Item - 2023.IB3.5

The Toronto Investment Board:

1. Directed that Confidential Attachments 1 and 2 to the report (June 4, 2023) from the Director, Capital Markets remain confidential in their entirety, as they pertain to the security of property belonging to the City or one of its agencies or corporations.

The Toronto Investment Board authorized the Director, Capital Markets to initiate a non-competitive procurement to retain the recommended third-party information provider to provide metrics in the area of assessing Environmental, Social, and Governance performance. This non-competitive procurement was recommended as the result of an unsuccessful invitational Request for Proposal in early 2021. 

This procurement would facilitate a response to the City Council request to the Toronto Investment Board and the Chief Financial Officer and Treasurer to develop a process to monitor and report on external investment firms hired by the Board are compliant with the terms of the Investment Policy with respect to Environmental, Social, and Governance factors. 

The Toronto Investment Board selected a vendor, and an alternate vendor, at its meeting in September 2021 to initiate the non-competitive procurement process. An agreement was reached and a three-year contract was signed the vendor in April 2023.

Since an agreement has been reached, it can be disclosed that the vendor is MSCI Inc. along with its subsidiary company MSCI ESG Research LLC. A general description of the Environmental, Social, and Governance Ratings Service can be found in Attachment 1.

In addition, the agreement also includes the MSCI Carbon Portfolio Analytics reporting package that is part of MSCI's Climate Lab Enterprise.  Carbon Portfolio Analytics reporting from MSCI Environmental, Social, and Governance Research helps investors understand, measure and manage carbon risk at the portfolio, sector, and company level. A brief overview of this tool can be found in Attachment 2. 

Both of these MSCI products are provided on a managed service basis. This requires City staff to upload the portfolio information to MSCI via a secured portal and then MSCI will generate reports on each portfolio as well as on a consolidated basis for both the Long-Term Fund and the Sinking Fund. Comparison information against a benchmark index is also provided.

The information from MSCI is proprietary and confidential. There are a number of identifiable individual companies and governments in their detailed reports. The agreement with MSCI allows for the viewing and use of the information on a confidential basis by a limited number of City staff, the Board, and City Council. The contract does allow for the public use of general consolidated information on a limited basis.

The process to score the portfolios and generate reports via the MSCI system was initiated in May 2023, however final reports were not received until May 31, 2023 which is close to the deadline for this report. Staff are still reviewing the materials however some preliminary consolidated data is provided in this report as well as in Confidential Attachment 1 and Confidential Attachment 2.