The Royal Academy of Arts Ethical Investment Policy (“the Policy”) has been developed with the intention of active promotion of investment in companies and investment funds which demonstrate policies and practices that are in line with The Royal Academy of Arts (“the Royal Academy”) values which state that “We will be guided by strong ethical principles and ensure that our values are embedded in our plans and actions”.
This Policy applies to the full scope of the investments held by the Royal Academy and its sister charity, the Royal Academy Trust (“the Trust”). The Trust holds its free reserves as investment funds from which it can generate income and capital gains for the future support of the Royal Academy.
It does not apply to the investments held by the Royal Academy of Arts Pension Scheme, which is independent of the Royal Academy and governed by its own trustee board. The Scheme’s Statement of Investment Principles (“SIP”), required under section 35 of the Pensions Act 1995, includes a policy on ESG and Stewardship.
The Royal Academy Council’s authority to invest funds derives from its Memorandum and Articles of Association, together with the Laws and the Administrative Instructions, which together form the governing documents of the Royal Academy. The Trust’s authority to invest funds derives from its Trust Deed.
The Finance Committee is responsible to the Council of the Royal Academy for overseeing the financial management of the Royal Academy and has delegated authority on all treasury matters. It works in conjunction with the separately constituted Investment Sub-Committee of the Trust, which has delegated authority from the Trust for endowment and wider investment management.
The governance of the Trust’s investment activities is delegated to the Investment Sub-Committee of the Trust. The Investment Sub-Committee advises the board of trustees on investment policy and risk. The Investment Sub-Committee comprises trustees with investment experience and non-trustees chosen for their experience of investment management.
This Policy is subject to regular review by the Royal Academy Finance Committee and the Trust Investment Sub-Committee and approval by the Royal Academy Council and the Royal Academy Trust board.
2. Investment of Funds
Separate Investment Policy Statements set out the objectives for the discrete investment portfolios held by the Royal Academy and the Trust (together “the Academy”).
The appointed investment fund managers of the Academy have responsibility for stock selection. They have the delegated authority to manage the assets of the portfolio in accordance with the guidelines set out by the Academy.
3. Investment Principles
The Academy is committed to investing its funds in a socially responsible basis. The Academy believes that to accord with its values when investing its funds, regard must be made to Environmental, Social and Governance (“ESG”) issues.
The Academy has identified two sets of principles which accord with its values and aspirations in this area, one relating to the operations of its fund managers and the other to setting appropriate standards for all its investments.
Firstly, The United Nations Principles for Responsible Investment: these six principles have been developed, inter alia, to “better align investors with the broader objectives of society”. The Academy therefore expects that its fund managers will be signatories of the UNPRI and follow its principles in the way it operates.
Secondly, The United Nations Global Compact: the Academy also supports the ten principles of the United Nations Global Compact, which stem from the acceptance that, as with the Academy itself, corporate sustainability starts with an entity’s value system and a principled approach to the way it operates. This means operating in ways that, at a minimum, meet fundamental responsibilities in the areas of human rights, labour, environment, and anti-corruption.
In managing its investments, the Academy therefore expects its appointed investment managers to encourage good behaviour and discourage poor behaviour through the screening of investments (using the principles above or an equivalent framework) and through the direct engagement with the companies in which they invest. In doing so, they should promote sustainability, good business ethics, good employment practices and the transition to a low carbon economy.
While operating in accordance with the principles set out above and the exclusions set out in section 4, appointed investment managers are left at their own discretion to select individual stocks and investments and to operate within their own socially responsible investment policies.
The Academy invests in certain investment strategies through pooled funds, where individual investors have no direct influence on the investments within the fund. The benefits of such investments may include access to illiquid asset classes through liquid investments or exposure to a more diversified range of underlying assets in the most cost effective way.
In selecting pooled funds or similar vehicles, the Academy will take account of these funds’ compatibility with the principles and exclusions set out in this Policy and seek to minimise indirect investment in companies that fall within the exclusions of this Policy wherever there is scope for this requirement to be accommodated.
Beyond the responsible investment practices and principles set out above, the Academy believes that certain types of investment should be excluded from its direct investments. Such investments are not in line with the Academy’s values and may damage the Academy’s reputation and impact fundraising and so are not in the Academy’s best interest. The Academy is particularly concerned about the following key ESG issues and will continue to adopt investment strategies that seek to minimise or, ideally, eliminate investments in companies with corporate behaviour leading to:
• Environmental degradation and climate change
• Manufacture of controversial weapons, including cluster munitions, landmines, biological and chemical weapons, nuclear and depleted uranium weapons
• Tobacco production, cultivation, and manufacture
• Adult entertainment (pornography) production, distribution, retail, and ownership.
5. Investment Manager Reporting
The appointed investment managers are expected to report regularly to the Trust Investment Sub-Committee. The investment managers will provide monthly valuation data and quarterly reports, which outline the performance of the Academy’s portfolio compared against the agreed benchmark. The investment managers will engage directly with the Investment Sub-Committee through attendance at Investment Sub-Committee meetings and the provision of reports including an ESG report and providing information on the engagement that has taken place with companies that the Academy has holdings in.
To give effect to its commitment to this Policy the Academy will:
• publish this abridged version of its full Policy on its website
• issue guidance to its investment managers responsible for the Academy’s investments
• for segregated (direct) mandates, incorporate the exclusions in section 4 into the relevant investment management agreements and agree how the exclusions will be achieved
• for pooled investments, seek to minimise indirect investment in companies which would fall under these exclusions
• delegate to the Royal Academy Finance Committee and the Trust Investment Sub-Committee the responsibility to monitor the operation and the effectiveness of the Policy and provide the Royal Academy Council and Royal Academy Trust with an annual update.
Any expressions of concern should be made to the Treasurer of the Royal Academy (who Chairs the Finance Committee) or Chair of the Trust Investment Sub-Committee and should be related to specific companies whose activities or values appear, on the basis of clear evidence, to be so far removed from the Academy’s values as to give grounds for serious concern.
In the event of an investment being considered by Royal Academy Finance Committee or the Trust Investment Sub-Committee to be invested in funds or activities that are inconsistent with this Policy, the Royal Academy Finance Committee or Trust Investment Sub-Committee will review the position with its investment managers and seek to reallocate funds as appropriate.