Bill C-226 (Historical)

An Act to amend the Pension Benefits Standards Act, 1985 (investment criteria)

Pension Benefits Standards Act, 1985

[Pauline Picard, Bloc, Drummond, QC]

Mr. Speaker, the intent of Bill C-226 is to require the administrator of a pension plan to prepare an annual report on the social, ethical and environmental factors that have been considered, during the previous year, in the selection, retention and liquidation of investments under the administrator's responsibility.

That means the administrator presents an annual report and indicates how and why the funds were invested. Ultimately, the intent of the bill is to increase transparency regarding the choices made by the administrator of the workers' savings.

To answer the question of the government member, the legislative amendment will not force pension committees to make socially responsible investments. That would be desirable. That is what we would like, but this amendment would go as far as to compel them to adopt a policy of making socially responsible investments and informing the plan's members about it.

What we are asking for today is just a step in the right direction. Let us take that step and, later, we can strengthen the legislation or amend it to make that demand on administrators. For the time being, however, the responsible thing to do would have been for the government to support this bill, which would have allowed us to do so. Administrators would like to be required to submit an annual report, but this possibility is not available to them at present because of the absence from the legislation of a specific definition of what fiduciary obligations are.

Our government colleague said earlier that the amendment would impose an obligation on administrators. That is not the purpose of this bill. Noting in this bill will force pension committees to make socially responsible investments. What the amendment does say, however, is that it would desirable for them to do so.

Canada-wide, this represents nearly $600 billion, including $90 billion for federally regulated corporations. This money collected from the workers has become one of the major forces driving globalization. These investors have in their hands considerable power to influence the creation of sustainable development all over the world.

The legislative amendment would have businesses draw up a more detailed balance sheet than a mere financial statement. My colleague also said that all investors have to do is ask for the statement and the administrators will provide it. However, we seldom see a single investor ask for a statement. It would take someone with no concern for transparency to say, “No problem; they will get a statement if they ask for it”. Often, one has to go through access to information to get it. That can take months. These are cumbersome administrative procedures.

To ensure maximum transparency and flexibility, why not ask pension plan administrators to present an annual report—that is perfectly acceptable—and tell us how they invested our money?

Mr. Speaker, at this time, I wish to seek the consent of the House to make this bill votable.

[Inky Mark, Canadian Alliance, Dauphin—Swan River, MB]

Mr. Speaker, on behalf of the PC Party of Canada it is a pleasure to rise to take part in this debate on Bill C-226, an act to amend the Pension Benefits Standards Act.

This bill would amend the Pension Benefits Standards Act insofar as it would require the administrators of a pension plan to prepare a specific annual report. This report would summarize the social, ethical, and environmental factors that were considered during the previous fiscal year in the selection, retention and liquidation of investments under the administrator's responsibility. A copy of the report would have to be provided to every member who requested it.

The PBSA is an act respecting pension plans that are organized and administered for the benefit of persons employed in connection with certain federal works, undertakings and businesses. The Canada pension plan does not come under the auspices of the PBSA. This proposed requirement to compel an administrator to file a report listing the social, ethical and environmental factors that might have been involved when making investments seems, perhaps, redundant if, in fact, it is accountability on investment criteria that the private member is seeking.

One can only assume why this amendment was put before the House. Possibly the hon. member did not want any pension administrator investing funds in certain companies for various reasons, ethical governance breaches, companies having suspect foreign practices or companies operating with a poor environmental track record. These are important issues that the employees and employers party to any private pension plan in a federally regulated undertaking should take note of. However, there is more than one way to ensure that pension plan administrators invest in an economically sound and prudent fashion.

The increase of regulatory requirements, which is what this bill would bring, might not be the answer to any real or perceived accountability problem. Parliament should be looking at ways to reduce regulatory requirements as opposed to increasing them while still ensuring the efficacy of any legislation.

Bill C-226 proposes to amend subsection 7.4(1) of the act, ostensibly to ensure that the administrator's investments are ethically and environmentally sound, et cetera. This amendment might not be needed considering the other sections that already exist in the act.

Section 7 of the act currently stipulates how some administrators are appointed. This section could possibly be used to ensure that any administrator appointment invest according to the wishes of the employer or employee. There are accountability safeguards already in place. Section 7 reads as follows:

1. (1) The administrator of a pension plan shall be

(a) in the case of a multi-employer pension plan established under one or more collective agreements, a board of trustees or other similar body constituted in accordance with the terms of the plan or the collective agreement or agreements to manage the affairs of the plan;

(b) in the case of a multi-employer pension plan not described in paragraph (a), a pension committee constituted in accordance with the terms of the plan, subject to section 7.1, to manage the affairs of the plan; or

(c) in the case of a pension plan other than a multi-employer pension plan,

(i) the employer, or

(ii) if the plan is established under one or more collective agreements and the terms of the plan or the collective agreement or agreements to manage the affairs of the plan provide for the constitution of a board of trustees or other similar body, that body.

(2) In the case of a simplified pension plan, the administrator of the pension plan shall be the prescribed person or body.

7.1 A pension committee must

(a) if a majority of the pension plan members so requests, include a representative of the plan members; and

(b) if the pension plan has fifty or more retired members and a majority of the retired members so requests, include a representative of the retired members.

Thus, we already have in place provisions where investors can actually be involved in scrutinizing the investment.

Section 8 of the act also deals with accountability issues, namely the standard of care that must be exercised by administrators when investing funds.

Section 13 deals with information that the administrator must furnish to the Superintendent of Financial Institutions. Section 13 states:

The administrator of a pension plan shall provide to the plan members, former members and any other persons entitled to pension benefits or refunds under the plan, at the time and in the manner specified by the Superintendent, any information that the Superintendent specifies.

Section 13, if utilized, could possibly be used as a tool to get the information that Bill C-226 seeks without the amendment. In other words there are already sections in the act to do what the amendment intends to do.

Furthermore, not rooted in any legislation is the premise that pensioners need only ask administrators for the social, ethical and environmental indices he or she took into consideration when administering the pension's funds.

Should the administrator not want to furnish the information, there are certain avenues open to the information seeker. Some are legislated avenues and some are not.

In addition, if the administrator feels unduly constrained by various criteria concerning investment standards, environmental or otherwise, the pensions and pensioners might suffer financial hardship if an administrator shied away from excellent investment opportunities that have negligible environmental breaches.

The bottom line is that pensioners want money in their bank accounts so they can put food on the table and a roof over their head.

On strictly a housekeeping note, this amendment should not be proposed as subsection 7.4(1.1). Rather the new amendment should properly be placed with the rest of the administrative reporting requirements as listed under section 12. It is important to keep legislation coherent and all possible provisions that deal with similar matters should be grouped together. Section 12 is titled “Duty to Provide Information”. This, one would think, is where the amendment should go.

On a final note, sections 33 to 37 are the inspection and enforcement provisions of the act. Certainly at first glance they seem fairly well equipped to deal with unruly administrators.

[Wendy Lill, NDP, Dartmouth, NS]

Mr. Speaker, it is my pleasure to rise today to speak to Bill C-226, an act to amend the Pension Benefits Standards Act, 1985. The intent of the bill is to have an administrator prepare a report each year setting out the social, ethical and environmental factors that were considered in the investment of the money in the fund each year.

I am in total support of this private member's bill and I believe the NDP is as well. The NDP is in solid support of any measures which would strengthen and deepen the transparency and accountability of public pension funds.

Canadians depend on the viability of their pension funds. It is clear and simple. We need them for our old age and for times of vulnerability. Whether it is QPP or CPP Canadians with disabilities depend on these funds to provide them with income support when they are no longer able to work. We must have confidence that the investments which our pension managers are making are effective and we must ensure that they are ethical.

I agree with the member for Drummond that we must have a rigorous and regular reporting on how our funds are being invested because our future depends on it. This is in fact our future nest egg as a nation and as a people.

Recently my colleague from Winnipeg Centre spoke about Bill C-3, the act to amend the Canada Pension Plan and the Canada Pension Plan Investment Board Act. He spoke about the alarming state of the Canada Pension Plan Investment Board. He asked the question which needs to be addressed by all parliamentarians: Is it a good idea for us to be investing on the open market with Canadian pension plan savings?

If we look at the actual experience in the last period of time since the Canada pension plan board was struck and put in charge of investing our hard earned pension contributions, the experience has in a word been terrible. One could have done better by playing pin the tail on the donkey when it comes to the stock market investments it made.

Unfortunately, the investment board chose to enter the stock market at exactly the wrong time. It was seduced by the high earnings in the bubble that took place in the high tech sector when people were getting returns of 20% and 30% per year on their investments. The board wanted a part in that but in fact entered at the wrong time and lost a fortune. It was our fortune.

Originally the board was given $11 billion to invest on our behalf. In the first return that came back it had lost $1.5 billion. Not only did this management board manage our funds badly but it then proceeded to reward the chief administrator of the fund. In the first quarter financial statement the board doubled the CEO's salary even though he lost $1.5 billion in the first venture in the stock market. It also doubled his performance bonus. His performance bonus went from $140,000 a year to over $200,000 a year. If the board rewarded bad behaviour so generously I wonder what it would do if it showed a profit?

We seem to have adopted the worst corporate models in the structure of this board but not the best practices or some of the unique structures that we must have in place now to manage the money of Canadians. This is taxpayers' money being invested on the private market.

The fund has grown not because we have made smart investments but because the rate of contributions has been massively increased. It is now at $53 billion in spite of the fact that at the next quarterly report the board reported a loss of $800 million. In the quarter after that it lost $1.5 billion. In the quarter ending in September 2002 it lost $1.3 billion. The fund is hemorrhaging. We are making bad investments. The people we have put in charge of our retirement savings are investing badly on our behalf.

Whether it is a good idea or not to be involved in the stock market, we cannot argue with the fact that if we had not gone down that road there would be billions of dollars which would not be lost and would at least be sitting there and could in fact be invested in other ways. It could be invested in municipalities, in provinces, or in low interest infrastructure loans that would benefit Canadians. It would not have been invested offshore, which is the experience we have now.

The NDP promotes socially responsible investment of workers' benefit funds, such as the Crocus Fund in Manitoba. We support this bill. We support the call for any regular critique of the social, ethical and environmental considerations involved in the investment of our public funds. We support the idea of an ethical screen for the CPP investment fund through public hearings and consultations with those who have developed ethical screens in the private and cooperative sector. We support the ban of CPP investment in industries that harm people, such as big tobacco industries.

The considerable experience with ethical screening has shown that introducing an ethical screen when making investment decisions does not mean earning a lower rate of return on investment. Experience has shown that ethical investments not only enhance social capital but are financially wise investments as well.

The NDP is committed to continuing a publicly funded pension plan because it works. Our public pension system is the cornerstone of Canada's retirement system. The CPP has brought most Canadians seniors out of poverty and allowed them to retire in dignity.

We support Bill C-226 and the safeguards it would put in place to protect the ethical, environmental and social standards. I regret that so far the bill has not been made votable because it would have a considerable impact on strengthening the public pension plan structure.

[Scott Reid, Canadian Alliance, Lanark—Carleton, ON]

Mr. Speaker, I too am addressing Bill C-226, an act to amend the Pension Benefits Standards Act, 1985 (investment criteria). It is a very small act that would modify section 7.4 of the Pension Benefits Standards Act of 1985.

Section 7.4 of the said act has the effect of requiring the administrator of any registered pension plan to file certain documents. These are pretty straightforward under the current act. They simply give information to ensure that various duties are being carried out, that the administrator's name and address is provided, and that the names and addresses of the persons who work with the body, that is the administrator, if the administrator is some kind of corporate or collective body.

The proposed act would add the following:

The administrator shall, at the end of each fiscal year, prepare a report setting out the social, ethical and environmental factors that have been considered, during that period, in the selection, retention and liquidation of investments--

I will return to that in a second, but before I do I want to stop and say that the bill, whatever its merits, is a non-votable item, and that is regrettable. The whole question of the administration of our pension system is one that deserves to be discussed at length, including all private proposals on it. Indeed, all private members' business brought before the House ought to be votable, not to simply die after one hour's debate. I would go on at more length about it except that it eat into the time I have to debate the issue at hand.

The substantive comments I have in regard to the proposed bill fall under three heads. First, I want to mention the fact that the bill relates to our registered pension system. We have a number of pension systems in Canada that overlap the Canada pension plan which is a mandatory contributory plan that is income dependent and is meant to replace income. We have the old age pension and the guaranteed income supplement which simply provide a base level of income that no pensioner can fall beneath, regardless of their income during their working years. We also have a registered system, which is also like the Canada pension plan, contributory, but is administered outside of government under government regulations.

This group of pensions, which tends to be known as RSPs, registered savings plans, or RRSPs, registered retirement savings plans, is part of the pension system that is perhaps the most actuarially secure and which I think has the greatest promise of providing for the retirement income of persons who are reasonably far from retirement age due to the actuarial insecurity, both of the Canada pension plan and of the other pensions plans that I described.

The registration system, which the Pension Benefits Standards Act controls, has some benefits but it also leads to a great deal of administrative expense. This is a fundamental problem with our registered pension system. The costs that are accumulated over the life of a registered retirement savings plan to administer and to comply with the reporting requirements of the Pension Benefits Standards Act are very considerable. Because they are accumulated within the RRSP and prevent the RRSP from accumulating greater wealth over time, this actually results in each registered retirement savings plan being substantially smaller than it would otherwise be when it is rolled over. That is particularly true with regard to the smaller pensions that are accumulated by persons of more modest means.

It seems to me that in general the practice of requiring very detailed reporting of registered retirement plans is one that is not beneficial to pensioners and which could be amended easily by the government so as to provide the same level or even better level of security for pensioners but not the tremendous regulatory burden. Of course, the proposals that are put forward in Bill C-226 do add, to a modest degree, to that regulatory burden.

Let me go on to my second point, the question of whether this is needed. Is the kind of reporting proposed here needed? I can certainly see the reason why the hon. member, in proposing the bill, put forward these suggestions. She has a genuine concern that our investments in Canada be channelled into ethical, environmentally responsible and socially responsible investments. That is a worthwhile sentiment to have.

I do think it is worth noting that this kind of investment vehicle is already available in Canada. There are already ethical investment funds that set out different kinds of criteria. If we are particularly concerned about the environment and we wish to make sure that our investment moneys will go only to funds that are environmentally responsible, we can direct our money in that direction. Similarly, there are ethical investment funds that have made sure, for example, to steer clear of investments in foreign countries that engage in human rights abuses. Those vehicles are available as well.

It seems to me that in fact the need being addressed here is already largely being addressed by the marketplace itself. I worry when the government starts to interfere and get involved in this kind of regulation that rather than the openness that the hon. member talked about in her speech when introducing this bill we are going to see strict rules developed that would limit the kind of reporting that can go on. I think that is a very real concern. It is not implied in the text of this bill, but I think we need to be aware of that danger. This is often what happens when government gets involved in promoting openness. In fact, it does not promote openness in practice.

The next point I want to raise, and this deals directly with the text of the bill, is whether or not this would actually work, whether or not we actually would get the kind of openness in reporting that the member is hoping to achieve. Under the terms of the bill as it is written we would have a report once a year in which the administrator would set out the social, ethical and environmental factors that have been considered. What strikes me about this is that what the administrator is reporting on are the administrator's own motivations. As for self-reporting on something that went on within one's own head, I am not sure we can guarantee that we will get a full, open and honest consideration or revelation of what was going on. One always hopes that is the case but there is no guarantee, so for that reason I am not sure that anything is actually being accomplished through the bill.

If it is a corporate body, it is a bit different. I can see that perhaps there would be some revelation of the minutes of meetings and discussions that had gone on. Perhaps there would be some form of administrative guidelines adopted by the corporate group administering the fund to state that they do not want to invest in the following kinds of investments, perhaps investments that might in some way endanger an endangered species, or perhaps they want to steer clear of investments in areas where it might lead to human rights abuse or be seen as human rights abuse. I can see how that could be done, but I wonder if we would achieve the kinds of goals being laid out here through following the text of the law as it is written.

I do think that when we set out to write laws we ought always to remember, as they say, that the devil is in the details. It is not enough to express the sentiment. I think it is necessary to actually sit down and make sure that those sentiments will be reflected in concrete action.

I must say that the bill strikes me as being more a motion, and it would perhaps have been better to bring it before the House in the form of a motion, expressing the sense of the House and then encouraging the House to develop rules that are more concrete than those laid out here. As a bill I think it is not really that workable, although as I said before I do respect the sentiment that the hon. member is expressing in putting forward this piece of legislation.

[Geoff Regan, Liberal, Parliamentary Secretary to the Leader of the Government in the House of Commons]

Mr. Speaker, the Standing Committee on Finance is travelling the country as part of the prebudget consultations. Therefore, I am pleased to rise on behalf of my colleague and seatmate, the Parliamentary Secretary to the Minister of Finance, to speak today to Bill C-226 which proposes to amend the Pension Benefits Standards Act, 1985 with respect to reporting to plan members.

The interest of the bill's sponsor, the hon. member for Drummond, in this issue is appreciate and duly noted. I thank my hon. colleague for bringing this matter to the floor of the House for debate.

Basically, the amendment in Bill C-226 would require the administrator of federally registered pension plans to prepare an annual report on the social, ethical and environmental factors that were taken into consideration during the previous fiscal year in the selection, retention and liquidation of investments.

Before directly addressing the amendment, I would like to provide some background that will help to put this matter in context. I will begin with a general overview of the pension plan system in Canada.

As hon. members know, the purpose of pension plans is to provide retirement benefits for plan beneficiaries. Our system includes both public pension plans and private pensions. The public pension plans include the Canada pension plan, the Quebec pension plan and old age security.

Private pension plans consist of occupational pension plans, otherwise called registered pension plans. They cover both defined benefit and defined contribution plans which are provided as part of an employment contract. The PBSA sets minimum standards for registered pension plans.

The federal and provincial governments also provide tax assistance to savings in registered pension plans and retirement savings plans or RRSPs to encourage and assist income replacement in retirement. It should be noted that private pension plans are voluntary but must be registered, either federally or provincially.

The bill before us today proposes to amend the Pension Benefits Standards Act, 1985. The PBSA, as the act is usually referred to, is the main federal statute that regulates private pension plans in federally chartered areas such as banking, interprovincial transportation and telecommunications. Over 1,100 pension plans fall under the purview of this Act. The Office of the Superintendent of Financial Institutions, otherwise known as OSFI, administers the PBSA.

I should mention, too, that other federal statutes like the Income Tax Act impact on private pension plans. In addition, it should be noted that most private pension plans are governed by pension standards legislation in the provinces, except for Prince Edward Island, which is the only province without its own pension legislation.

The PBSA has several goals. It sets minimum standards for funding, investments, membership eligibility, vesting, locking-in, portability of benefits, death benefits and members' rights to information.

In its role as administrator of the Pension Benefits Standards Act, OSFI makes every effort to protect the rights of pension plan members, having due regard for the voluntary nature of pension plan sponsorship. OSFI is committed to ensuring that losses to plan members are minimized.

Bill C-226 focuses on the duties of pension plan administrators under the PBSA. As we know, a pension plan administrator is the entity responsible for running a pension plan. Allow me briefly to review their role.

In many cases, the administrator is the employer who established the pension plan. However the administrator may also be a board of trustees if the plan is a multi-employer pension plan or a pension committee defined in the terms of the pension plan.

The administrator is charged with several responsibilities, including ensuring that the pension plan and its funding are administered in accordance with the law and the provisions of the plan. Among other things, an administrator is responsible for: registering the pension plan and plan amendments; providing information to members; responding to member questions about the plan; prudently managing the pension fund; and filing required documents with OSFI. These are serious responsibilities.

May I remind the House that, back in 1998, this House passed Bill S-3, which included various measures designed to enhance the supervision of federally regulated private pension plans.

One of the changes back then included a means to facilitate agreements between employers and plan beneficiaries on the distribution of pension plan surpluses.

Of direct interest to this debate were two other measures in that bill, both of which affected pension plan administrators. Those changes included: enhancing plan governance by placing more emphasis on the importance of the responsibilities of plan administrators; and requiring the administrator to provide more information to plan members and former members on the financial condition of the plan.

Honourable members should also know that pension plan administrators have a duty-of-care requirement. This means that they must take all relevant matters and issues into consideration when making decisions affecting plan assets.

It is the plan administrator's duty to act in the best interest of the employer and the plan's beneficiaries. They have a fiduciary duty to maximize the rate of return, while at the same time ensuring the solvency and security of the fund and its ability to pay out promised benefits.

Turning to Bill C-226, let me say at the outset that I agree that transparency of pension plan investment policy is a key priority.

In my remarks today, I have outlined several measures in our current system, which ensure that this goal is met. Let me expand further.

As I indicated, the Pension Benefits Standards Act already requires that a pension plan administrator act in the best interests of the employer and the plan's beneficiaries.

In addition, the administrator is required to provide a written statement of investment policies and procedures—often called an SIP&P—with respect to the plan's portfolio of investments and loans to a member or other beneficiary, if requested. The SIP&P must communicate the investment philosophy of the plan administrator and, among other things, provide details on all categories of investments and loans.

Further, pension plan administrators must reference all factors that may affect the funding, solvency and ability of the plan to meet its financial obligations. These rules are already on the books.

Another built-in check in the system is the fact that pension plan members have the right to establish a pension council and the council may ask the plan administrator to disclose any ethical, social and environmental concerns taken into consideration in making investment decisions.

In other words, the current statute already largely meets the purpose of Bill C-226. The government believes that the Pension Benefit Standards Act and its Regulations establish the right climate to ensure that pension administrators are responsive to the concerns and objectives of plan members and employers. Under the current system, pension plan members through their pension councils have the flexibility to decide on the appropriate reporting for the plan—and this reporting could include ethical, social and environmental factors.

At this point, the government does not believe that reporting on these factors should be a requirement as proposed by this bill. Ensuring sound secure pension systems is a priority for the government. Recent reforms to the Canada Pension Plan together with recent PBSA amendments and regulations demonstrate this commitment.

I can assure the House that the government will continue to make changes to the Pension Benefits Standards Act when, and if, required. However, given the built-in checks and balances and the existing duties and responsibilities of pension plan administrators under the PBSA, the amendment we are debating today is not necessary.

Therefore, I am unable to support Bill C-226 and would encourage my honourable colleagues to follow suit.

[Pauline Picard, Bloc, Drummond, QC]

moved that Bill C-226, an act to amend the Pension Benefits Standards Act, 1985 (investment criteria), be read the second time and referred to a committee.

Mr. Speaker, I would first like to thank my colleague from Sherbrooke for seconding this very important bill. I am a bit disappointed because I know that Parliament refused to make it a votable item. I would still like to make you and the population aware of the intent of this bill.

The purpose of this bill is to amend section 7.4 of the Pension Benefits Standards Act, 1985, by adding the following after subsection (1):

(1.1) The administrator shall, after the end of each fiscal year, prepare a report setting out the social, ethical and environmental factors that have been considered, during that period, in the selection, retention and liquidation of investments under the administrator's responsibility and in the exercise of any rights related to those investments, including voting rights, and shall provide a copy of the report, free of charge, to every member who requests it.

What this means is that pension fund administrators, such as those responsible for the government's superannuation fund, would be required to prepare a report to inform the shareholders of the factors that were considered in the selection of investments.

This bill asks: why did you invest in a particular company and how did you invest? It does not require pension fund administrators to make socially responsible investments, but it is a step in the right direction. Administrators would be required to tell us why they invested in a particular company. It is a small step in the right direction but, unfortunately, the government chose to ignore it.

However, other countries have done something about that. For example, in July 2001, France enacted legislation to include in its social security code the requirement to take social, ethical and environmental factors into account.

Until now, both the law and the practice limited this legal concept, simply requiring administrators to defend the proprietary interest of investors in the funds. Beyond the quest for a satisfactory financial return, we are now looking at the means to achieve that. Are all the means acceptable? That is the question we must ask ourselves.

I know that pension fund administrators have an obligation to ensure a high return on the investments for which they are responsible, but more and more countries are adopting a code of ethics that prohibits them from investing in companies that have no respect for human rights.

It is not the first time that the Bloc Quebecois has spoken in favour of socially responsible investments. Since Parliament will not vote on this issue, members can be sure that I will make other efforts to have a simple principle included in legislation: that social, ethical and environmental factors be taken into account in pension fund investments.

It is possible take action to ensure that the funds destined for providing a future for the men and women of this country are not invested in companies the operations of which are liable to increase the social and environmental risks to which we are exposed.

This means that, if people were more aware, or if they were to learn that their savings were invested in companies using child labour for instance, in order to get a high rate of return, would these people who entrust their savings to administrators not make those administrators more aware of how they feel, by telling them “We want a high return, yes, but not at any price”.

I gave an example of companies using child labour. There are also companies that pollute our environment. We know that there is increasing public awareness of those industries that emit greenhouse gases. The investors are more and more aware. They do not want to see their money going to help pollute the planet. That is why I say it would be desirable for fund administrators to have the possibility of putting a code of ethics in place so as to be able to listen to their investors and to be more attuned to where investments should go.

We are all aware that, in this era of globalization, companies move from one country to another according to the laws of the market place. Unfortunately, what attracts companies to certain countries too desperate to refuse such investments is their lack of respect for human rights, social rights and the environment.

Socially responsible investment consists in integrating social or environmental criteria, or both, into every investment decision, without giving up on financial advantage. These criteria are complementary to the traditional financial analysis, and make it possible to have specific investment funds tailored to an individual or institutional clientele.

In its final report tabled last January, the Canadian Democracy and Corporate Accountability Commission reached a consensus on 24 recommendations. As well, a national survey carried out between September 28 and October 8, 2001 by Research and Development Inc. concluded that Canadians, as well as Quebeckers, whether business people or not, are wondering more and more about businesses' responsibility to the society of which they are a part.

France, the United States, the United Kingdom and Germany already have innovative policies in place. In the U.K., there is a minister whose portfolio covers corporate social responsibility. In the U.S. a number of states have expanded the powers of company boards. The European Union has even published a discussion paper on corporate social responsibility.

What has Canada done? If it had been chosen as a votable bill, Bill C-226 would have been a first step. Instead, Canada is sitting back and falling far behind compared to other countries that are pioneers when it comes to making corporations more socially responsible. While Canada is lagging behind, initiatives are sprouting up all over the place. After the wave of activist shareholders, now we are seeing portfolio managers who can be considered equally activist.

The unions have also discovered that they wield considerable power through their members' pension funds. This is the case with the CSN and the FTQ, who are interested in the socialization of capital.

In Ontario, one of the largest pension funds, the Ontario Teachers' pension plan, has adopted the following policy:

Consequently, non-financial considerations cannot take precedence over risk and return considerations in the management of the pension fund. Nevertheless, we believe that careful consideration of issues of social responsibility by companies and their Boards will enhance long-term shareholder value.

In the United States, one out of every eight dollars in pension plans will be invested in socially responsible investments. This will likely increase, since we have seen how people are concerned about financial scandals. More and more pension plan administrators are making socially responsible investments, with the support of their members.

Just this Friday, the University of Montreal announced that it was implementing a policy to invest in ethical funds. The university management came to this decision based on a report from a task force on responsible investing and purchasing. The university accounts add up to close to $2 billion. That is a lot of money, when you think of $2 billion for the University of Montreal alone.

From now on, the pension plan administrators will ensure that all of their capital is invested in companies that are concerned about the social development of the societies in which they do business.

The decision made by the University of Montreal is not unique in Canada. The University of Toronto is already on stream. Chances are that this is a growing trend and that other Quebec universities will follow suit.

In Canada, we find that without a clear definition of their fiduciary obligations pension plan managers believe that they do not have enough flexibility to take social responsibility into account when making a decision. Such managers do not want the rate of return to be relegated to the back seat. They lack the framework and the legislation that would give them the authority or the means to consider ethical factors. These managers are afraid of being accused of not yielding a high rate of return. This is why today it is very important to raise the issue and give these managers in Canada a code that would allow them to invest in socially responsible investments.

Such investments are not aimed at diminishing the wealth of the pension plan members. Several studies were conducted on the performance of ethical funds. The results do not confirm the fears of certain managers, who believe that ethical funds yield lower rates of return than similar funds.

In 1998, the Weisenberg firm looked at the performance of some 183 American ethical funds. It reached the conclusion that these funds had better rates of return than others in the same category, and that they have a slightly higher level of risk. So we should not be afraid of putting our money into funds where the companies are concerned with ethics, the environment, and support, or do not violate human rights. These 183 American funds that deal with ethical investments are said to have a high rate of return. This does not eliminate the level of risk, which is slightly higher than for funds that do not deal with ethical investments.

In conclusion, I will say that the debate on the social responsibility of companies is ongoing in our society. The purpose of the legislative amendment I wanted to introduce through Bill C-226 was to make the work of pension plan managers more transparent and to better inform plan members. Knowing what considerations were taken into account when making investments, employees could better influence the decisions made by their portfolio managers.

I will rise again later to properly conclude this debate.