorporated into this process going forward. Research shows that companies that score higher on ESG factors tend to have stronger fundamentals that mitigate financial risk which puts those companies in a better position for long-term stability and profitability. Investing in companies that prioritize sustainable business practices should help protect our environment for future generations.
A second change removes references to primary, regional, and minority banks or broker/dealers to clarify that investments may be purchased from any eligible bank or broker/dealer.
A third change modifies the number of years the District requires a bank or broker/dealer to have been in operation. The proposed reduction to the requirement from five years to one year will allow for newer minority-, women-, and veteran-owned business enterprises to become eligible for investment transactions. To become eligible as a broker/dealer, all firms must provide its most recent audited financial statement, four most recent quarterly Financial and Operational Combined Uniform Single reports, proof of compliance with the Securities and Exchange Commission’s Uniform Net Capital Rule of maintaining sufficient capital, company and representative overviews, a list of Illinois clients, and bank clearing instructions. To become eligible as a bank, it must provide its most recent audited financial statement, four most recent quarterly Call reports, and proof of collateral provided. All applicants must also certify that it has read and will comply with the District’s Investment Policy. This information is used by Treasury staff in conjunction with research regarding the firm’s recent news and its standing with the National Association of Securities Dealers, FDIC, and the State of Illinois to evaluate whether a firm is eligible to act as a District broker/dealer or bank. These requirements mitigate the risks from reducing the number of required years in operation.
A fourth change adds Veteran-owned Business Enterprises (“VBEs”) as a specific consideration in investment decisions. On October 24, 2018, the Board adopted a policy for increasing contracting opportunities ensuring full and equitable contracting opportunities for military veterans of the United States; accordingly, reference to VBEs has been added to this Investment Policy.
A fifth change added a statement to ensure banks and broker/dealers provide any other needed but heretofore unspecified information.
A summary of changes is attached.
It is recommended that the revised Investment Policy be adopted by the Board of Commissioners as the official Investment Policy of the District for the management and investment of District funds.
Requested, Mary Ann Boyle, Treasurer, MAB:WNS
Respectfully Submitted, Frank Avila, Chairman Committee on Finance
Disposition of this agenda item will be documented in the official Regular Board Meeting Minutes of the Board of Commissioners for December 19, 2019
Attachments