And the winner is….

Last night the Canadian Investment Awards Gala took place at the Fairmont Royal York in Toronto. The awards recognize leading investment products and firms who demonstrate a commitment to excellence within the Canadian financial services industry. The investment categories have grown over time, and in addition to the standard fund types and the SRI award, a set of awards for hedge funds was added this year.

The Socially Responsible Investment Fund Award was won by the Inhance Monthly Income Fund. Steve MacInnes, the Chief Investment Officer at Inhance, was on hand to accept the award. “It’s a compliment to myself and the team we have at Inhance. The Monthly Income Fund is a fund for the times we went through. It’s very well balanced, no crazy bets and diversified across all yield asset classes. It outperformed it’s balanced fund peer group. We had a shot at winning the whole category”

The runner up was the Ethical Balanced Fund. Both funds are in the top quartile based on Globefund rankings of 3 year performance of the Canadian Equity Balanced Peer Group. Perhaps we can now put an end to the pervasive myth of SRI underperformance.

Glorianne Stromberg was the winner of this year’s Career Achievement Award. This award is well deserved, and a courageous choice given the mutual fund industry’s reluctant acceptance of many of her much needed reforms.

The second annual Green Company Award for Environmental Leadership went to TD Bank. Peter Love, the former Chief Energy Conservation Office with the Ontario Power Authority, when presenting the award, asked a question that goes to the heart of SRI, ‘What good is prosperity if it cannot be sustained?”.

Unfortunately, Thomas Dyck in his acceptance speech spoke about the Great Canadian Shoreline Cleanup, a wonderful initiative, but neglected to mention the impact of TD’s Sustainable Investing Policy introduced earlier this year which now takes ESG factors into consideration when managing their 53 billion dollar mutual fund portfolio.

The CIA Gala is itself committed to going green. The event was powered with renewable energy by Bullfrog Power, and the program was printed by Informco on ‘100% recycled paper with no new trees harmed, using vegetable based inks and Environment 14001 certified processes.’ Hmm, looks like the broader investment community is finally catching up to us!

Pushing Tim Hortons on Fair Trade

Canadian coffee drinkers love Tim Hortons. Many of us make multiple trips to the nearest "Timmy's" every day. But the coffee giant has so far resisted requests to offer Fair Trade certified coffee. A number of groups are working to change that.

According to the Shareholder Association for Research and Education (SHARE), the Fair Trade program offers an alternative to the conventional coffee trade, ensuring that producers in developing countries get a fair price for their products. "This is accomplished through a set of trading, social and environmental standards whose implementation by producers or buyers is certified by an independent body," SHARE says. The standards are established by Fairtrade Labelling Organizations International (FLO), a non-profit group based in Germany.

Although Fair Trade coffee is widely available in Canada, and has been for years, it's sold mostly in smaller, independent shops. Recently, SHARE and Batirente started a dialogue with Tim Hortons to request that the company start offering Fair Trade certified coffee. Ethical Funds has announced plans to engage Tim Hortons on the same issue this year.

Tim Hortons does have a Sustainable Coffee Program, a goodwill project that aims to provide financial assistance, technical training, education and social services to a number of coffee-producing communities in Guatemala, Colombia and Brazil. That's admirable and SHARE has asked for more information on the program.

But is it enough?

SHARE, working on behalf of Meritas Mutual Funds, says it hopes to convince Tim Hortons to adopt a more forward-looking approach to coffee sourcing. "The proposed steps recognize the significance of the Fair Trade coffee market growth and the opportunities that Fair Trade presents for Tim Hortons' coffee supply management processes," says SHARE.

Average annual sales of Fair Trade coffee grew nearly 33% in Canada between 2003 and 2008. Tim Hortons has a chance to share in that growth, while at the same time helping the estimated 25 million people around the world who depend on the coffee industry to make a living.

Something to think about next time you're waiting in that long line-up for a double-double.

Small steps for shareholder action

Most Canadian mutual funds still strongly support management on shareholder resolutions, though there are signs of some movement away from that trend, according to a report by the Shareholder Association for Research and Education (SHARE) and Fund Votes.

For example, the second annual Proxy Voting by Canadian Mutual Funds report notes that Canadian mutual funds are more likely to oppose the election of directors put forward by corporate management than in previous years. And note the success of this year's "Say on Pay" campaign (not included in the report), which will allow shareholders of Canada's big banks an advisory vote on executive compensation starting next year.

“Canadians depend on mutual fund companies to protect their retirement savings and studies have shown repeatedly that careful proxy voting adds value and manages risk for investors,” says SHARE’s Laura O’Neill. “At this time of battered financial markets and depressed shareholder value, it is a positive sign that more funds are challenging management’s hold on the ballot.”

The report found that three mutual fund companies stood out from the crowd. “Among their peers, Inhance Asset Management, Meritas Mutual Funds, and Northwest & Ethical Funds, were significantly more likely to vote against management,” the report notes. “The three companies are known for integrating environmental, social and governance factors into their investment decisions.” Inhance, Meritas and Northwest & Ethical voted in favour of shareholder proposals on at least 40% of all ballots and each also withheld support from management on at least one in five resolutions.

However, those three companies are the exceptions. Canadian mutual funds supported management about 90% of the time. Eighteen of 21 fund families rejected more than 80% of the shareholder proposals they voted on.

And the report turned out a few anomalies of interest to SRI investors, especially those who are invested in SRI products from fund companies that are not SRI-exclusive or SRI specialists. For instance, the proxy voting records of SRI funds sold by diversified fund companies are likely to be the same. “We looked for evidence that SRI funds would report voting in favour of corporate social responsibility proposals more heavily than non-SRI funds in the same family. With notable exceptions, we found that this was not the case.”

“When you invest in a fund from an SRI family, you can count on very progressive proxy voting,” O’Neill said. “We found that in most cases, an SRI product managed within a non-SRI fund family votes in the same management-friendly way for all of its funds.”

Canadian fund companies have been required to publicly disclose their proxy voting records since 2006. The SHARE/Fund Votes report is available here.

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.

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.

Ethical Funds maps out action plan for 2009

It looks to be another busy year for the research team at Vancouver-based Ethical Funds, with today’s release of the mutual fund company’s extensive sustainable investment program annual report.

Bob Walker, vice president, sustainability, says Ethical plans to focus on three key issues in 2009. “The first is investor risk in Canada’s oil sands. The second is how companies can assess the full range of their impacts on human rights and ensure that their activities benefit impacted communities. The third will address how investors can help restore integrity to capital markets and the publicly-traded companies that benefit from the ethical functioning of those markets.”

As well as engaging oil sands companies on climate change, Ethical will ask companies in other sectors to work on emissions reduction, including continued dialogue with real estate companies on implementing green building strategies. Oil sands companies will also be asked to address cumulative water use issues and forestry companies will be encouraged to adopt sustainable practices.

On the social side, Ethical will continue to work with companies to encourage the development and implementation of human rights policies and programs when operating in risky countries. The fund company will also work towards eliminating sweatshop conditions and make an effort to ensure companies are not inadvertently supporting the use of child or forced labour.

Respecting indigenous rights is also on the 2009 agenda, particularly in the mining sector, where Ethical will support the adoption of informed consent as the standard for project development.

Corporate governance will be Ethical’s third main focus, with the company asking companies to improve their corporate social responsibility reporting and overall quality of their disclosure. Curbing excessive compensation will remain a priority, with Ethical asking that compensation be linked to positive performance on both the financial and the non-financial side.

“We believe companies that proactively address environmental, social and governance challenges have a long-term competitive advantage over companies that choose to ignore these issues,” notes Walker.

The sustainability report also includes highlights from Ethical’s work in 2008, including encouraging more Canadian companies to participate in the Carbon Disclosure Project, encouraging Canadian banks to adopt and disclose procedures for evaluating climate change-related credit risk in their commercial lending policies and raising awareness of the risks investors face from the scale and pace of development in Alberta’s oil sands.

Canadian SRI funds closely monitoring Barrick

The Norwegian government’s decision to expel Barrick Gold from its state pension plan for environmental reasons has sparked renewed debate over whether Canadian SRI mutual funds should continue to invest in the controversial mining company.

Barrick is a top ten holding in four Canadian SRI funds: Ethical Balanced, Ethical Stock, Ethical Index and Acuity Social Values Canadian Equity.

Bob Walker, vice president, sustainability, at Ethical Funds notes that the Norwegian pension fund uses divestment as a tool to express dissatisfaction with a company’s performance, instead of engagement, which is Ethical’s preferred approach.

Walker notes that Ethical has been talking with Barrick since 2005 and has made progress in a number of areas. For instance, Barrick has established a human rights policy, joined the UN Global Compact on corporate responsibility, hired a chief medical officer to deal with HIV/AIDS and has extended the availability of antiretroviral drugs to employees and their families.

The company also established community engagement guidelines that Walker says could have improved Barrick’s performance in a number of controversial mining projects around the world. However: “In the last two years, that hasn’t happened, the controversies are continuing.”

Ethical sent two analysts to Nevada last year to tour Barrick’s mines and meet with the 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 now in the process of drafting a shareholder proposal for Barrick’s 2009 annual general meeting in an effort to get the company to improve its human rights and environmental performance, Walker says.

So what would it take for Ethical to divest in Barrick?

“We have fairly clear rules on that,” Walker says. “We make three concerted efforts at engaging a company on any given issue and if they fail to respond with sound arguments on those three occasions then we will divest.”

The rejection of [establishing a human rights impact assessment in Nevada] would represent the first strike, Walker says. But there’s still the shareholder proposal and an upcoming meeting with Barrick’s new CEO to consider. “We’ll see how things go from there. We are pretty patient around these issues and we believe that corporate change takes time.”

Over at Acuity, Social Values Funds manager Martin Grosskopf points out that for a Canadian equity fund benchmarked to the TSX, the gold sector is impossible to ignore.

Still, he concedes that Barrick, like most companies in that sector, does not come without controversy. “The reality is that all of the gold mining companies have significant issues and Barrick has had many of these issues for years, but it still ranks better than others within the space.”

“We’re not trying to avoid the issues entirely; we know we are going to own companies that have some contentious issues and Barrick is certainly one of them.”

Of course, both Walker and Grosskopf note that socially responsible investors can avoid Barrick by investing in other Canadian Ethical or Acuity products, such as Ethical’s Special Equity Fund or Acuity’s Clean Environment Equity Fund. “We don’t own gold in that fund,” Grosskopf notes. “I don’t think you can mine gold without having significant environmental impacts, that’s the nature of that sector.”

Canada’s two other SRI-focused mutual fund companies – Inhance Investment Management and Meritas Mutual Funds – do not hold Barrick.