Tuesday, September 15, 2009

The time has come for increased pension fund disclosure

Robert Oliphant, the Liberal MP for Don Valley West will introduce a Private Members Bill later this week requiring public and private pension plans to disclose considerations given to ESG factors throughout the investment process.

The socially responsible investment community in Canada has been advocating action on this issue for some time. Mr. Oliphant was supported at a press conference on Parliament Hill earlier today by Eugene Ellmen of the Social Investment Organization, Sarah Smith from Jantzi Sustainalytics and Ian Thomson of KAIROS.

Mr. Ellmen said “Our members believe that investment means more than just financial risk and return. We believe that the only way we can truly invest for the future is by incorporating environmental, social and governance issues into financial analysis and management.”

Similar legislation already exists in many parts of the world. According to the OECD Policy Framework for Investment, ‘An amendment to the UK Pensions Act in 2000, prompted a higher level of disclosure in pension funds: the act requires fund managers to tell members whether they consider the ethical, social or environmental impact of the companies they invest in. Managers still have the option to state that they do not take these impacts into account, but the fact that they are required to disclose their policies puts greater pressure on them to justify their stances. Other countries in Europe, including Austria, Belgium, France, Germany, Italy and Sweden, have all enacted similar legislation. In Australia, the Financial Services Reform Act includes an amendment that compels providers of investment products to disclose ‘the extent, if any, to which labour standards, environmental, social or ethical considerations are incorporated into their investment principles’. The Act applies to all investment, not just pension schemes.’

Mr. Ellmen continues, “It’s important to understand that the bill does not force pension funds to adopt ESG policies and practices. In fact, we expect that many pension funds will choose to do nothing under these new rules. However, the important principle is that pension mangers and trustees will need to disclose whether any of their investment decisions were based on ESG factors in the last year.”

As with many areas of SRI, transparency is the first step. Given the steep losses incurred by many pension funds in the recent market meltdown, Canadians are looking for more information. Mr. Oliphant said “This bill is about transparency. It will ensure that clear information about the way investment decisions are made is available to protect pension plan members. It also recognizes the significant role pension funds play in the Canadian economy.”

Good work, Mr. Oliphant!

1 comment:



    When (not if) this(above link) goes through with the OSC what will happen to the current KYCs clients complete? There is a need then to have the IIROC on board to raise awareness of this change. SRIs are not only about values but also about managing risks.