School governors: six top governance tips for 2021
Article by Miranda Richards, Schools Specialist, Aberdeen Standard Capital
The year of Covid-19, in which schools were closed, exams abandoned, and results algorithmically challenged, has presented financial challenges and brought governance into sharp focus in schools. To help governors take stock, here are my top tips going into 2021.
Review your investment policy statement
It can be easy to let an investment policy statement (IPS) become stale, but now is a good time to review it to ensure it reflects current thinking and your organisation’s ethos. This is particularly true if the make-up of the board has changed recently. It is no bad thing, after a difficult year, for governors to be reminded of their purpose and vision. Our Policy Matters guide can help you review your IPS, or write a new one for the first time. It includes a template with a sample to help you get started, and can be found here
Review your approach to environmental, social and governance (ESG) matters
In the run up to the COP climate summit in December 2021, there will be increased focus on the drive to net zero carbon emissions. Does your investment policy reflect this? Have you articulated your approach to ESG? Have you considered "double materiality", (the idea that investors should consider not just the risks of social and environmental issues on their investments, but also the impact their investment decisions have on society). Many organisations are facing pressure from stakeholders to invest sustainably. But navigating the alphabet soup of jargon and deciding what really matters to trustees can be difficult. Our Policy Matters guide can help you review these issues.
Look again at your extraction rate
The current era of low interest rates and cuts to dividends has lowered investment returns. With this low interest rate, low return environment likely to continue for a few years, what extraction rate from your investments is viable? Given that strong returns in recent years may have boosted the investment pot, should this be spent, in order to keep the extraction rate at the same level, if allowed?
Extracting more benefit from your investment
Can your investments be valuable in other ways? Could you use the portfolio as a real life case study for the economics/finance/business studies students, or elsewhere in the curriculum?
Does this trigger an investment manager review?
Any of the above factors may trigger an investment manager review. This need be neither expensive nor difficult, but could be useful to find out if there are better options available, either through your existing manager or by changing manager. You may choose to establish a subset of trustees/governors to undertake the process, but it is important to use your investment policy statement to inform your review.
Keep your board dynamics healthy
Finally, don’t undervalue the human element. Value your fellow governors – even the challenging ones. Decision-making becomes exponentially harder when relationships break down. Make sure the executive feel supported, especially given the exceptionally difficult time we have all been through, and the difficulty of forecasting what is to come. Our mental wellbeing has been tested during the last few months: by providing a safe space and a culture which allows open discussion of any issues, trustees/governors can help build resilience in their school communities.
Miranda Richards is the Education and Schools Specialist at Aberdeen Standard Capital, with a broad range of experience as a school governor, charity trustee and portfolio manager.