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.