Pension plans targeted by environmental, anti-smoking groups

(February 13, 2004) Two of the country’s largest pension plans are being criticized for their investment policies. Environmental groups are targeting the Ontario Teachers Pension Plan (OTTP), while Physicians for a Smoke-Free Canada is taking on the CPP.

Greenpeace and the Sierra Youth Coalition say the OTTP, with $68 billion in assets, is Canada’s largest investor in coal and has additional fossil fuel holdings as well as tobacco investments.

“This issue has a lot of history, it’s been around for a long time,” says Matt Price, coordinator of the Greenpeace/Sierra campaign. “It came to the top of our target list last year when they [OTTP] became the largest investor in coal.”

Price says the pension plan reform campaign, called “It’s My Future,” has already received some positive feedback from teachers. “As a demographic, teachers are relatively progressive. When we describe to them where they’re invested, they’re a bit shocked and horrified. So it’s likely that we’ll be able to build a base of support among teachers and that’s the first stage of the campaign, going into schools and talking about the issue.”

Physicians for a Smoke-Free Canada is concerned about the CPP’s tobacco holdings, noting that through the government plan, Canadians own nearly 2.7 million shares of large tobacco companies, worth an estimated $89 million. The CPP has assets of $66 billion.

“Workers are forced to invest in these companies because the government refuses to apply ethical screens to its CPP investments,” the anti-smoking group says in a petition posted on its Web site.

Both the OTTP and the CPP have taken the same approach to screening, arguing that it doesn’t fit with their fiduciary duty to earn the highest possible returns for members.

“The CPP Investment Board’s (CPPIB) statutory mandate and fiduciary duty are based exclusively on investment considerations,” states the CPPIB’s investment policy.

“The board believes that social investing means different things to different people; and that, while it might be easy for individuals or small groups of like-minded people to agree on criteria for including or excluding certain investments, the CPPIB cannot reflect the divergent religious, economic, political, social and personal views of millions of Canadians in its investment decisions.”

The OTTP’s policy is similar, stating that the plan’s fiduciary duty is to “obtain the highest return for the plan commensurate with acceptable levels of risk. Consequently, non-financial considerations cannot take precedence over risk and return considerations in the management of the pension fund.”

“We do not have the legal authority to select or exclude investments based on religious, political, social, environmental or any other non-investment criteria,” the OTTP says, adding that it does review the impact of social and environmental issues on a company’s long-term prospects as part of its investment selection process.

Socially responsible investing (SRI) advocates have argued that pension fund managers can take social and environmental considerations into account, without sacrificing their fiduciary responsibilities.

“There’s nothing in law that prevents [OTTP] from going down the pathway of SRI. Other funds in the U.S. that are even bigger are doing it,” Price maintains.

“As time goes on, the legal argument is fading,” he adds, noting Canada is falling behind on the SRI issue. “The U.K. has a law requiring pension fund managers to disclose social and environmental risks.”

But Price concedes it’s unlikely the OTTP will change its policies without government intervention. “We think it’s going to take some legislative direction from the government of Ontario to clarify that they can be more responsive to their members and to social responsibility in their investing.”

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com