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

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