Overview of the Prudent Investor Standard

In 2019, the Province of Ontario provided municipalities with a new investment option called the Prudent Investor Standard (Section 418.1 of the Municipal Act). This change aims to enable municipalities to earn improved risk-adjusted rates of return by building more diverse investment portfolios. Municipalities that opt for the Prudent Investor Standard can invest in anything a 'prudent person' could invest in, considering their circumstances.

To invest under the Prudent Investor Standard, a municipality must delegate control and management of its Money not required immediately (MNRI) to an external, professional investment board. MNRI is a term defined in the municipal investment policy. The municipality continues to retain control over all funds that are not MNRI.

A more strategic investment approach like this can offer stronger investment returns over the long term which can reduce the reliance on other sources of municipal revenue, such as property taxes, and user fees.