TERMS OF REFERENCE
I. INTRODUCTION TO GSCM GOVERNANCE
Global Sustainable Capital Management (UK) Limited (“GSCM”) invests in climate-resilient agriculture (CRA). The Fund concept is incubated by the Green Growth Action Alliance, an initiative hosted by the World Economic Forum, IFC and the Global Green Growth Institute. GSCM invests in commercially operated and sustainably managed forestry, agroforestry and agriculture businesses. It pursues a global investment strategy with a focus on Latin America and South East Asia. The projects are small to medium-sized and produce certified products that can be sold at a price premium. This clear strategy allows scalable, profitable and cost-effective operations, whilst building and maintaining valuable ecosystems. GSCM has developed a governance structure for the agroforestry industry with experienced financial services leaders and sustainability experts dedicated to the fund.
This governance structure establishes the fund’s leadership, the purposes, decision-making powers, and responsibilities of each unit to most effectively manage risk and ensure interests are adequately represented.
This governance structure document is intended to guide GSCM through the fund’s close and early years of investment activity. The underlying infrastructure is designed for long-term use. Expansion of the fund, both assets under management and the number of investments, will likely result in changes to the funds governance, ensuring it remains fit for purpose.
GSCM will make investments in project companies with different risk ratings and return profiles.
As the fund matures and grows a Nomination Committee with being formed and will act under the corporate governance area of the fund. The GSCM Board will be responsible for confirming the composition of each committee.
ARC will be responsible for remuneration for people in governance positions, which includes committee members, members of the GSCM Board of Directors, GSCM’s full-time employees and project managers.
II. STRUCTURE OVERVIEW & VOTING PRINCIPLES
Voting Principles: Four bodies will have decision-making powers for the administrative functioning and general governance of GSCM. In this case, “governance” refers to general oversight, but does not include responsibility for GSCM’s day-to-day operations. The four bodies are the GSCM Board, the Investment Committee, the Risk and Operating Committee and the Audit and Remuneration Committee. Decisions are enacted through voting. Unless otherwise stated in this document, simple majority voting principles apply. Supermajority means a two-thirds majority. The PMs facilitates and leads the investment activities of the Fund, with oversight from the GSCM Board and the other committees.
Governance Units: Governance at GSCM is centred on four units: the GSCM Board of Directors (“the Board”), the Investment Committee (IC), the Audit and Remuneration Committee (ARC) and the Risk and Operating Committee (ROC). All of these units interact closely with our in-house Fund Manager (“FM”), and where necessary, Project Managers (PMs).
The PMs are responsible for the origination and day-to-day management of the investment portfolio. The PMs does not have a decision-making role in the investment process, but is an important partner for the FM and governance units as the PMs drives the process, prepares the project documentation, and implements the decisions. As a matter of principle, no representative of the PMs, be it an employee in an executive or non-executive role, an individual representing a shareholder of the PMs, or any person with the powers to otherwise exert material influence on the business and investment proposals of the PMs, can become a member of any of the above mentioned units with a governance role (namely the BD, IC, ARC or ROC).
III. REPRESENTATION, DECISION-MAKING POWERS, & ADMINSTRATIVE AND OVERSIGHT DUTIES
GSCM Board of Directors
Role & Objectives: The role of the GSCM Board is to provide entrepreneurial leadership of GSCM within a framework of prudent and efficient controls which enables risks to be assessed and managed. The Board is collectively responsible for the long-term success of GSCM and delivery of environmentally and economically sustainable value to shareholders. It sets the strategy and risk appetite for GSCM and approves plans presented by management for the achievement of the strategic objectives it has set.
The Board is the head governance unit of GSCM. It will consist of appropriately qualified, experienced individuals dedicated to fulfilling their directors’ duties to GSCM and the fund’s investors. The Board is established to oversee the operations and activities of all of GSCM’s operations. This includes oversight of the PMs, the IC, the ROC and the ARC.
Members & Composition:
The GSCM Board will consist of the following members:
A. (1) Chair of the Board;
B. (1) Chair of the Risk and Operating Committee (Vice-Chair);
C. (1) Chair of the Investment Committee;
D. (1) Chair of the Audit and Remuneration Committee;
E. (1) Experienced and qualified investment professional;
The Board should have the appropriate balance of skills, experience, independence and knowledge of GSCM to enable it to discharge its duties and responsibilities effectively.
Terms of Appointments: All members referred to in (a), (b), (c), (d) and (e) will serve a three-year term while members referred to in (f) will serve a five-year term, which may be renewed for one additional five-year term with the ARC Chair’s approval. Retiring members may be reappointed. The professional requirements and level of experienced are described in the corresponding committee section.
Member Resignation: In the event a member (excluding the Chair of the Board) should be unable to serve the remainder of his or her term, the matter will be submitted to the Chair of the Board. The Chair of the Board will be responsible for reconstituting the Board. In the event the Chair of the Board should be unable to serve the remainder of his or her term, the remaining members of the Board will appoint a new Chair of the Board to serve the remainder of the resigning Chair of the Board’s term by way of a simple majority vote among the remaining members.
Meetings and Quorum: The Board should meet sufficiently regularly to discharge its duties effectively. The Board shall meet with such frequency and at such times as it may determine. It is expected that the Board shall meet at least 4 times a year, in practice most likely more often. When participating in meetings of the Board, executive directors are expected to discharge their responsibilities as directors of GSCM and not to act
Voting Rights: Members referred to in (a), (b), (c), (d), (e) will be the decision-making members of the Board and will have voting rights on matters over which the Board maintains jurisdiction, while the members referred to in (f) will be non-decision making members, and will not have voting rights. All actions taken by the board will be passed by a Board Resolution, unless specifically stated otherwise or required by operation of statute. For the purposes of this document, a Board Resolution is defined as a simple majority of the members present at a quorate Board meeting.
Duties & Responsibilities: The Board is responsible for managing the business of GSCM and, in doing so, may exercise all the powers of GSCM, subject to any relevant laws and regulations.