The governing body of the vehicle should ensure that reporting to, and communication with investors is balanced and fairly represents the activities of the vehicle.
The governing body of the vehicle has an obligation, including applicable regulatory and legal obligations, to ensure that all forms of reporting by the vehicle to its investors are appropriate in the circumstances. In pursuing this responsibility, the governing body of the vehicle should always consider the best interests of investors.
The investment manager should ensure the constitutional documents set out clear obligations of confidentiality assumed by the vehicle and its investors.
The investment manager is aware of information relating to the vehicle, some of which will be disclosed to investors, either through regular reporting obligations or on an ad-hoc basis. Information that is commercially sensitive to the vehicle, should be treated as confidential and investors should refrain from acting on it. The constitutional terms of the vehicle should contain appropriate undertakings to ensure confidentiality of such commercially sensitive information.
The need to maintain confidentiality should be balanced by the need to ensure transparency; if there is a conflict, the need for transparency should prevail. Confidentiality provisions should not effectively prohibit investors exercising their rights under the constitutional documents, such as when engaging third- party advisors.
An investor may also be required to share confidential information related to the vehicle with a third party. In such a case, the investor should provide a notice to such third parties that such disclosure is made in confidence and should be kept in confidence. The investor remains responsible and accountable for the compliance of the third party to whom confidential information is disclosed.
The investment manager should ensure the constitutional documents of the vehicle include a clear and accurate description of the management and performance fee structures.
Management and performance fee structures, whilst being a key tool to align interests, (see G16), are often based on complex mathematical formulas which are subject to interpretation. The constitutional documents of the vehicle should clearly describe in detail how such fees are calculated over time. Best practice would be to include worked examples to ensure that subjective interpretation is limited.
The investment manager should also describe in detail the services to which the fees relate. For instance, there should be a clear distinction between a management fee and other charges and activities related to the administration of the vehicle, commonly conducted by third parties.
Where the investment manager has the right to make certain amendments to the constitutional documents of the vehicle without investor approval or through a power of attorney, such changes should be fully communicated and disclosed to investors.
If the investment manager has the right to amend certain elements of the constitutional documents of the vehicle, it should proactively communicate to investors the purpose and the intended results of any proposed changes and provide the amended documents on a timely basis. The constitutional documents of the vehicle should clearly describe the scope of such rights. (see G29 on voting thresholds).
The investment manager should disclose the existence and terms of side letters entered into with investors.
There may be circumstances in which different investors will have different arrangements, financial or otherwise, with a vehicle. For example, larger investors may receive a discount on fees payable to the investment manager and have the right to be represented in investor advisory groups. The investment manager should disclose how side letters and similar individual investor agreements are negotiated and implemented. The manager should also disclose the scope and terms of such side letters from a vehicle-wide perspective.
Investors should provide the investment manager on a timely basis with information legitimately required by the investment manager, such as for tax compliance purposes and anti-money laundering procedures.
Investors should respond in a timely manner to legitimate requests by the investment manager or service providers related to the vehicle to enable them to comply with certain legal or regulatory requirements such as tax compliance and anti-money laundering obligations. In addition, investors should provide other legitimate, non-statutory information, such as that related to conflicts of interest that they may have with the vehicle.
The investment manager should clearly define the annual and interim reporting requirements towards investors in the constitutional documents of the vehicle.
In accordance with INREV’s Reporting Guidelines, the constitutional documents of the vehicle should define the content and timing of investor reporting.
The investment manager should disclose relevant information periodically in a clear and concise manner under internationally accepted reporting standards and alongside the audited annual financial statements.
The annual report should describe the governance framework defined in the constitutional documents of the vehicle in accordance with applicable regulations (see also RG14 of the Reporting module).
The annual report should also include information such as the risk framework of the vehicle, its portfolio strategy and objectives, its sustainability strategy, and the economic outlook. It should further describe how the investment manager has complied with its business objectives and policies.
Read more at Reporting module.
In addition to respecting the contractual reporting obligations of the vehicle, the investment manager should provide further clear, timely and accurate information to investors and/ or key stakeholders, as relevant.
During the lifecycle of a vehicle, there may be situations or unforeseen events that the investment manager understands to be material to the outcomes of investors, which warrant timely and clear communication to investors outside of the regular reporting obligations. The investment manager, together with the governing body of the vehicle, should enable such communications to take place through appropriate channels such as written reports and/or convening meetings. The information communicated should be relevant and reliable.
The investment manager and the governing body of the vehicle should enable potential investors to fully utilise the INREV Due Diligence Questionnaire (DDQ) when considering an investment opportunity.
The INREV DDQ provides a consistent due diligence framework, helping potential investors achieve a high level of scrutiny when entering a vehicle. The investment manager should consider the adoption of the INREV DDQ and answer all its questions appropriately and in a clear and precise manner.
The investment manager, in collaboration with the governing body of the vehicle, should clearly state in the constitutional documents the vehicle’s intended level of adoption of the INREV (Vehicle) Governance Guidelines and perform an annual self-assessment of the effectiveness of its intended implementation.
To enable investors to fully understand the nature and extent of compliance of the vehicle’s intended governance framework with the INREV Guidelines, an initial as well as ongoing annual self-assessment by the governing body of the vehicle should be performed and the results disclosed appropriately.
See also RG16 and RG17 of the Reporting module.
The investment manager should ensure that the constitutional terms of the vehicle enable it to comply with INREV’s data collection requirements.
The investment manager should describe in the constitutional documents of the vehicle the type, frequency and purpose of information that will be provided to INREV. The investment manager should use reasonable efforts to ensure timely and accurate submission of such information and data required by INREV in the context of industry data analysis and performance measurement.
Read more at INREV Data Delivery module.