Friday, May 29, 2009

Canadian pension plans sticking with SRI

Despite the financial crisis, Canadian pension plans are not cutting back on their responsible investment commitments, attendees to an SRI conference heard on Friday morning.

"We've seen no reduction in interest from institutional investors," said Jordan Berger, Principal, Mercer Investment Consulting, at the Canadian Business Ethics Research Network's second annual SRI Cluster in Ottawa.

Katharine Preston of OPSEU Pension Trust, with 80,000 members and $11 billion in assets under management, says there's a recognition within the pension community that environmental, social and governance (ESG) issues affect performance. OPSEU recently introduced its first ever statement of responsible investment principles.

Still, Preston admits that it can be a challenge to get ESG issues on the agenda at board meetings, particularly in tough times. "It's an evolutionary process," she says.

And there are larger issues to consider. Berger notes that incorporating ESG requires a "re-think" of the pension process. "Climate change is an example of something that can be transformative for humanity. And there's a need to focus on governance and regulation."

From a practical perspective, Ronald Davis, associate professor of law at the University of British Columbia, says trustees remain concerned about their fiduciary responsibilities. And with good reason.

Although there's a strong argument to be made that fiduciary duties should go beyond maximizing financial returns (and in fact ESG factors are now a widely accepted part of the investment process in the pension world), "Trustees are justifiably not comfortable using this criteria," Davis says.

That's not because ESG factors are wrong, but are they sustainable? he asks, pointing out that there is virtually no case law in Canada supporting the ESG argument.

"It's right and it's popular, but you need to engage the beneficiaries in the process," Davis says.

"Members of pension plans should be asking more questions," adds Berger

Thursday, May 28, 2009

New Shariah-compliant product to be launched

It’s a fast-paced world we live in. Just yesterday, this blog referred to FrontierAlt Oasis as Canada’s only Shariah-compliant mutual fund. Not for much longer, it appears.

Jovian Capital Corporation today announced an agreement with Islamic financial services company UM Financial Inc. to “explore the launch of a co-branded, Shariah-compliant investment product.”

Toronto-based UM Financial has previously secured a $120 million Shariah-compliant residential mortgage investment facility from a regulated Canadian financial institution, and has developed Shariah- compliant investment and deposit products with other financial institutions in Canada.

"We are very excited to be partnering with Jovian on a product that would provide Muslims in Canada with a much-needed, Canadian-based and Shariah-compliant investment product which avoids such industries as gambling, alcohol and tobacco, and enables active review of financial ratios and leveraging," said Omar Kalair, President and CEO of UM.

"We feel that a product designed for Muslim investors will have broad appeal in Canada and elsewhere," said Jovian CEO Philip Armstrong.

There’s no word yet on when the new product will be available.

Wednesday, May 27, 2009

Standard & Poor’s launches Shariah-compliant index

Standard & Poor’s today introduced a Shariah-compliant version of the S&P/TSX 60. The S&P/TSX 60 Shariah Index is highly correlated to the S&P/TSX 60 Index, S&P says, providing a comparable investment portfolio while adopting explicit selection criteria defined by Islamic law.

“The S&P/TSX 60 Shariah Index will create new opportunities for Islamic investors to benchmark their Canadian investments, and for asset managers to create new investment products serving the Islamic community,” says Alka Banerjee, vice president of Standard & Poor’s Index Services. “With the launch of this index, S&P now has Shariah compliant Indices in 52 markets.”

The new index excludes businesses that offer products and services that are considered unacceptable according to Shariah law, such as stocks of companies that operate in alcohol, entertainment, financial services, pork-related products, and tobacco, as well as companies whose financial ratios may violate the compliance measure. All index constituents are evaluated on an ongoing basis to ensure the index maintains strict Shariah compliance, S&P adds.

The S&P Shariah Indices are screened by Rating Intelligence Partners, a Kuwait-based consulting company specializing in the Islamic investment market.

Canada is currently home to one Shariah-compliant mutual fund, FrontierAlt Oasis, which is designed to provide long-term capital growth through an actively managed portfolio of primarily Canadian securities that adhere to Shariah investment principles.

As of April 30, 2009, FrontierAlt Oasis had a three-month return of 3.88%, but was down -41.89% since April 2008, according to Globefund.

Monday, May 25, 2009

I’ll take Sustainability for 500, Alex.

Want answers to your questions about sustainable business? Check out the new website ethipedia, the online encyclopedia of sustainable business practices, hosts a database of documented practices adopted by organizations seeking to incorporate greater social and environmental responsibility into their operations. With an initial store of over 75 case studies from around the world, this is the largest free resource of its kind.

"The goal of this portal is to offer a library of replicable strategies for applying sustainability principles to one's organization. By making this information accessible, this site hopes to accelerate the market shift towards sustainable operations," says the site's Co-Founder, sustainability consultant Brenda Plant.

The project was launched by ethiquette Inc., creators of the green consumer portal,, in partnership with Fondaction, Quebec's labour-sponsored venture capital fund. Content exchange partnerships have so far been established with the Canadian Business Ethics Research Network and the World Forum Lille, a European coalition of businesses implementing Corporate Social Responsibility strategies.

What are sustainable business practices? Practices recognized by ethipedia are ones that go beyond legal compliance and that demonstrate an improvement upon standard procedures.

The Practice must have a ‘net positive’ effect on the environment or social conditions when all surrounding and subsidiary effects are considered. That is, that a perceived benefit is not cancelled out by an accompanying drawback. The net positive effect of the Practice must correspond with one of 7 social or environmental areas of concern: respect for the environment, governance and transparency, respect for social justice, respect for workers, community economic development, respect for consumers and fair operating practices.

If you think companies can and should do better, check out the ideas and resources on this website.

"ethipedia opens the door to a powerful information exchange and the advancement of sustainability." Amy Domini, Founder and CEO of Domini Social Investments and the Co-founder of the Domini 400 Social Index, a stock market index selected according to a set of social and environmental standards.

Saturday, May 23, 2009

Foundations urged to embrace responsible investment

The integration of environmental, social and governance (ESG) factors into the investment process is being recognized as a way to enhance value by mainstream investors. However, most trusts and foundations are falling behind when it comes to responsible investment, according to a recent report from the EIRIS Foundation Charity Project.

The recent financial crisis highlighted the significance of accountability, transparency, responsible ownership and long-term investing, the report notes. “Increasingly, it is recognized that these values should be at the heart of the investment strategy of trusts and foundations.”

This “extra-financial” approach is not new, the report adds, noting that a number of charities have included ESG in their investment process for decades. “Whether or not you agree with the mission case for incorporating ESG factors, there is growing evidence that this is an astute financial decision and can be used to safeguard and enhance financial returns.”

For example, poor corporate governance has been shown to have serious consequences for individual companies and the wider economy,” says the report’s author, Sam Collin. Similarly, there is a growing consensus that climate change will be financially significant to all companies.

Given the financial relevance of ESG factors, the report says, there is a danger that by not taking such issues into account, trusts and foundations could be seen as acting imprudently and failing to secure their long-term financial sustainability.

The report suggests that as a first step, trusts and foundations determine their beliefs and position in relation to responsible investment. “A simple next step is to look into the expertise and skills of your current investment manager(s) and determine if they could potentially meet your needs.”

“Trustees do not have to become experts in an array of ESG concerns. Rather, they should ensure that asset managers have such expertise.”

If trustees decide to follow the responsible investment route, they should ensure that ESG integration forms part of their contractual agreements with asset managers, the report suggests.

“Trustees need to integrate sustainability issues fully into their governance roles,” says Penny Shepherd, chief executive of UKSIF. “This is about investment beliefs and improved contractual relationships, not about usurping the role of investment consultants or fund managers. Quality of responsible investment must become a significant factor in the awarding and retaining of mandates.”

Trusts or foundations can also join collaborative initiatives, such as the Carbon Disclosure Project, vote their shares on ESG-related issues and invest in SRI funds.

Read the
full EIRIS report.

Wednesday, May 20, 2009

Ottawa to host SRI workshop

The Canadian Business Ethics Research Network (CBERN) is holding a day-long workshop on responsible investing on Friday, May 29, 2009 in Ottawa. This workshop, Responsible Investment, Ethics and the Global Financial Crisis, makes up the first day of CBERN’s annual conference and annual meeting.

“The purpose of the workshop is to connect researchers from universities with business leaders, government officials and NGO representatives from across Canada in effort to share insights on the ethical dimensions of responsible investment and the global financial crisis,” CBERN says on its website. “Participation will include those already involved in CBERN’s SRI Cluster including PhD students from a variety of disciplines, as well as those not yet involved with the Cluster. An objective of the workshop will be to identify how CBERN can play a role with respect to SRI, through supporting and mobilizing research and transferring research findings and insights effectively among investment related constituencies, stakeholders and economic sectors.”

The workshop features a morning panel session devoted to the current financial crisis with five guest speakers:

Jordan Berger, Principal, Mercer Investment Consulting
Isla Carmichael, University of Toronto
Ronald B. Davis, Associate Professor of Law, University of British Columbia, Faculty of Law
Eugene Ellmen, Executive Director, Social Investment Organization
Katharine Preston, Manager, Proxy Voting & ESG, OPSEU Pension Trust

Each panelist will discuss the current financial situation and present ideas on what should be done about the global financial crisis and what resources might be available. The presentations will be followed by a discussion with conference participants.

Researchers from CBERN’s SRI Cluster will make presentations during the afternoon session.

For details on the conference, please visit the CBERN website.

Wednesday, May 13, 2009

Bigger isn't better

The silver lining of this crisis could be that we decide to think a little more broadly about the economic impacts of how we live. It's natural for the SRI community to embrace the idea that growth is not always good, and that it is necessary to 'value' the environmental and social impacts of our way of life, in both a philosophical and an economic sense.

The following OpEd piece is from today's Ottawa Citizen. It's by Peter Victor, who teaches at York University and has recently published a book on this subject, Managing without Growth: Slower by Design, not Disaster. It's a bit lengthy for a blog, so we have reprinted the first few paragraphs, and then provided the link.

There's nothing like a good crisis to make us rethink old ideas. The Depression of the 1930s led to the rejection of the prevailing idea that unemployment would right itself if only people would work for lower wages. Governments could do very little to help.

These ideas were overthrown by experience and by the invention of modern macro economics by British economist, John Maynard Keynes. By the end of the Second World War, most western governments had adopted Keynesian economic policies designed to ensure that total expenditures were sufficient to maintain full employment.

Keynesian economists soon discovered that full employment today meant a bigger economy tomorrow because some of the investment expenditures required to keep unemployment down -- on infrastructure, buildings and equipment -- also expanded the productive capacity of the economy. So does an expanding population and labour force. Initially, governments pursued economic growth to meet the more pressing concern of maintaining full employment, but this soon changed. In the 1950s, economic growth became the No. 1 economic policy objective of governments and all others, such as productivity, innovation, free trade, competitiveness, immigration, even education, became a means to that end.

Until a year or so ago all seemed to be going reasonably well. Then came the breakdown in the financial sector followed quickly by a recession that, through globalization, spread farther and faster than swine flu. Now governments are congratulating themselves for acting together to stimulate spending to get their economies back on course, much as Keynes might have recommended.

But times have changed since his day. World population has increased almost three times, world economic output has increased 10 times and with this massive expansion of the human presence on earth, we are confronting limits to the availability of cheap energy, to fresh water, and to the capacity of the atmosphere to absorb increasing emissions of greenhouse gases. At the same time we are destroying the habitat of numerous species of flora and fauna and the security of our own food supplies is threatened. Read the rest here.

Monday, May 11, 2009

TD Asset Management adopts across-the-board sustainable investment policy

TD Asset Management has opted to apply a Sustainable Investing Policy across all its operations in Canada and the United States.

The move, announced recently in a press release by TD, builds on the company’s Global Sustainability Strategy, “a global equity approach that invests in companies that contribute to the world's future sustainability," said Barbara Palk, President, TD Asset Management.

"Where environmental, social and corporate governance (ESG) factors are key drivers of financial value for that Global Sustainability Strategy, they should be part of our analysis for all our investment mandates,” Palk added.

The policy notes that the financial effect of ESG factors on a company can be positive, if new opportunities open up for the company, and negative, if the company fails to properly manage the reputational and other risks arising from ESG factors.

“For us, sustainable investing means helping our clients who have a shorter time horizon achieve their financial objective in a way that does not compromise our ability to help clients who have a longer time horizon achieve their financial objective too,” the policy states. “This approach is based on the most common definition of sustainability.”

TD’s sustainable investing process consists of four parts: 1) developing a proprietary sustainability matrix to ensure TD’s analysis of a company includes a thorough analysis of ESG factors; 2) paying close attention to risk management; 3) ensuring proper disclosure to make more informed investment decisions; and 4) evaluating the total mix of information. “Under our approach, there is no single ESG factor that automatically trumps all others. We continually need to weigh the importance of competing factors and apply our professional judgement. "

The policy also includes active ownership of companies through engagement, proxy voting, and, as last resorts, litigation and divestment.

TD Asset Management, which also operates as TDAM USA Inc., managed over $169 billion in assets under management as of March 31, 2009, for pension, insurance, foundation and corporate and HNW clients, as well as retail mutual funds.

Friday, May 8, 2009

Suncor/Petro-Canada merger: an ESG analysis

There's been lots of chatter since Suncor announced a $19.2 billion bid for Petro-Canada in late March, mostly about how the proposed merger will affect share and bondholders of the two energy giants. But what does the deal mean from an ESG perspective?

Investors are expressing significant concerns over the environmental impacts of the tar sands, which will be a major focus of the new joint entity. Analysts at Toronto-based Jantzi Research have taken a closer look and believe that ESG issues will be an important objective of the merged company. "The companies’ ESG policies and practices are similar and/or complementary in a number of areas, and this bodes well for strong ESG performance," the report states.

Visit the Jantzi website to read the report.

Thursday, May 7, 2009

Amnesty, SHARE set sights on Chevron

As part of its annual Share Power campaign, Amnesty International is supporting a resolution urging Chevron to address investor concerns regarding its operations in Burma.

Chevron, in partnership with Total of France, the Petroleum Authority of Thailand and Myanmar Oil and Gas Enterprise (MOGE), holds equity in the largest investment project in Burma: the Yadana gas field and pipeline that transports gas to Thailand and has reportedly paid millions of dollars to the Burmese regime, Amnesty’s Ian Heide notes.

“Human rights organizations have documented egregious human rights abuses by Burmese troops employed to secure the pipeline area, including forcible relocation of villagers and use of forced labour on infrastructure related to the pipeline project.”

Chevron is the last major American company with active operations in Burma, according to the Shareholder Association for Research in Education (SHARE). “When Chevron purchased U.S. oil company UNOCAL in 2005, it acquired a minority stake in the Yadana pipeline,” SHARE says. A “grandfather” clause exempts Chevron from current U.S. sanctions on commercial activity in Burma.

Ongoing human rights issues, as well as mounting legal and reputational risks, have shareholders, unions and civil society groups calling for the company’s withdrawal from the country, SHARE adds.

The broad resolution – drafted by a diverse coalition of U.S. investors –­ calls on Chevron to submit a report by 2010 explaining the company’s criteria for investment in; continued operations in; and withdrawal from specific countries.

In its latest corporate social responsibility report, Chevron does not specifically mention its operations in Burma. “We are committed to respecting human rights in the countries and communities where we operate,” the report states.

SHARE says SRI investors can express support for human rights in Burma by asking mutual fund investment managers and advisors to consider voting in favour of the resolution.

Results will be announced at Chevron’s annual meeting on May 26, 2009.

Wednesday, May 6, 2009


Growthworks, a leader in the venture capital space and manager of a number of labour sponsored investments funds, has an offer on the table to buy Mavrix Fund Management.
While Growthworks does not promote itself as an SRI fund company, they use SRI considerations in their investment process. Mavrix is the owner of the Sierra Equity Fund, a retail SRI mutual fund.
This follows hot on the heels of the acquisition of Innovest by Risk Metrics and last years purchase of PH&N by RBC.
What does this mean for SRI? Are we going to have fewer stronger firms? Or will the SRI focus be diluted in these larger corporate entities?
And who’s next?

Monday, May 4, 2009

SRI: the best kept secret in Canada

Last Thursday, Eugene Ellmen, the Executive Director of the SIO, spoke to the Forest Hill chapter of the Rotary Club. In addition to providing some information on the newly released SRI Review (see SRI Assets Jump 21% to more than $600 Billion Thursday April 30), he provided an introduction to socially responsible investing, and some of the current issues we are working on.

He described how the events of the past eight months have shown that there is a disconnect between the way investments are managed and the concerns of ordinary citizens. What is SRI about? Measuring impacts and presenting them in a practical way to investors so they can make informed decisions as to what they want to invest in. Do Canadians really want this? Ellmen cited Globescan research that answers this question with a resounding ‘yes!’. 78% of Canadians want to know more about the ESG performance of the firms they are investing in.

Then why, Ellmen asked, is SRI ‘Canada’s best kept secret?’

Certainly, most of what he said was new to the Rotarians in attendance. The Rotary is an organization of business and professional leaders who provide humanitarian service, encourage high ethical standards and help build goodwill and peace in the world. The people involved in Rotary are committed to using their time, money and resources to build a better world. The live their ideals on a daily basis. Pretty much the profile of the SRI investor. Except for one thing. They’ve never heard of SRI.

So why haven’t we been able to reach out to these people? Ellmen feels that on the retail side, advisors are poorly informed. “The struggle of our industry is to claim some shelf space for SRI products”. Although the most recent SRI Review shows that retail assets are growing, it’s not the kind of growth demand statistics would indicate. We have a lot of work ahead of us to make that happen.

Saturday, May 2, 2009

Ethical files human rights proposal with Power Corp.

Ethical Funds says Power Corporation of Canada needs to improve disclosure on how the financial holding company is dealing with human rights abuses in countries where it has operations.

Subsequently, Ethical has filed a shareholder proposal asking Power to strengthen its Corporate Social Responsibility statement to describe how it evaluates investments, as well as its commitment to the Universal Declaration of Human Rights.

Power is perhaps best known for its financial subsidiaries, which include IGM Financial, Great-West Lifeco, Mackenzie Financial and London Life. All four companies offer SRI mutual funds.

However, Power also controls Pargesa Holding S.A. and ultimately Groupe Bruxelles Lambert (GBL), which has significant holdings in energy giant Total S.A. Total has operations in Burma and Sudan. In addition, Power has been approved by China’s securities regulator to invest in Yuan-denominates securities, Ethical notes.

“From the current disclosure, Power investors are unable to identify how the company is implementing its Corporate Social Responsibility statement,” Ethical says. “Consequently, investors are unable to determine if the company is effectively working to mitigate the risks of complicity with human rights abuses. Disclosure of Total’s policies in the appendix of Power’s proxy circular does not constitute adequate disclosure, nor do those policies effectively mitigate the risks from exposure to the deteriorating human rights situations in Burma and Sudan.”

“Shareholders require improved disclosure from Power in order to understand how the company is working to mitigate risks related to human rights abuses,” Ethical adds. “This resolution is simply asking for better disclosure on the implementation of the Corporate Social Responsibility statement.”

Power’s AGM is scheduled for May 13.

Friday, May 1, 2009

How Companies Manage ESG Issues

By Lisa Hayles, our London Correspondent

The financial sector is the worst performer in terms of managing environmental, social and governance (ESG) risks, and has shown the least improvement over the last three years, according to a study from Experts in Responsible Investment Solutions (EIRIS).

The UK-based research company examined how 2,200 companies in the FTSE All-World Index managed ESG risks, comparing the results with data from 2005.
The study looked at 4 broad issues to measure the management of ESG issues: board responsibility for ESG issues; risk management systems; identification of ESG risks; and discussion of potential liabilities and opportunities. It gave companies one of five grades – from ‘no evidence’ of ESG management to ‘advanced’.
It found that almost one quarter of financial institutions failed to disclose any evidence of ESG risk management – at least twice the level of any other sector. It also found that only one sixth could be categorised as ‘good’ or ‘advanced’.
Overall, the report found, companies have demonstrated a “small improvement” in ESG risk management, with the number of companies achieving an average overall score for their risk management systems increasing by 7.4% between 2005 and 2008.
Japanese companies were the best performers in 2008, and showed the biggest improvement, with 19% demonstrating an improvement in their risk management systems. In contrast, companies in Australia and New Zealand – the formerly best performing region – showed very little progress (only improving by 0.4%).

The report found significant regional variation with, for example, Canadian companies – of whom 32% were ranked ‘good’ or ‘advanced’ – outperformed their US peers, of whom 19% reach those ranks.

The resources sector was the best performer in both years, the report found, with 41.5% of companies scoring either ‘good’ or ‘advanced’ in 2008.
The financial sector also showed the smallest improvement between 2005 and 2008, with just a 4.2% increase in score. Technology was the worst performing sector in 2005 but improved more than any other sector (9.5%) by 2008. Click here to download a copy of the research or contact Lisa Hayles at lisa at

Lisa Hayles works with investors in North America and the UK on behalf of EIRIS (Experts in Responsible Investment Solutions)

Ethical proposal at Barrick AGM gets strong support, says Walker

Ethical Fund’s Bob Walker posted an interesting comment on our story about Barrick’s annual general meeting earlier this week, which we feel is worth sharing.

The headline read “Ethical gets some shareholder support at Barrick AGM” and the story noted that a shareholder proposed by Ethical asking that Barrick hire an independent party to assess performance against the Company’s current community engagement and sustainable development guidelines received the support of nearly 20% of shareholders.

“This result is actually quite strong,” said Walker, Ethical's vice president, sustainability, in his comment. “Most large blocks of shares are held by investors who are not as familiar with the issue of social licence to operate as they might be with climate risk or executive compensation issues - issues and proposals that have had time to mature.”

The substance of the Barrick proposal is relatively new to investors, he added, noting that it takes time to educate investors on new risks and concerns.

“A proposal must get at least 3% of the vote in its first year; 6% in its second year; and 10% in its third year to remain eligible for inclusion in the management proxy circular. In this light, the result for our proposal at Barrick is very good. Also note that, historically, companies have tended to take steps to address shareholder concerns when proposals reach about 10% investor support.”

Noted, Bob, and thanks for the feedback.