Thursday, February 23, 2012

Corporate Knights releases SRI fund survey

Corporate Knights magazine has released its annual Responsible Investing Guide, including a survey of SRI mutual funds.

Meritas has four funds in the magazine’s top 10, including the top ranked Meritas International Equity fund. Acuity, IA Clarington and Ethical each have two funds in the top 10.

The survey measures funds on a number of indicators including performance, engagement, integration and portfolio turnover rate. Click here for CK’s 2012 Responsible Investing Guide.

Tuesday, February 21, 2012

Group pushes for mandatory SRI question

originally published on

Concerned that advisors aren’t talking to their clients about socially responsible investing, the Social Investment Organization will push for rules mandating advisors to ask about a client’s interest in SRI.

The SRI question could be part of the process to open new accounts with clients or part of the annual review, says SIO executive director Eugene Ellmen.

“We want to have a fuller discussion with IIROC and MFDA on this and put the issue squarely on the table,” Ellmen said in an interview, adding that simply encouraging advisors to ask the question isn’t enough.

“Without mandating it, it’s going to be difficult to convey to advisors that this is something important for them to take up with their clients. It’s not going to be heavy handed; we’re not forcing advisors to push SRI on their clients in any way.”

The SIO first raised this issue in 2010, as part of a submission to IIROC’s client relationship model consultations. IIROC responded by stating that environmental, social and governance (ESG) issues are considerations in determining investment objectives, “an existing required consideration in the rules.”

“IIROC took the position that it’s not necessary to explicitly call on advisors to ask about ESG issues,” Ellmen says. “Our view is that advisors simply are not having this conversation with their clients in spite of the demonstrated demand from clients.”

Ellmen says the social values of a client are fundamentally part of the suitability of an investment, ranking these considerations with risk tolerance and investment horizon.

“If they don’t ask the question, they could be recommending unsuitable investments. It’s in the client’s interest; it’s in the advisor’s interest to do this.”

Ellmen points to other countries which have successfully regulated SRI client inquiries, notably Australia. “They have mandated advisors to look at this for quite some time, and advisors don’t have a problem with it. In fact, it’s part of the reason Australia is a world leader in SRI.”

Gary Godard, a senior vice-president with National Bank Financial in Calgary, says he supports the SIO’s campaign, but doesn’t expect any regulatory changes in the near future. ”I don’t believe it’s up to the regulators to define what constitutes social or ethical considerations. I think the dealers have to take the first step,” he says.

Godard includes the SRI question in clients’ investment policy statements, estimating that he gets a positive response seven times out of ten. “It’s a best practice for advisors to make those reasonable enquiries.”

Ellmen notes that some dealers mandate the SRI inquiry already, such as QTrade and Credential. “From discussions I’ve had with [their] advisors, it’s not an issue, in fact it’s helpful. What we’re asking is that the kind of questions that QTrade and Credential put in their KYC should be mandated across the board.”

As well as discussions with regulators, the SIO plans to reach out to advisors with courses through Advocis and the development of an online course. “We’re also planning on getting out to some financial planning conferences this year to talk about advisor education and the mandated inquiry rule.”

Thursday, February 16, 2012

Executive compensation flagged by pension managers

Private sector pension managers are growing impatient with boards that fail to align executive pay with shareholders’ interests, according to the Canadian Key Proxy Voting Survey. The Shareholder Association for Research and Education (SHARE) survey looks at the voting records of 32 investment managers and proxy voting services.

More than one-third of the issues surveyed in 2011 were votes on executive compensation. Participating companies voted against management more often than they voted in favour.

Despite the generally tough stance, a proposal that challenged companies on the growing gap between executive compensation and average wages received support from only 1 in every 3 surveyed firms that voted on it.

“This muted response to the pay disparity proposal indicates that few firms answering the survey have an appetite for calling market norms into question,” said Laura O’Neill, SHARE’s Director of Law and Policy.

The survey examines voting decisions on about two dozen issues that attracted relatively strong opposition from shareholders, SHARE said in a news release.

The survey also includes data on how firms make their voting decisions.

“Responses to the survey provide evidence that Canadian pension fund asset managers are devoting more attention to proxy voting and disclosing their decisions,” said Charley Beresford, Executive Director of the Columbia Institute, a survey sponsor. “Over the past three years, for example, an increasing percentage of firms report that they have proxy guidelines, that they review them every year and that they make them available to the public.”

Thursday, February 9, 2012

CBERN issues call for SRI research papers

The Canadian Business and Ethics Research Network and the Principles for Responsible Investment have announced details of the Fifth Annual Academic Conference on Responsible Investment, including a call for SRI research papers.

The conference will take place at the Schulich School of Business at Toronto’s York University October 1-3, 2012. The theme is “Evolution of Responsible Investment: Navigating Complexity.”

“The purpose of the 2012 Academic Conference is to develop understanding of the complexity of institutions, organizations, strategies and processes that make up responsible investment,” CBERN said in an e-mail announcing details of the conference.

Organizers are looking for papers that address SRI-related themes, including investment strategies, shareholder engagement, public policy and regulation.

Online applications are due by April 30.

Thursday, February 2, 2012

Teachers outlines position on executive compensation

The Ontario Teachers’ Pension Plan says it does not support advisory votes on executive compensation, preferring instead to let directors make decisions on compensation matters.

“We believe shareholders are better served by having boards comprised of competent directors make, and be accountable to shareholders for, executive compensation decisions,” Teachers said in a letter to 665 public companies in Canada, the United States and the United Kingdom.

Still, Teachers says it will review compensation disclosures to assess the executive compensation decisions made by directors, in a three-step, three-year process.

In the first year, Teachers says it will “generally support management on advisory votes and only follow-up with companies where we have identified significant issues with management’s proposal.”

Teachers says if any issues identified in the first year are not resolved by the second year, it will generally not support management on the advisory vote in that year and will again follow-up with the company, outlining its concerns.

If the concerns remain unaddressed by year three, Teachers will not support the re-election of the chair and/or members of the compensation committee.

Teachers adds that in circumstances where there is no advisory vote and where there are concerns about a company’s compensation practices, it will consider whether or not to support the election of the chair and members of the compensation committee.

Teachers says its ability to analyze a company’s compensation program is dependent upon the quality of disclosure provided in the Compensation Discussion & Analysis (CD&A) section of company meeting materials.

“We encourage issuers to draft their CD&A accurately, completely and in plain language so that it is clear and easily understood by the reader.”