The Social Investment Organization has just published their third comprehensive survey of the socially responsible investment climate in Canada. The report, available at their website www.socialinvestment.ca, highlights the progress made on many fronts of the SRI movement in Canada, but also demonstrates how far we have to go in this country to catch up to the much more mainstream acceptance of SRI in Europe and the U.S..
I often wonder why a socially progressive country like Canada is such a laggard when it comes to integrating environmental and social concerns into the investment decision process. A thought I keep coming back to is that Canadians have grown up with an enormous back yard, that is, we seem to have such immensity of space that we don’t feel, see or smell the impact of our economic growth to nearly the same extent as those who live in densely-populated Europe, or California.
It is perhaps not surprising that modern-day green politics took root in West Germany, a country that has been grappling with population pressures for generations. Similarly, crowded California has emerged as probably the most progressive region in North America when it comes to accounting for the social and environmental impact of it’s economic policies.
Yet in Canada, while 84% of investors believe the financial community should pay more attention to social and environmental issues when valuing companies, and 74% of Canadians expect their financial advisors to incorporate social responsibility information into their investment decisions (according to a national study of shareholder attitudes by GlobeScan Inc. in 2003), only 3.6% of the retail mutual fund and institutional investment market is devoted to some type of socially responsible investment strategy.
That three and a bit percent represents about $65.5 billion in assets according to the Social Investment Organization, and includes:
$25.4 billion with institutional investors managing their assets primarily or wholly in-house using social or environmental screens or policies
Asset managers directing $21.2 billion using social or environmental screens or policies on behalf of outside clients, many of whom are institutional or high net worth investors
$14.8 billion managed on behalf of retail SRI mutual funds, labour-sponsored venture capital funds and alternative energy income trusts
$2.1 billion of assets in shares voted according to social responsibility guidelines
$1.3 billion in loans covered under the Citizens Bank of Canada and VanCity ethical lending policy
An estimated $546 million invested in locally based community investment organizations such as micro-loan funds, the bulk of which are managed in Quebec.
While the raw numbers may not impress anyone, the real pointy end of the SRI stick is in the hands of shareholders, given their right to cast a vote in corporate affairs. The vast majority of these votes are proxy votes made on behalf of the shareholder by their mutual fund company, or private or public pension fund managers.
Beginning in June 2006, securities law will require mutual funds in Canada to publicly disclose their proxy voting policies and their votes on shareholder proposals . While most SRI fund companies already follow this practice, so to do the CPP Investment Board, Ontario Teachers? Pension Plan, Ontario Municipal Employees? Retirement System pension, and just recently, the BC Investment Management Corporation, who manage pensions in BC for nearly 400,000 public sector workers.
Proxy voting records are available for viewing on these institutions? respective websites, and the SIO has highlighted the votes on social and environmental resolutions in their recent survey of Canada’s largest public pension managers. Here’s a sampling of shareholder resolutions from 2004 that the CPP Investment Board voted to support:
Bank of Montreal – to report on how the bank evaluates and manages the risk of environmental liabilities
- Walt Disney Company – to report on human and labour rights and supplier’s compliance with International Labour Organization conventions
- Petro Canada and Imperial Oil – to report on opportunities in renewable sources of energy and specific emission reduction initiatives
- Aastra Technologies – proposal that they make a greater effort to locate women for the board and senior officer positions
- General Electric Corporation – to report on PCB cleanup costs
- Safeway Inc. – regarding sustainability reporting
Of perhaps greater interest are the resolutions that the CPP Investment Board, and therefore by proxy almost every adult Canadian, did not support, among them:
Monsanto – to report on genetically engineered seed and the export of hazardous pesticides
Colgate-Palmolive Co. – to report on workplace human rights
Dow Chemical Company – to report on social initiatives in Bhopal, India
Lockheed Martin Corp. – to develop ethical criteria for military contracts (which looks like a terrific application of Orwellian logic)
While the efforts of these pension managers and the SRI fund companies to disclose this type of information is welcomed, those who take issue with corporate social responsibility will watch with great interest when all mutual fund companies begin to report on their proxy voting records in 2006. Will the average shareholder take notice? Will the companies that dominate the Canadian mutual fund market – Royal Bank, CIBC, TD, Investors Group, Fidelity, etc. be more willing to cast their proxy votes for progressive environmental and social resolutions when these votes become transparent? Will this reporting cause a shift in assets away from those fund companies seen to be voting against issues that are to the greater public welfare? The answers to these questions will go a long way towards determining the evolution of socially responsible investment in Canada.