The Right Stuff

As far back as 1997, members of the University of Western Ontario retirement plans showed an interest in a portfolio choice that would reflect doing good things in the world, says Louise Koza, director of the university’s HR. “That’s not surprising in an academic environment,” she says, “because their mission is to find better ways of doing things.” Western conducted focus groups and surveys of plan members. A November 2006 survey, for example, asked members if they’d be interested in investing in a socially responsible fund. Of the 353 pension plan and retirement investment fund members who responded, 290 (82.2%) were interested in investing in this type of fund. And 22.8% said they would potentially allocate 10% to 25% of their funds to it. As of March 1 this year, Western offers a socially responsible investing (SRI) option to the more than 6,200 members of its two large defined contribution pension plans.

In today’s world, it may not be enough for pension funds to produce flourishing investment returns. Many also want to consider SRI, the practice of employing environmental, social and governance (ESG) factors in the management or selection of investments.

The 2007 Report on Socially Responsible Investing Trends in the United States indicates that US$2.71 trillion in total assets under management are being used in one or more of the three main SRI strategies: screening (investment managers use positive and/ or negative screens to evaluate portfolios based on ESG criteria), shareholder advocacy (investors “dialogue” with companies on ESG issues) and community investing (investors direct their capital to financially underserved communities). Pension funds, it seems, are doing the right thing.

In Canada, according to the 2006 Canadian Socially Responsible Investment Review, pension assets invested according to SRI guidelines jumped to $433.07 billion as of June 30, 2006. That’s a significant increase from $25.45 billion in 2004. “That was the result of several very large pension funds adopting SRI policies in the 2005/06 period,” says Eugene Ellmen, executive director, Social Investment Organization. Funds such as the Canada Pension Plan Investment Board, the Caisse de dépôt et placement du Québec and the British Columbia Investment Management Corporation (BCIMC), to name a few. While the larger pension funds are leading the way in ESG, some funds in the education sector are also beginning to take action. Last year, the University of Toronto was the first university in Canada to divest its pension fund of investment in tobacco. McGill University soon followed. “As knowledge and tools start to disseminate through the pension industry, [SRI] will go from the large public plans, to the smaller and mid-size public ones, to the private plans,” says Ellmen. “It’s just a question of the gradual education of trustees and administrators, the gradual implementation of SRI policies through the pension industry, and a gradual consciousness-raising on the importance of doing this.”