Asset invested according to socially responsible (SRI) guidelines increased to $609.23 billion from $503.61 billion, from 2006 to June 30, 2008, according to the Social Investment Organization’s biennial industry study, which was released today.
“While the growth rate [21%] was lower than the growth rate experienced by SRI in the 2004 to 2006 period, this report shows that SRI is continuing to occupy a significant share of the financial services market in Canada,” the study notes.
Core SRI assets, defined as those most closely associated with traditional values-based approaches to SRI, declined to $54.17 billion from $57.39 billion in 2006, a decrease of 5.6%. This decline was attributable to general market conditions rather than a reduction in the number of managers with SRI mandates. The decline was most pronounced among asset managers with institutional clients, partially offset by an increase in retail SRI funds, particularly due to growth in renewable energy income trusts, the study revealed.
Broad SRI assets, which include strategies to integrate environmental, social and governance (ESG) factors into financial analysis and portfolio management, was responsible for most of the growth in overall SRI assets, rising to $555.06 billion from $446.22 billion two years earlier.
“The growth reflects a small increase in the number of pension plans and endowments with responsible investment policies, as well as asset growth by pension funds with existing responsible investment policies. This growth was partially offset by a decline in asset managers with institutional mandates using ESG integration strategies. Sustainable venture capital, while representing a relatively small part of total SRI assets, continued to enjoy substantial growth between 2006 and 2008.”
The study found that $544.13 billion in pension and endowment assets invested under responsible investment policies in Canada in 2008, a 26% increase from $433.07 billion in 2006. “These assets are mostly in the large public pension sector, reflecting a consensus among the managers of Canada’s large public pensions that responsible investment represents a prudent policy for investment fiduciaries.”
Pension and endowment assets are the single largest component of assets in the wider SRI category, as well as the largest component of SRI in total. While the 26% growth rate is substantial, the growth rate between 2006 and 2008 was much smaller than the growth rate between 2004 and 2006, when a number of pension managers first adopted responsible investment policies.
At the end of June 2008, retail investment funds fund assets totalled $22.19 billion, a 22% cent increase from 2006. This includes $8.41 billion in assets of renewable energy income trusts, a 40% increase from 2006; $8.24 billion in assets of socially responsible retail venture funds, an increase of 7.2% from 2006; and $5.54 billion in assets of socially responsible mutual funds, an increase of 25% cent from two years earlier.
As a comparison, market growth in this period was 24%, as measured by the S&P/TSX Composite Index meaning that growth in the renewable energy income trusts exceeded market growth, growth in SRI retail venture capital funds was below market growth and growth in SRI mutual funds was about the same as market growth.
“At more than $600 billion in core and broad SRI strategies, socially responsible investment is holding steady at nearly 20% of assets under management in Canada, the study concludes. “Screened and integrated approaches by asset managers suffered declines in assets as a result of general market conditions, but these declines were more than offset by continued growth in broad SRI strategies by large public sector pension plans. In addition, while small by comparison with total assets, substantial growth continued among SRI mutual funds, renewable energy income trusts and sustainable venture capital.”
The market downturn in the second half of 2008 is not reflected in the report, but the SIO says it believes that SRI is well-positioned to survive the current economic turmoil and resume its impressive growth pattern.
“In spite of these difficult times, there is evidence that Canadians want their investments to pose solutions to global social and environmental issues, not to simply profit from the status quo. Socially responsible investment is proposing such solutions through investment screens, integration of social and environmental issues into the investment process, corporate engagement on social and environmental issues, sustainable venture capital, community investment, social finance and ethical lending.”
“We believe that socially responsible investment represents the leading edge of the investment industry, and points the way forward for mainstream analysis and investment selection in the years ahead.”
Thursday, April 30, 2009
Wednesday, April 29, 2009
Ethical gets some shareholder support at Barrick AGM
Ethical Funds received the support of nearly 20% of shareholders for a proposal filed at Barrick’s annual general meeting on Wednesday in Toronto.
After five years of dialogue with company and a site visit to Barrick’s operations in Nevada, Ethical asked that Barrick hire an independent party to assess performance against the Company’s current community engagement and sustainable development guidelines.
In response to the proposal, Barrick has committed to review its existing policies in 2009 as part of its membership obligations in the International Council of Mining and Metals. However, many shareholders believe the core risks associated with on-the-ground performance will not be captured by an industry review of existing policy alone.
“The risk here is the ability of Barrick to maintain its social license to operate,” said Bob Walker, vice president of sustainability for Ethical Funds. “Without an independent review focused on community engagement practices and getting robust feedback from the affected communities, investors cannot properly evaluate the company’s performance.”
“Barrick has good policies in place but is falling behind industry best practices, given that competitors Newmont Gold and Goldcorp Inc. have recently conducted independent reviews of their community engagement policies and performance to address similar risks, at the request of shareholders,” Walker added.
The controversy over Barrick heated up earlier this year when Norway’s state pension fund divested from the gold miner, citing environmental concerns and human rights violations.
“We are active shareholders and we are looking for action from Barrick to address these social issues,” Walker added. “We must own to engage and address risks – Barrick has strong policies; it’s time to see them realized.”
After five years of dialogue with company and a site visit to Barrick’s operations in Nevada, Ethical asked that Barrick hire an independent party to assess performance against the Company’s current community engagement and sustainable development guidelines.
In response to the proposal, Barrick has committed to review its existing policies in 2009 as part of its membership obligations in the International Council of Mining and Metals. However, many shareholders believe the core risks associated with on-the-ground performance will not be captured by an industry review of existing policy alone.
“The risk here is the ability of Barrick to maintain its social license to operate,” said Bob Walker, vice president of sustainability for Ethical Funds. “Without an independent review focused on community engagement practices and getting robust feedback from the affected communities, investors cannot properly evaluate the company’s performance.”
“Barrick has good policies in place but is falling behind industry best practices, given that competitors Newmont Gold and Goldcorp Inc. have recently conducted independent reviews of their community engagement policies and performance to address similar risks, at the request of shareholders,” Walker added.
The controversy over Barrick heated up earlier this year when Norway’s state pension fund divested from the gold miner, citing environmental concerns and human rights violations.
“We are active shareholders and we are looking for action from Barrick to address these social issues,” Walker added. “We must own to engage and address risks – Barrick has strong policies; it’s time to see them realized.”
Tuesday, April 28, 2009
SIO questions need for new corporate governance rules
The Social Investment Organization (SIO) says the Canadian Securities Administrators’ (CSA) proposed change to Canada’s corporate governance policy does not improve the current regime.
In a letter to the CSA, SIO executive director Eugene Ellmen notes that under the existing “comply or explain” model, Canada has scored consistently at or near the top of international rankings of corporate governance.
“Issuers in Canada have expended significant time, staff resources and compliance costs in meeting the “comply or explain” model,” the letter states. “We believe that the proposed principles-based model would inject unnecessary confusion into the corporate governance framework. Further, companies that are corporate governance laggards would escape the requirement under the current rules to explain their weak corporate governance structures, thereby encouraging lower corporate governance standards, not higher standards. The result would be higher costs for issuers, uncertainty for issuers’ management, and a gradual lowering of Canada’s corporate governance standards.”
However, the SIO does offer up a number of suggestions to the CSA for improved corporate governance, such as further consultations on the issue of shareholder voting practices, and the issuance of an additional National Instrument specifically mandating required voting practices for shareholders.
The SIO also suggests that that CSA consider establishing “one or more permanent consultative bodies to bring forward the views of the public and important stakeholder groups on emerging securities issues, such as corporate governance, continuous disclosure and investor protection. These bodies should have sufficient resources to independently conduct research and gather opinion on their mandates.”
The SIO submission to the CSA is available here.
In a letter to the CSA, SIO executive director Eugene Ellmen notes that under the existing “comply or explain” model, Canada has scored consistently at or near the top of international rankings of corporate governance.
“Issuers in Canada have expended significant time, staff resources and compliance costs in meeting the “comply or explain” model,” the letter states. “We believe that the proposed principles-based model would inject unnecessary confusion into the corporate governance framework. Further, companies that are corporate governance laggards would escape the requirement under the current rules to explain their weak corporate governance structures, thereby encouraging lower corporate governance standards, not higher standards. The result would be higher costs for issuers, uncertainty for issuers’ management, and a gradual lowering of Canada’s corporate governance standards.”
However, the SIO does offer up a number of suggestions to the CSA for improved corporate governance, such as further consultations on the issue of shareholder voting practices, and the issuance of an additional National Instrument specifically mandating required voting practices for shareholders.
The SIO also suggests that that CSA consider establishing “one or more permanent consultative bodies to bring forward the views of the public and important stakeholder groups on emerging securities issues, such as corporate governance, continuous disclosure and investor protection. These bodies should have sufficient resources to independently conduct research and gather opinion on their mandates.”
The SIO submission to the CSA is available here.
Thursday, April 23, 2009
Talisman takes socially responsible step
Canadian mining company Talisman has agreed to prepare a report on how its operations affect indigenous peoples around the world, focused on the concepts of free, prior and informed consent.
The agreement was reached following discussions with Bâtirente, a Quebec-based non-profit organization created by the Confederation of National Trade Unions and Regroupement pour la responsabilité sociale et l’équité (RRSE), a network of religious communities, NGOs, private foundations and individuals which aims to promote corporate social responsibility through shareholder engagement. Bâtirente and RRSE members hold shares of Talisman Energy.
“Talisman will conduct research and develop a report that will define and assess the benefits of adopting and implementing policies and procedures for securing and maintaining free, prior, and informed consent (FPIC) of indigenous communities impacted by Talisman’s operations,” Bâtirente said in a news release.
The report will focus on the concept of FPIC as it pertains to corporations engaging with indigenous communities in the various parts of the world where Talisman operates and will also examine current best practices in this area.
Gare Smith, a partner with business law firm Foley Hoag LLP and corporate social responsibility expert, will produce the report, which will also be reviewed by the World Resources Institute, an environmental think tank that has published two reports on how FPIC can be implemented by extractive companies such as Talisman.
“By investigating the notion of FPIC and its implementation, Talisman is taking an important step in developing its community relations approach,” said François Meloche, Extra Financial Risk Manager with Bâtirente.
“We hope that this report will allow Talisman to lead the industry by demonstrating that FPIC can make business sense and be a key part of good community relations,” added Philippe Bélanger, analyst with RRSE.
The report will be available to shareholders and the public before Talisman’s annual shareholder meeting in 2010.
Talisman has a checkered history with social investors. The company was forced to sell its stake in a controversial oil project in Sudan after being threatened with sanctions and divestment.
The agreement was reached following discussions with Bâtirente, a Quebec-based non-profit organization created by the Confederation of National Trade Unions and Regroupement pour la responsabilité sociale et l’équité (RRSE), a network of religious communities, NGOs, private foundations and individuals which aims to promote corporate social responsibility through shareholder engagement. Bâtirente and RRSE members hold shares of Talisman Energy.
“Talisman will conduct research and develop a report that will define and assess the benefits of adopting and implementing policies and procedures for securing and maintaining free, prior, and informed consent (FPIC) of indigenous communities impacted by Talisman’s operations,” Bâtirente said in a news release.
The report will focus on the concept of FPIC as it pertains to corporations engaging with indigenous communities in the various parts of the world where Talisman operates and will also examine current best practices in this area.
Gare Smith, a partner with business law firm Foley Hoag LLP and corporate social responsibility expert, will produce the report, which will also be reviewed by the World Resources Institute, an environmental think tank that has published two reports on how FPIC can be implemented by extractive companies such as Talisman.
“By investigating the notion of FPIC and its implementation, Talisman is taking an important step in developing its community relations approach,” said François Meloche, Extra Financial Risk Manager with Bâtirente.
“We hope that this report will allow Talisman to lead the industry by demonstrating that FPIC can make business sense and be a key part of good community relations,” added Philippe Bélanger, analyst with RRSE.
The report will be available to shareholders and the public before Talisman’s annual shareholder meeting in 2010.
Talisman has a checkered history with social investors. The company was forced to sell its stake in a controversial oil project in Sudan after being threatened with sanctions and divestment.
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