Monday, March 30, 2009

New Voluntary Quality Standard for Corporate Sustainability and Responsibility Research

The CSRR-QS2.1 was created with the objective of promoting confidence in corporate sustainability and responsibility research. The Standard aims to improve quality management systems, stimulate transparency, facilitate assurance processes and form a basis for subsequent verification procedures.

The establishment of the standard was initiated with the support of the European Commission, Employment and Social Affairs DG as the outcome of the project “Developing a Voluntary Quality Standard for SRI Research” (2002-2003). It was drawn up to help further the European Commission’s aim to build partnerships for the promotion of CSR. The project began in 2002 and version 1.0 was introduced in 2003. Over the following years, the VQS has undergone an iterative process resulting in this latest launch, version 2.1.

Organizations who are signatories of CSRR-QS 2.1 subscribe to a series of quality principles, the “Eleven commitments”; subscribe to “Nine integrity commitments”; ensure objectivity, independence, impartiality; operate an effective quality management system and fulfill some administrative requirements.

So far, seven corporate sustainability research providers have been certified, Ecodes, EIRIS, EthiFinance, GES, imug, Oekom, and Vigeo.

Thursday, March 26, 2009

Sustainable Architecture

Architects have, interestingly enough, taken up the fight against climate change. The American Institute of Architects has issued the 2030 Challenge. “Buildings are the major source of demand for energy and materials that produce by-product greenhouse gases (GHG). Slowing the growth rate of GHG emissions and then reversing it over the next ten years is the key to keeping global warming under one degree centigrade (°C) above today's level. It will require immediate action and a concerted global effort” The AIA hopes to reduce the use of fossil fuel over time, culminating in a carbon neutral standard for all new buildings and major renovations by 2030. The Royal Architectural Institute of Canada has taken up this challenge, as have many architecture firms around the world.

For most of us, green buildings are identified by LEED. According to Canada’s Green Building Council, LEED (Leadership in Environmental Energy and Design) is a third-party certification program and an internationally accepted benchmark for the design, construction and operation of high performance green buildings. It provides building owners and operators the tools they need to have an immediate and measurable impact on their buildings’ performance.
LEED promotes a whole-building approach to sustainability by recognizing performance in five key areas of human and environmental health:
• sustainable site development
• water efficiency
• energy efficiency
• materials selection
• indoor environmental quality
Certification is based on the total point score achieved, following an independent review and an audit of selected credits. There are four levels of certification: certified, silver, gold and platinum.

Last fall I was in Vancouver and I came across a real estate fund that specialized in sustainable buildings. Socially responsible investors are excited about ideas like this. While we recognize the need for balanced funds, we are keen to encourage this sort of innovation. How about a REIT made up of LEED certified buildings only? Would we not get financial outperformance as these buildings would not only be cheaper to run, they would command premium rent due to their environmental cachet. Let’s take this time of capital markets dislocation to think about new ways of investing in what we believe in.

Tuesday, March 24, 2009

Tenth company adopts “say on pay”

Potash Corporation of Saskatchewan has announced it will voluntarily introduce a non-binding shareholder advisory vote on executive compensation starting next year.

“Potash is the last of the companies slated to face Meritas Mutual Funds’ proposal for a “say on pay” vote during the 2009 proxy season,” the Shareholder Association for Research and Education (SHARE) said on its website. “All of the companies that received the Meritas proposal implemented it in response to the filing.”

The ball started rolling in late February, when votes at RBC and CIBC received majority shareholder support. Bank of Montreal and Scotiabank shareholders followed suit the next week, as did Laurentian bank, but since then, support has been voluntarily, with TD Bank, National Bank, TMX Group, Sun Life and Potash all agreeing to adopt the resolution without a shareholder vote. Only Nortel Networks, which is facing an uncertain future and has postponed its annual meeting, has not followed suit.

For social investors concerned about corporate governance, adoption of the resolution at ten of Canada's largest companies is a clear victory, but Gary Hawton, chief executive officer at Meritas, says there's more work to be done.

“There are still many more companies we had approached but chose not to file – we can only manage so many AGMs in a year – and we are going to go back to them asking them to voluntarily adopt the vote in 2010,” Hawton says. “After we have reached a larger number of adopters, I think it will be incumbent on the Canadian Securities Administrators to then mandate the advisory vote to maintain a level playing field.”

Sunday, March 22, 2009

Happy World Water Day!

As individuals, it’s easy to think about how to celebrate World Water Day. Drink tap water, encourage others to give up bottled water, email Stephen Harper and tell him it’s shameful that Canada does not support enshrining water as a human right.. But as a socially responsible investor?

Water is an area where there is so much green washing going on that it’s hard to know what to do. Mutual funds and ETFs focusing on water tend to include Suez, much maligned for it’s participation in the privatization of water, and sometimes Nestle or Danone for their bottled water businesses. Signatories to the CEO Water Mandate include the Chief Executive Officers of Coke, Nestle and Suez.

As with all SRI investments, it’s a good idea to do a little homework before you invest. One of the questions we ask ourselves is ‘what’s the best way to achieve our goals?’ Sometimes it’s positive screening, sometimes shareholder engagement, sometimes a boycott. And sometimes it’s also a recognition that in some areas, and perhaps water is one of them, the public sector is better able to safeguard our interests than the private sector.

Friday, March 20, 2009

Jeffcott to leave Maquila Solidarity Network

One of Canada’s best-known sweatshop activists, Bob Jeffcott, has decided to leave the Maquila Solidarity Network (MSN), an organization he co-founded in 1995, to pursue other interests.

MSN describes itself as a labour and women's rights organization that supports the efforts of workers in global supply chains to win improved wages and working conditions and a better quality of life.

“Our focus has always been on supporting the efforts of the women and men who make our clothes to organize to improve their wages and working conditions, not on shutting down factories with bad conditions or giving shoppers ethical choices,” Jeffcott said in an open letter to his MSN colleagues. “We've always been more interested in and committed to finding new ways to make corporations more accountable rather than in helping them to better regulate themselves.”

Jeffcott admits that the “harsh reality” of factory conditions has improved little over the past 15 years and that the current financial crisis has undermined what little job security garment workers once enjoyed.

Still, there have been some significant advances over the years related to workers’ rights. “When MSN first became involved in campaigns targeting major apparel brands back in the 1990s, companies like Nike, Gap, Disney and Levi's would often deny that reports of sweatshop abuses were based in fact and/or try to avoid accepting their share of responsibility for the abuses,” Jeffcott writes.

”Today, few major apparel brands are still in the denial stage, and many of these brand-sensitive companies are now willing to sit down and discuss core issues like what steps they should take to ensure that workers' right to organize and bargain collectively is respected. While there are still major hurdles to overcome before the brands' stated commitment to freedom of association becomes reality at the factory level, we've come a long way from the days when they would tell us, "It's not our responsibility."

In 2000, MSN and its partners in Canada's Ethical Trading Action Group (ETAG) launched a national campaign for government regulations that would require companies whose clothes are sold in the Canadian market to publicly disclose the names and addresses of the factories where those products were made.

Apparel retailers and manufacturers fought back, and were able to convince the Canadian government that factory locations were "proprietary information." ETAG then shifted its focus to pressuring individual companies to voluntarily disclose their global supply chains and to lobby public institutions to adopt procurement polices that require, among other things, that suppliers publicly disclose factory locations.

”Today, almost every major sportswear brand publicly discloses their factory locations, and last year, Mountain Equipment Co-op became the first Canadian retailer to voluntarily disclose the names and addresses of the supplier factories where its own-brand products are made,” Jeffcott says.

MSN and ETAG also helped to instigate and provided advice and support to local campaigns lobbying public institutions to adopt "No Sweat" purchasing and licensing policies. Today, 19 Canadian universities, five Canadian municipalities and 11 Ontario Catholic school boards have No Sweat policies.

Jeffcott has also been busy outside of Canada, collaborating with trade unions, women's organizations and labour rights NGOs in garment-producing countries such as El Salvador, Lesotho, Honduras, Guatemala, Thailand, Mexico, Haiti and the Philippines.

”Although some of these struggles were unsuccessful and many of the victories were short-lived, they did achieve important precedents and helped keep alive workers' hope for change. This truly is a global movement against sweatshop abuses and for workers' and women's rights, and I feel privileged to have had the opportunity to be a part of it.”

For more information, visit the Maquila Solidarity Network website.

Wednesday, March 18, 2009

TD Bank gets on “say on pay” bandwagon

TD Bank agreed Wednesday to allow its shareholders an advisory vote on executive compensation, starting next year.

The votes, which are non-binding, have already been accepted by the rest of Canada’s big banks, including RBC, CIBC, Scotiabank and BMO.

The resolution, brought forward by Meritas Mutual Funds and Mouvement d'éducation et de défense des actionnaires (MEDAC) was to be voted on at TD’s annual meeting on April 2, however in a pre-emptive move, the bank decided to accept the proposal and the resolution will now be withdrawn.

"TD promotes open and proactive dialogue with shareholders, ensuring their feedback on compensation and other important issues is heard and carefully considered by the board," TD chairman John Thompson said in a release Wednesday.

"It's now clear from the votes held this year at the other major Canadian banks' meetings that the opinion of the investment community, while still divided, has moved in favour of an advisory vote, and so we've acted accordingly."

Last week, TMX Group, parent of the Toronto Stock Exchange, and Sun Life Financial both said they will voluntarily offer shareholders a non-binding advisory vote on executive pay starting at their annual meeting next year. As a result, Meritas withdrew its proposal at both companies.

Just a few weeks ago, Canadian banks were carefully counting proxy votes before making the decision to adopt a non-binding pay vote, the Shareholder Association for Research and Education (SHARE, which assisted Meritas on the resolutions) noted on its website. “Now, companies are implementing a shareholder 'say on pay' well ahead of their shareholder meetings.”

Laura O’Neill, director of law and policy at SHARE, says she’s pleased with TD’s decision, but adds that “given the lockstep in which our big banks move on governance, we certainly didn’t think that TD had much choice. But we’re happy to see the announcement a full two weeks before their AGM.”

O’Neill notes that Sun Life and TMX’s acceptances of the resolution are perhaps even more significant, providing a toehold into the world of issuers who are not banks, “because that’s clearly where we want to go.”

There are still a couple of outstanding executive compensation resolutions: Potash Corporation meets May 7 and a proposal was also filed at Nortel Networks, which filed for protection from creditors in January. “I doubt very much we’ll ever see this proposal on a Nortel ballot,” O’Neill concedes.

Considering the momentum the executive compensation has generated during this proxy voting season, O’Neill says she’s very interested to see what will happen next. “We’d like to see movement by the Canadian Securities Administrators to put this in place across the board. It would be a quick, clean way to get this done.”

Tuesday, March 17, 2009

New Gender Index launched

Pax World Management, one of the original SRI mutual fund firms in the United States, has teamed up with KLD Research and Analytics to launch a Gender Index Series. This series is sponsored by the International Finance Corporation, a member of the World Bank Group, as part of it’s Gender Entrepreneurship Markets program. It was announced last week on, when else - International Women’s Day.

There will be five indices, three regional, North America, Asia Pacific, and Europe, which are sub indices of the Global Women Investment Index. The fifth index is the Global 100 Women Investment Index, representing the top 100 women friendly companies around the world.
The eligible universe from which companies will be chosen is the FTSE All-World Developed Index, and KLD will rank companies on four primary areas: board representation, workplace representation, programs and polices, and controversies.

This is welcome news for a couple of reasons. First, it draws attention to gender and diversity as ESG concerns which have unfortunately taken a back seat to other social and governance issues. In the current round of Annual Meetings a resolution was brought by MEDAC as follows, “Since there are currently numerous men and women qualified and seasoned to fulfill expectations and prerequisites to become board members, it is proposed that the board of directors adopts a policy stipulating that 50 percent of new candidacies proposed as board member be women until a parity of men and women be reached.” This garnered a mere 5 -6% of votes. Corporate Canada continues to say that they are actively seeking women for Board vacancies and don’t need this push, however, the numbers tell a different story. The Catalyst Census found that in 2008, “women’s representation as corporate officers rose to 16.9 percent, an increase of 1.8 percentage points since 2006 and greater than the 1.1 percentage point increase from 2002 to 2006. The increase in women’s representation among corporate officers was driven by private and crown corporations. Women’s representation among corporate officers of public companies remained stagnant. (italics mine). Meanwhile, since 2002, approximately one-third of FP500 companies have had no women corporate officers.”

Second, it will help us to quantify the effect of gender and diversity practices in companies. And this may well help with increasing the numbers. There is significant anecdotal evidence that more women and minorities in senior management and on boards leads to better financial performance. There are also numerous studies on individual social and governance factors that demonstrate this outperformance. However, there are still far too many fence sitters in corporate management saying ‘show me the money’. Perhaps, with the advent of these indices, we will soon be able to do that.

Thursday, March 12, 2009

Corporate sustainability reporting: the executive disconnect

Canada’s senior executives seem to be getting the message that sustainability issues are important to their businesses. But there’s a major gap between understanding and action, according to a survey released this week.

The study, conducted by PricewaterhouseCoopers LLP (PwC) and the Canadian Financial Executives Research Foundation, reveals that 90% of Canada’s senior financial executives believe their companies should be reporting on environmental and social impacts. However, only half said they have sustainability reporting systems in place, even though most also believe the average investor does not have enough information about the environmental and social performance of Canadian companies.

The survey suggests that most executives understood which sustainability issues were most relevant to achieving their business goals and felt it was important to communicate sustainability performance to senior managers and their boards of directors. But again, more than half admitted they did not have systems and processes in place to measure sustainability performance.

“Several forces may be working together to explain the disconnect,” says PcW partner Mike Harris. “First, a general framework does not exist for measuring and reporting, making comparisons between industries a challenge. Second, many companies have not developed robust data collection systems to make the reporting process efficient and reliable. Third, most finance executives continue to only focus on the mandatory financial disclosures and finally, the cost/benefit of optional sustainability reporting does not provide support for the types of systems and process required to effectively implement it.”

“Until sustainability reporting is mandatory, this is likely to remain the norm,” Harris concluded.

The survey found that larger companies were more likely to link the application of corporate sustainability practices to business goals. And public companies were more like to comply with external reporting standards such as the Global Reporting Initiative and the Greenhouse Gas Protocol.

Companies were also concerned about compiling data in a cost-effective manner that would accommodate a broad spectrum of stakeholders, such as employees, shareholders, customers, institutional investors, regulators and environmental activist groups. The costs associated with sustainability reporting were of particular concern to small- to medium-sized businesses.

The survey results indicate that the vast majority of financial executives believe that regulatory requirements pertaining to sustainability disclosure and reporting will increase in the years to come; nearly three-quarters said they believed that legislation relating to disclosure and reporting of sustainability performance will become more stringent over the next five years.

Nearly 350 senior executives from across Canada participated in the survey.

Wednesday, March 11, 2009

Ethical releases list of shareholder resolutions

Ethical Funds announced today that it has filed shareholder resolutions with a number of Canadian companies outlining a variety of concerns, including climate change, human rights, indigenous people’s rights and sweatshops.

Topping the list is Barrick Gold, which made headlines recently when it was expelled from the Norwegian government’s pension plan for environmental reasons. Ethical is asking Barrick’s board of directors to engage an independent third party to review the company’s engagement practices and performances, focusing on the Cortez Hill mine site in Nevada.

Ethical sent two analysts to Nevada last year to tour Barrick’s mines and meet with the indigenous Western Shoshone community. Subsequently, Ethical recommended that Barrick consider conducting a human rights impact assessment of that project, an idea rejected by Barrick.

Ethical is also asking Enbridge to provide a report assessing the costs and benefits of adopting a policy requiring the free, prior and informed consent of aboriginal communities as a necessary condition for proceeding with the construction of company projects.

Sherritt International, E-L Financial, Great West Lifeco and Saputo have all been asked to report on how they are assessing the impact of climate change on their corporations and how they plan to disclose this information to shareholders. If applicable, the four companies have also been asked to explain their rationale for not disclosing such information in the future, through reporting mechanisms such as the Carbon Disclosure Project.

Power's board of directors has been asked to issue a report describing how it evaluates investments according to its CSR statement and commitment to the Universal Declaration of Human Rights. Power has investments in countries where human rights violations are of international concern, including Burma, Sudan and China.

The board of directors at Reitmans as been asked to publicly disclose a code of conduct for the company’s suppliers, including a credible compliance program with independent monitoring. According to Reitmans’ most recent Annual Information Form, the company sources 75% of its merchandise from countries where labour and human rights abuses are known to occur.

Please click here for the full text of the Ethical resolutions.

Monday, March 9, 2009

Carbon footprint index launched

Standard & Poor’s continues its push to create new market indexes focused on the environment, today announcing the S&P U.S. Carbon Efficient Index, designed to measure the performance of large cap, publicly-traded American firms whose carbon footprints are lower than their peers.

The new index provides a benchmark to the U.S. stock market, as represented by the parent S&P 500, while allowing investors to create financial products that seek to gain exposure from a more environmentally efficient perspective, S&P said in a press release.

"Organizations around the world are paying greater attention to the impact of greenhouse gases on our climate, as increasingly more investors consider carbon efficiency as an important investment theme," said S&P’s David Blitzer.

The index is comprised of constituents of the S&P 500 ranked by carbon footprint, as measured by Trucost, an environmental data organization which has quantified the environmental impact of over 4,500 companies in various industries around the world. Trucost has the world’s largest bank of greenhouse gas emissions data and carbon footprints measure the impact that a company has on the environment in terms of the amount of greenhouse gas emissions produced.

For this particular index, Trucost uses publicly-disclosed information on greenhouse gas emissions, such as annual and sustainability reports as well as other publicly-disclosed information, and engages directly with companies to verify its calculations. Nine greenhouse gases are included in the analysis, expressed as tons of carbon dioxide equivalent.

A company’s carbon footprint is calculated by taking that carbon dioxide equivalent and dividing it by annual revenues. Stocks in the S&P 500 are then ranked by carbon footprint to create the index. A smaller carbon footprint means lower contributions to climate change and less exposure to the rising costs of emitting carbon dioxide, S&P says in its explanation of the index’s methodology.

The top five companies by index weighting are Procter & Gamble, Chevron, Johnson & Johnson, AT&T and IBM. S&P already offers a number of other “green investing” indexes, including Asia Water, Global Eco, Japan Eco and Global Water.

Last year, Trucost teamed up with Mercer to create a carbon footprint analysis tool for institutional investors.

Saturday, March 7, 2009

ESG Integration…If not now, when?

Don Reed from Sustainable Finance was in Toronto recently to talk about the risks and opportunities for businesses around sustainability issues. It was refreshing to listen to someone who is not interested in either denial or greenwashing, but takes a practical approach to helping companies address the challenges they face today. Sustainable Finance is now owned by PricewaterhouseCoopers who sponsored the presentation.

In the SRI world integrating ESG factors into investment analysis is a given. But for a firm just dipping their toes in these waters, how would they start? Mr. Reed suggests that they choose highly affected sectors and then work through some scenarios around material financial issues such as the physical effects of climate change, and the regulatory impacts. Having gone through this process with traditional asset managers he reports that they are often surprised to find that there are indeed material financial issues, and that companies within a sector may be quite differently positioned.

Recognizing that ESG factors incorporate a long term view of sustainable development trends and are not just a flavour of the month has also broadened the appeal of ESG/SRI analysis. For example, policy or business decisions that use the price of oil don’t price oil at $147 a barrel where it was last July, nor do they use the $45 a barrel it stands at today, a mere 8 months later. Models use average prices as well as extremes, and also include factors like volatility. When the business and investment community starts talking about the price of carbon, we can use this same type of thinking.

ESG issues are not irrelevant, nor are they somehow outside the parameters of business considerations. President Obama has stated, "But to truly transform our economy, protect our security, and save our planet from the ravages of climate change, we need to ultimately make clean, renewable energy the profitable kind of energy. So I ask this Congress to send me legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy in America. And to support that innovation, we will invest $15 billion a year to develop technologies like wind power and solar power; advanced biofuels, clean coal, and more fuel-efficient cars and trucks built right here in America."

Corporations, and the financial services sector, need to understand ESG. And perhaps we are at a moment in time when traditional analysts and those who already integrate ESG into their work can come together to make decisions that benefit both the economy and the environment. Profitable and Green are not mutually exclusive.

Friday, March 6, 2009

Corporate responsibility gaining ground in developing economies

It’s safe to say environmental, social and governance issues haven’t been viewed as a priority in the developing world. But there are signs of progress, according to a review of ESG practices at 40 major companies in ten emerging markets conducted by the Sustainable Investment Research Analyst Network (SIRAN) in partnership with global sustainable investment specialists EIRIS.

The assessed companies scored much better in environmental areas than in social or governance, with some reaching grades on par with environmental leaders in the developed world, but many fared poorly on human rights.

“Issues such as climate change, water shortages and local pollution are driving the environmental agenda in many emerging markets,” the study found. “However, climate change disclosure remains an area where emerging market companies lag in establishing good reporting practices.”

The report found little emphasis on human rights by the largest emerging markets companies. “Half of the companies which had exposure to human rights issues in countries of concern had established policies on human rights,” the study stated. “A much smaller percentage of companies, however, report on the details of their systems and performance.”

Countries assessed in the study were Brazil, China, India, Indonesia, Israel, South Korea, Malaysia, Mexico, Russia and South Africa. The South African and Brazilian companies in the sample stood out overall as consistently having the highest assessments, possibly because their local stock exchanges have each launched a responsible investment index.

“Increasingly, responsible investors are focusing on emerging markets as they seek to diversify their equity investments,” says Stephanie Maier, head of research at EIRIS. “This research will help investors to identify ESG risks and opportunities which exist beyond developed markets when constructing their responsible investment strategies.”

Please click here to read the complete SIRAN study.

Thursday, March 5, 2009

Book Review - Investing for Change

Investing for Change by Augustin Landier and Vinay B. Nair

This recently published book on SRI is a helpful overview for investors, a good introductory volume for SRI professionals, and it’s available in the public library system. In a quick read, the authors cover the history of SRI, issues around screening and engagement, and performance. While there is a notable absence of Canadian content, they address the growth of SRI around the world, including tidbits about the UN PRI, the GRI and sovereign funds.

However, in trying to cover it all, they perhaps have overreached themselves. The calculations on subjects like the cost of capital will be too detailed for most investors, while the gimmicky nature of dividing socially responsible investors into groups of yellow, blue and red and providing little stories about them may irritate SRI professionals.

Landier and Nair believe that SRI has arrived at the tipping point for a number of interesting but not entirely convincing reasons. Based on Maslow’s Hierarchy of Needs they suggest that as the world gets richer, a shift is taking place from materialist values to post materialist values which emphasize self expression and quality-of-life concerns. While this may be happening to some extent in North America, there’s a lot of material catch up to be done in countries like China and India before they move to post materialistic concerns. Landier and Nair also view institutional capital as an early adopter of SRI and a harbinger of things to come. They present 9 trends that reinforce their assertion of ‘The Oncoming Big Wave’. These are: the boom in retail SRI, new SRI products cost less so more people join, standardization of information, peer effects in 401(K) choices – the viral propagation of SRI, sovereign funds, the UN PRI, responsible firms want to offer responsible savings, toward responsible alternative investments and the professional rise of women.

Investing for Change does make two important points. First, it recognizes the importance of achieving change. For the values based investor, the ability to make a difference is paramount, and we acknowledge this in our shift in emphasis from negative screening to shareholder engagement. Secondly, while I may disagree with the authors’ categorizations, the book recognizes that there is not one SRI investor. People, and entities, are attracted to SRI for different reasons and if the industry wants to continue to grow we must work to clarify and address this multiplicity of views.

Wednesday, March 4, 2009

Two more banks agree to allow shareholders “say on pay”

Following the lead of RBC and CIBC, the Bank of Nova Scotia and the Bank of Montreal have agreed to implement a shareholder resolution on executive compensation.

The resolution — which allows shareholders to provide an annual advisory vote to the banks’ boards of directors on executive compensation — received 51.6% support at Scotiabank and 53.6% at BMO at annual general meetings held on Tuesday.

The two banks indicated they would respect the vote and work with shareholders to implement the resolution. "I’d like to announce that the bank will provide shareholders with a non-binding vote on executive compensation at the next shareholders meeting," said BMO chair David Galloway.

The resolution was filed with all of Canada’s big banks by Meritas Mutual Funds with support from SHARE (Shareholder Association for Research and Education). At RBC and CIBC’s annual meetings, the ‘say on pay’ proposals garnered the support of 54.4% and 51.9% of shareholders, respectively. TD Bank, whose AGM is scheduled for next month, is also expected to support the resolution.

Meritas brought the issue of advisory votes on executive compensation to the Canadian investment community in 2007 through dialogue with Canada's largest banks and followed up with shareholder proposals asking for a vote. "We asked that this vote be advisory, so that it would not ultimately determine executive pay, but would provide clear and consistent shareholder feedback on the decisions that bank boards make about compensation", said Meritas CEO Gary Hawton.

Last year, support at the big banks averaged 40.5%. Hawton says he was surprised by the increased level of support this year, adding that he is hopeful regulators will consider rules requiring companies to hold votes on executive compensation.

Tuesday, March 3, 2009

SIO announces preliminary conference information

The Social Investment Organization has released a few early details of its biennial conference, to be held in Winnipeg from June 7-9. This year’s theme will be “sustainable investing in unprecedented times.”

“With the headlines full of economic uncertainty, this conference will explore how socially responsible investment is responding to current market volatility.” The SIO said in an e-mail to members. “Sessions on climate change, green investing, community investing, aboriginal issues, retail markets and institutional investment will provide insight and hope for how SRI can point a way forward through the current market turmoil.”

Confirmed speakers include Mark Jaccard, Professor, School of Resource and Environment Management at Simon Fraser University, member of the National Roundtable on Environment & Economy, and research fellow, CD Howe Institute; Lloyd Axworthy, formerly Foreign Affairs Minister and currently President and Vice-Chancellor, University of Winnipeg; Nancy McHarg, Vice President, Strategic Counsel, Hoggan & Associates; and Ed Waitzer, Stikeman Elliott LLP, Chair, Corporate Governance, Osgoode Hall Law School and Schulich School of Business, and former Chair, Ontario Securities Commission.

Full conference details will be available soon at

Blue Gold

‘We simply cannot manage water in the future as we have in the past or the economic web will collapse’ stated a report released earlier this year by the World Economic Forum. Like every commodity out there (and some will object to my characterization of water as a commodity), water raises a number of issues around social responsibility. These concerns were clearly presented by Maude Barlow at last Saturday’s ‘Water: A Human Right? Let’s make it our business’ event, sponsored by Amnesty International

“Who should be making the decisions around this declining resource?” asked Ms. Barlow. Should water be a for-profit commodity, or should it belong to everyone, to the commons? This is becoming an increasingly urgent question.

The problems and the grey areas are well known. Industrial use of water, desertification, health and sanitation crises, aging infrastructure, energy use in desalination, the list goes on. As the World Economic Forum recognized ‘We are now on the verge of water bankruptcy in many places with no way of paying the debt back.’

Ms. Barlow offered us solutions, not always clear cut and acceptable to all, but suggestions for thinking about how to move forward. She believes that we must begin by declaring water to be a public trust that belongs to the people, to the ecosystem and to the future. No one would own it, it would be managed by the government, and accessed by those who need it. She also asserted that we need to leave enough water in nature to allow it to function. We need to recreate a healthy hydrological cycle, focus on ecology and conservation, integrated watershed management and new agricultural policies informed by water use metrics. Our decisions around water would be based on a prioritization of water for life before commercial use.

All of this is encompassed in the idea of water as a human right. The role of business would be in the sphere of technological innovation, helping us use our water more efficiently. This contrasts starkly with much current private sector activity which involves taking our water and selling it back to us.

Water presents to socially responsible investors some overarching issues. One is the decision as to which activities belong in the private sector. As a society, how do we decide what is acceptable to be managed by corporations, on a for-profit basis, and what should be managed by the public sector. Creating a world where air and water and forests have value does involve pricing them, and therefore a degree of commoditisation. But we have seen that the old economic model where these were ‘externalities’ has led to untrammelled degradation of the natural environment at ‘no cost’ to some, and significant cost to all. Appropriate mechanisms for valuing, pricing and trading are in their infancy, but will be fundamental to a world where the economy and the environment function in tandem.

Monday, March 2, 2009

Major pension funds speak out on credit crisis

A group representing hundreds of the world’s largest pension funds says institutional investors must accept their share of responsibility for the “the largest financial crisis in a generation.”

Signatories to the United Nations Principles for Responsible Investment, including the Canada Pension Plan Investment Board and Quebec’s Caisse de dépôt, issued a joint statement today, urging its 500 members to work together to improve risk management practices.

“As clients and part owners of the financial institutions at the core of this crisis, institutional investors should accept some shared responsibility for the behaviours that led to the crisis,” said Donald MacDonald, chair of the PRI Initiative. “In response, and to protect our investments over the long-term, institutional investors need to greatly improve due diligence within the investment chain, and to practice and incentivise much smarter risk management.”

At the same time, MacDonald says he believes the current crisis represents an opportunity, potentially shifting the mainstream investment sector towards more responsible investment practices.

“Institutional investors can make a positive contribution to rebuilding trust by taking action in support of our eight-point plan set out today,” he added, “PRI signatories can lead from the front to make that happen.”

The plan calls on institutional investors to invest more in responsible investment activities, create a culture of “active ownership” by monitoring investments more closely and engage in dialogue with companies where risks are not being managed appropriately.

The PRI also says that institutional investors should engage with governments and market regulators to ensure that responsible investment is seen as part of the solution. Investors should also disclose their responsible investment activities, emphasizing measures being taken to respond to the credit crisis.

Long-term value and success of business are inextricably linked to the integration of environmental, social and governance issues into corporate management operations, the PRI’s plan notes, adding that corporate responsibility will help restore the trust that is required for markets to function.

“Integrating responsible investing with our asset management is part of our fiduciary responsibility,” says Anne Stausboll, CEO of CalPERS, one of the world’s largest pension funds. “More than ever, we're committed to collaborative efforts to develop better regulatory and market risk management structures and to better assess and fully report risks and opportunities related to environmental, social and governance issues."