Ethical Investment Advisory Group CONSTITUTION & TERMS OF REFERENCE Glossary CBF Church of England Funds: Any funds approved by CBF Funds Trustee Limited CBFFT: CBF Funds Trustee Limited Chair: Non-Executive Chair of the EIAG Church Commissioners: The Church Commissioners for England Deputy Chair: Non-Executive Deputy Chair of the EIAG EIAG: The Church of England Ethical Investment Advisory Group Pensions Board: Church of England Pensions Board 1. Constitution 1.1 The EIAG was formed and is funded by the Church Commissioners, CBFFT and the Pensions Board, collectively referred to in this document as the NIBs. 1.2 In this document, references to Advice are references to the EIAG s ethical investment advice to the NIBs, and references to Policies are references to any such advice after it has been formally adopted as an ethical investment policy by each of the NIBs. 2. Roles 2.1 The EIAG s purpose is to support the NIBs to invest ethically in a way which is distinctly Christian and Anglican. In furtherance of that purpose, the EIAG has the following functions: to offer timely and practical Advice to the NIBs; to communicate, or assist in communicating, their Policies more widely; where the NIBs desire, to vote on their behalf at the general meetings of companies in which the NIBs have investments; where the NIBs desire, to engage on their behalf with companies and other organisations in which the NIBs have, or might have, investments, or which have influence over such organisations, in any such case in relation to ethical matters; and where the NIBs desire, to prepare, or arrange for the preparation of, exclusion lists based on their Policies. 2.2 The EIAG may also raise awareness of, and give guidance on, ethical investment in the Church of England through the publication of reports.
2.3 Nothing herein shall oblige the EIAG to give advice the nature and circumstances of which would require the EIAG or any member to obtain a Part 4A permission under the Financial Services and Markets Act 2000. The Advice, the Policies and the other activities of the EIAG are not, and are not to be construed as, financial or investment advice. The EIAG shall be entitled to recover its costs from the NIBs as referred to below, but neither the EIAG nor the NIBs intend that the EIAG should carry on a business. 2.4 The EIAG is not responsible for advising on the legal, tax or regulatory implications of its Advice, the Policies or its other activities. It is the responsibility of the NIBs to identify such implications (if any) and to respond to them as necessary or appropriate. 2.5 Nothing in this Constitution and Terms of Reference shall be construed as diminishing the responsibility of each NIB to consider and make its own decisions in relation to ethical matters relating to its actual or potential investments. 3. Authority 3.1 The EIAG shall have no investment powers and may act only in an advisory capacity or as agent for one or more of the NIBs in accordance with its purposes as described above. Advice given by the EIAG shall not be binding on the NIBs, and adoption and implementation shall remain the responsibility of each NIB. 4. Membership 4.1 The EIAG shall comprise non-executive members appointed as described under paragraph 4.3 or 4.4 below and executive members appointed as described under paragraph 4.6 below. 4.2 The EIAG shall have a total membership not exceeding fifteen persons, a majority of whom shall be non-executive members. Non-executive members 4.3 Each of the following shall be entitled to appoint one non-executive member of the EIAG, who shall not be a member of staff and may, but need not, be a trustee of the appointing body: Church Commissioners; CBFFT; Pensions Board; Mission and Public Affairs Council; Archbishops Council; and General Synod. 4.4 In addition the EIAG may co-opt up to four non-executive members recognised for their relevant technical, theological or academic expertise (the coopted members ), including a Chair and/or Deputy Chair as described in paragraph 6.1 below if not drawn from the other non-executive members. 2
4.5 Before any person is appointed as a non-executive member the appointment must be discussed with the Chair with a view to promoting diversity within the EIAG and ensuring adequate expertise among its members. Executive Members 4.6 Executive members shall be determined by the EIAG from time to time but shall normally comprise: The Secretary or nominee, Church Commissioners The CCLA Director or nominee responsible for the CBF Church of England Funds The Secretary or nominee, Pensions Board The Director of Mission and Public Affairs or nominee, The Secretary of the EIAG. 5. Voting 5.1 Only non-executive members shall be entitled to vote. A simple majority shall determine the outcome of a vote, except in the event of a hung decision, when the Chair shall have a casting vote. 6. Chair 6.1 The non-executive members of the EIAG shall appoint a Chair and a Deputy Chair (who shall be co-opted as members in accordance with paragraph 4.4 if they are not already non-executive members of the EIAG). 6.2 One or both of the Chair and Deputy Chair must be a member of General Synod and able to represent the EIAG in General Synod when required. 7. Term of Office 7.1 The Chair and Deputy Chair shall be appointed to those roles for a term of three years, except where both appointments are made concurrently when one shall serve for an initial term of two years. 7.2 The Chair and Deputy Chair may be re-appointed for two further terms of up to three years (with the agreement of the EIAG). 7.3 Non-executive members appointed after 1 February 2014 by a body listed at paragraph 4.3 above shall serve for such term as such body may determine up to a maximum of nine years. 7.4 Co-opted members are to be appointed for an initial term of three years, and may be reappointed for two further terms of up to three years (with the agreement of the EIAG). 3
7.5 All members must comply with the terms of the Code of Conduct, as amended from time to time by the EIAG, which is at Annex A. A member who materially breaches a provision of the Code of Conduct may be summarily removed from the EIAG. 8. Meetings 8.1 The EIAG shall meet at least three times a year. Additional meetings may be held from time to time as determined by the EIAG. 8.2 A quorum shall comprise a minimum of six members present, three of whom must be non-executive members. 8.3 The EIAG s year-end shall be 31 March or such other date as determined by the EIAG. 9. Observers 9.1 The EIAG may permit observers, who shall be entitled to speak but not vote, to be present at its meetings. 10. Responsibilities 10.1 The EIAG shall be responsible for fulfilling the purposes set out in paragraph 2.1 above. 10.2 The EIAG shall be responsible for developing a theological commentary that informs the substance and process of its work in keeping with the Christian witness of the Church of England. 10.3 The EIAG shall be responsible for keeping the Policies under review to ensure continued relevance. 10.4 The EIAG shall be responsible for preparing, for review by and consultation with the NIBs, Annual Work Plans setting out the priority areas for work by the EIAG. 10.5 The EIAG may enter into agreements with third parties for research, the preparation of exclusion lists, proxy voting and such other matters as the EIAG thinks necessary or desirable in connection with the fulfilment of its purposes. 10.6 The EIAG may publish Policies and occasional other reports and may serve as a wider resource for the Church of England in advising on the implementation of the Policies. 10.7 The EIAG shall be responsible for maintaining contact with similar groups in other churches at home and overseas to progress an ecumenical dialogue on ethical investment matters. 4
10.8 The EIAG may collaborate on engagements with companies and other organisations with church investors from other denominations and with non-church asset owners and managers. 10.9 The EIAG shall recognise the requirement to address at short notice important ethical investment issues as and when they emerge. In such instances the Chair, Deputy Chair and Secretary may, collectively, act on the EIAG s behalf, seeking the retrospective approval of the Group as a whole where appropriate. 10.10 No member of the EIAG other than the Chair, Deputy Chair or Secretary may have contact with the media, or comment on social media, on behalf of the EIAG, except with the prior approval of the Secretary or, if the Secretary is unavailable, the Chair. 11. Accountability 11.1 The EIAG: may publish Policies and other reports to help Christians of all denominations manage their investments with care; and shall publish an Annual Report of its activities and lay it before the General Synod. The Annual Report and associated website shall contain sufficient detail and information on matters brought before the EIAG so as to allow an informed understanding of the EIAG s work. 11.2 The EIAG shall have regard to (but shall not be bound by) opinion expressed in General Synod and in the wider Church on matters informing its responsibilities. 11.3 The EIAG shall have authority to host and participate in seminars, presentations and public meetings in the furtherance of its work. 11.4 The EIAG shall have authority in keeping with best business practice to conduct, or to cause to have conducted, an audit of its work from time to time. 11.5 The EIAG will seek regular feedback from the NIBs on its work. 12. Secretary 12.1 The NIBs shall appoint a Secretary and may appoint other staff to support the EIAG. 12.2 The Secretary and other staff of the EIAG (if any) shall be employed by one or more of the NIBs. 12.3 The Secretary shall be responsible for timely circulation of papers, ensuring an accurate written record is taken of the proceedings at each meeting and for circulating a copy of the minutes to EIAG members. 12.4 The Secretary shall have authority to act on behalf of the EIAG, in consultation with the Chair or Deputy Chair, in matters requiring urgent attention. 5
12.5 The Secretary shall be responsible for managing the relationship between the organisation(s) providing research, proxy voting and other services and the EIAG. 12.6 The Secretary shall be responsible for utilising and making best use of available resources within the Church of England. The EIAG may also engage independent, technical or professional advice in pursuance of its responsibilities where it deems it necessary or desirable to do so. 12.7 One month before the NIBs year-end, the Secretary shall prepare an annual budget, including information about the proportion of costs to be paid by each of the NIBs, for approval by the NIBs. 12.8 The NIBs shall pay the costs set out in the approved budget in accordance with the agreed proportions. 12.9 The Secretary shall be responsible for managing the EIAG s priorities within its budget. 12.10 The Secretary shall be subject to annual appraisal by his or her employer in consultation with the Chair or Deputy Chair. 13. Expenses 13.1 Non-executive members shall be entitled to receive from their appointing body all reasonable travelling and incidental expenses in respect of attending EIAG meetings in fulfilment of their duties, or from the EIAG in the case of co-opted members. 14. Liability 14.1 Each NIB shall indemnify and hold harmless the non-executive member appointed by it in relation to any claims, losses, costs or liabilities suffered or incurred by him or her and arising directly or indirectly out of or in connection with his or her membership of the EIAG including all reasonable legal costs and expenses incurred in defending any claim made by any third party, whether or not successful. 14.2 The NIBs shall indemnify and hold harmless all other non-executive members in relation to any claims, losses, costs or liabilities suffered or incurred by any of them arising directly or indirectly out of or in connection with their membership of the EIAG including all reasonable legal costs and expenses incurred in defending any claim made by any third party, whether or not successful, in accordance with paragraph 14.3. 14.3 As between the NIBs, each of the NIBs shall bear a share of the indemnity under paragraph 14.2 equal to the proportion of the EIAG s costs paid or payable by it under paragraph 12.7 above. 6
14.4 The indemnity conferred by paragraphs 14.1 and 14.2 does not apply to any non-executive member if and to the extent that the claim, loss, cost or liability arises from the fraud, deliberate misconduct or wilful default of that non-executive member. 14.5 Subject to the terms of employment or appointment between any NIB and any executive member, no NIB shall make any claim against any member of the EIAG in relation to any matter arising directly or indirectly out of or in connection with his or her membership of the EIAG or the fulfilment or purported fulfilment of his or her duties as a member of the EIAG unless and to the extent that such matter relates to the fraud, deliberate misconduct or wilful default of such member. 15. Amendment to the Constitution & Terms of Reference, and review of effectiveness 15.1 The EIAG must review the Constitution and Terms of Reference every three years. 15.2 If, following review, the EIAG considers that amendments should be made to the Constitution and Terms of Reference, the EIAG may not make the amendments until the NIBs have approved the proposed changes. 15.3 On each occasion when it reviews the Constitution and Terms of Reference: the EIAG must also review the effectiveness of its activities, in consultation with the NIBs; and the EIAG and NIBs must jointly conduct an appraisal of the Chair s performance. Adopted January 2014 7
Introduction EIAG Constitution Annex A CODE OF CONDUCT For all members of the Ethical Investment Advisory Group 1. Members ( members ) of the Ethical Investment Advisory Group (the EIAG ) must at all times observe the highest standards of impartiality, integrity and objectivity in relation to the work of the EIAG and its ethical advice to the National Investing Bodies of the Church of England (the NIBs ). Standards of conduct 2. All members must: (a) comply with this Code of Conduct, and ensure that they understand their duties, rights and responsibilities, and that they are familiar with the function and role of the EIAG; and (b) not use the opportunity of their service to the EIAG to promote their private interests or those of any family members or those of any other groups or organisations to which they belong. Confidentiality 3. Members may receive information that has not been made public and is confidential for a number of reasons. In addition to information received from companies, this may include information about the deliberations of the EIAG and/or the NIBs on potential new or amended policies, restrictions on investments, or engagements with companies. Members must not disclose or misuse any such confidential information. Insider dealing and market abuse 4. No member may use confidential information received in relation to any activity of the EIAG in order to obtain a financial advantage. In addition to information received from companies, this may include information about the EIAG s or an NIB s deliberations on potential new or amended policies and information on an NIB s policies or dealing intentions. 5. Members are reminded that a person who deals in certain shares or other investments on the basis of confidential inside information (which could include any information to which the member has access by virtue of membership of the EIAG e.g. information received from a director of the company or another senior person within it or information about the EIAG s or an NIB s deliberations on potential new or amended policies or information on an NIB s policies or dealing 8
intentions) which would, if made public, affect the price of those shares or investments, may be committing the criminal offence of insider dealing. Encouraging others to deal, improperly passing inside information to others, and market manipulation (such as creating false or misleading impressions as to investments) are also criminal offences. These offences are punishable by a prison sentence. 6. Members are also reminded that a civil regime prohibits market abuse. This regime covers similar misconduct to the insider dealing and market manipulation offences but the lower civil burden of proof applies. Sanctions for market abuse include significant fines and public censure. Insider dealing and market abuse law is complex and members should seek legal advice where appropriate. The FCA s Code of Market Conduct, which summarises market abuse law, is available at: http://fshandbook.info/fs/html/handbook/mar/1. The FCA actively pursues insider dealing, market manipulation and market abuse. 7. Members should also be aware that reputational damage to them, to the EIAG and to the NIBs may result from members conduct even where no breach of insider dealing or market abuse law arises. Conflicts of interest 8. The purpose of these provisions is to avoid any danger of members being influenced, or appearing to be influenced, by their private interests (or the interests of those individuals, companies or other bodies with whom they are closely connected) in the exercise of their duties as a member. These provisions apply to all members, whether or not they are voting members of the EIAG. 9. Prospective members should consider actual or potential Material Conflicts of Interest before they are appointed. 10. Members should notify the Secretary in writing of any material financial interests which are, or are likely to become, Material Conflicts of Interest. 11. Where the EIAG intends to discuss any matter at any meeting, and any member has an actual or potential Material Conflict of Interest in relation to that matter, then that member shall, whether or not previously disclosed, disclose the actual or potential Material Conflict of Interest at that meeting. 12. All material financial interests in relation to a matter shall be Material Conflicts of Interest in relation to that matter. 13. However, material non-financial interests in relation to a matter shall only be Material Conflicts of Interest in relation to that matter if the meeting at which they are disclosed so determines (with that member being excluded from casting any vote). 9
14. No member may vote at any meeting of the EIAG on any matter where he or she has a Material Conflict of Interest in relation to that matter. The meeting shall determine, however, whether or not he or she shall be entitled to remain in the room whilst that matter is discussed and/or participate in that discussion. 15. For the purposes of this Code: a. a member has a material financial interest in relation to a matter where that matter relates to a company or other body and that member or his or her spouse or partner: i. in the case of a listed company, directly or indirectly as a beneficial interest holds 1% or more of its share capital, ii. in the case of a non-listed company or other body, directly or indirectly as a beneficial interest holds 5% or more of its share capital (or an equivalent financial interest in a body which is not a company), or iii. is an employee, director, trustee or other officer of or consultant to that company or other body; unless in any such case the matter relates to all companies or bodies and is not specific either to that company or body or to a sector which includes that company or body; b. a member has a material non-financial interest in relation to a matter where that matter relates to a company or body, or to a sector which includes that company or sector, and that member, or a close relative, would be affected directly or indirectly by decisions relating to that company or body, or that sector, in a way that a reasonable person would regard as likely to influence in a material manner his or her judgement in relation to that matter; and c. close relative includes spouses, partners, parents, children (adult and minor), brothers, sisters and the spouses or partners of any of these. 16. Examples of matters that are and are not material non-financial interests are given in the schedule to this Code. 17. All such disclosures and decisions relating to actual and potential Material Conflicts of Interest shall be noted in the minutes. 18. For the avoidance of doubt, those members who are executives, employees or trustees of an NIB are, for the purposes of this Code, not to be regarded as having a material financial interest or a material non-financial interest by virtue of so being. 10
Disclosable interests 19. The purpose of these provisions is to ensure that all members are aware of any particular interest, beyond normal interest, that other members may have in matters discussed at the EIAG. These provisions apply to all members, whether or not they are voting members of the EIAG. 20. Where the EIAG intends to discuss any matter at any meeting, and any member has a disclosable interest in relation to that matter, then that member shall, whether or not previously disclosed, disclose that disclosable interest at that meeting. 21. However, no member shall be barred from remaining in any meeting of the EIAG to discuss any matter, from participating in the discussion of any matter, or from voting on any matter by reason only of having a disclosable interest in that matter. 22. For the purposes of this Code, a member has a disclosable interest in a matter if a charity or campaign organisation is active in relation to, or publicly associated with, that matter in a material manner and that member or his or her spouse or partner is a member of that charity or campaign organisation. 23. Being a member of a church is not a disclosable interest. 24. All such disclosures shall be noted in the minutes. Gifts and hospitality 25. Members must treat with great care any offer, gift, favour or hospitality that is made to them personally and in connection with their service as a member. Members should only accept gifts of nominal value and declare them to the Secretary. 26. Members should only accept hospitality in connection with their service as a member where it is commensurate with the style, presentation and value that it would be appropriate for a public body to provide on a reciprocal basis. Non-compliance with the Code of Conduct 27. The Secretary will investigate alleged breaches of this Code and take appropriate action if necessary. A member who is found to have materially breached this Code will be immediately removed from the EIAG. Any wrongdoing amounting to criminal conduct will be reported to the police. Adopted January 2014 11
Schedule An example of a matter which is a material non-financial interest would be acting as a trustee or Board member of a charitable body which is directly engaged in a matter that the EIAG is considering, such as a club promoting shooting for sport in the context of EIAG consideration of policy on non-military firearms. The member has no financial interest in the matter, but there is a conflict of loyalties between the charitable purposes of the club (which the member, as a trustee or Board member, is bound to further) and the aim of the EIAG policy. An example of a matter that would not be a material non-financial interest (but would be disclosable) would be that the member is also a member of a gun club. 12