Vancouver SRI firm screens CPP

(February 14, 2005) Considering the Canada Pension Plan has repeatedly rejected calls for social and environmental screening of its investments, any undertaking of such a project may be just a theoretical exercise. But as Real Assets Investment Management discovered, the results were quite an eye-opener.

Using a broad-based screening approach, the Vancouver-based SRI firm eliminated 119 of the nearly 700 firms the CPP invests in. “While CPP managers may see these issues as “external” in relation to the market value of a company, the record shows that yesterday’s externalities are today’s liabilities,” Real Assets said in its recent research report. “To preserve the long-term value of your hard-earned assets, managers need to be looking at the full picture, not just the bottom line.”

Real Assets singled out three CPP-invested firms in its report, including U.S. military giant Halliburton, which was heavily involved in the Iraq war.

The report also notes that the U.S. Securities and Exchange Commission is investigating Halliburton for alleged bribery and kickbacks in support of a controversial natural gas project in Nigeria.

Cigarette firm Rothmans is also on the CPP list. “Even if you just look at the financial bottom line, with fewer people smoking every year, this is a sunset industry with limited financial prospects 20 years from now,” Real Assets says, noting that the World Health Organization’s “Tobacco Free Initiative” has been approved by 192 countries, including Canada. The convention calls for higher taxes, bans on cigarette advertising and restrictions on smoking in the workplace.

Agri-business company Archer-Daniels-Midland, another CPP investment, was also screened out by Real Assets. In 2003, the firm agreed to pay $350 million to settle pollution charges covering 52 facilities. And last year, the company paid out a further $400 million to settle a class-action suit involving price fixing. “Does this sound like good corporate governance or a sustainable business model?” Real Assets asks.

However, Real Assets’ report is unlikely to sway the managers who oversee the CPP. On a statement posted on its website, the government pension plan says that while some Canadians believe the CPP should use its power to influence non-investment outcomes, other believe it should focus solely on maximizing returns, “recognizing that the financial security of the Canada Pension Plan is itself an important social policy.”

“While social investing is easily applied by individuals and small groups of like-minded people, it is extremely difficult, if not impossible, to implement for an institutional investor representing over 16 million contributors and beneficiaries with a wide cross-section of personal beliefs,” the CPP adds.

The statement reiterates that the CPP will not accept or reject investments based on non-investment criteria. “However, we will generally support corporate policies and practices and shareholder resolutions that would result in the disclosure of information that could enable investors to evaluate whether a corporation’s behavior will enhance or hinder long-term investment returns.”

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

(02/14/05)

Doug Watt

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(February 14, 2005) Considering the Canada Pension Plan has repeatedly rejected calls for social and environmental screening of its investments, any undertaking of such a project may be just a theoretical exercise. But as Real Assets Investment Management discovered, the results were quite an eye-opener. Using a broad-based screening approach, the Vancouver-based SRI firm eliminated 119 of the nearly 700 firms the CPP invests in. “While CPP managers may see these issues as “external” in relation to the market value of a company, the record shows that yesterday’s externalities are today’s liabilities,” Real Assets said in its recent research report. “To preserve the long-term value of your hard-earned assets, managers need to be looking at the full picture, not just the bottom line.” Real Assets singled out three CPP-invested firms in its report, including U.S. military giant Halliburton, which was heavily involved in the Iraq war. The report also notes that the U.S. Securities and Exchange Commission is investigating Halliburton for alleged bribery and kickbacks in support of a controversial natural gas project in Nigeria. Cigarette firm Rothmans is also on the CPP list. “Even if you just look at the financial bottom line, with fewer people smoking every year, this is a sunset industry with limited financial prospects 20 years from now,” Real Assets says, noting that the World Health Organization’s “Tobacco Free Initiative” has been approved by 192 countries, including Canada. The convention calls for higher taxes, bans on cigarette advertising and restrictions on smoking in the workplace. Agri-business company Archer-Daniels-Midland, another CPP investment, was also screened out by Real Assets. In 2003, the firm agreed to pay $350 million to settle pollution charges covering 52 facilities. And last year, the company paid out a further $400 million to settle a class-action suit involving price fixing. “Does this sound like good corporate governance or a sustainable business model?” Real Assets asks. However, Real Assets’ report is unlikely to sway the managers who oversee the CPP. On a statement posted on its website, the government pension plan says that while some Canadians believe the CPP should use its power to influence non-investment outcomes, other believe it should focus solely on maximizing returns, “recognizing that the financial security of the Canada Pension Plan is itself an important social policy.” “While social investing is easily applied by individuals and small groups of like-minded people, it is extremely difficult, if not impossible, to implement for an institutional investor representing over 16 million contributors and beneficiaries with a wide cross-section of personal beliefs,” the CPP adds. The statement reiterates that the CPP will not accept or reject investments based on non-investment criteria. “However, we will generally support corporate policies and practices and shareholder resolutions that would result in the disclosure of information that could enable investors to evaluate whether a corporation’s behavior will enhance or hinder long-term investment returns.” Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com (02/14/05) Industry FAIR Canada applauds Saskatchewan’s OBSI bill "Landmark" legislation is significant step forward in protecting investors, organization says By James Langton |May 28, 2024 2 min read Industry Private equity firm buys maker of hockey rink boards Reichmann Segal Capital Partners says it plans to invest in new product development and expansion By The Canadian Press |May 28, 2024 1 min read Industry Scotiabank profits slip amid rising strain in auto loans, mortgages Despite challenges, overall revenue grew By Ian Bickis, Canadian Press |May 28, 2024 3 min read We use cookies to make your website experience better. By accepting this notice and continuing to browse our website you confirm you accept our Terms of Use & Privacy Policy. I agree Read More