Foreign Affairs Committee on Nov. 17th, 2009

[The Chair, Conservative, Kevin Sorenson]

Mr. Andrews.

[Anthony Andrews]

Thank you.

First of all, my organization is not going to recommend that a company pull out of Canada. That's a decision they will make on their own.

[Paul Dewar, NDP, Ottawa Centre, ON]

No, I thought I heard you say something otherwise.

[Anthony Andrews]

No, I just wanted to correct that.

[Paul Dewar, NDP, Ottawa Centre, ON]

I'm glad to hear that.

[Anthony Andrews]

Good.

So no, we want our companies to act responsibly wherever they work. But this particular bill will bring with it some very significant risks in terms of the fact that it is a government that's investigating. There's a very significant stigma that goes along with that and that will place immediate risk on the company in the host country. Even if it's innocent, it will suffer that risk, and this kind of process will become very litigious.

[Paul Dewar, NDP, Ottawa Centre, ON]

But that's happening now, is it not, in terms of—

[The Chair, Conservative, Kevin Sorenson]

Your time, Mr. Dewar, is about 30 seconds.

[Paul Dewar, NDP, Ottawa Centre, ON]

I'll use it. Thank you, Chair.

Right now we have court cases. We just had one in Mexico, where a Canadian company, New Gold, didn't abide by what was asked for. They've now finally had their licence suspended, when they were supposed to abide by it since 2005. There's litigation all over the place. So to say there's going to be no litigation with Bill C-300, I think not. In fact, I've said before that we need to protect ourselves from litigation, and this is the way to do it. We might disagree.

[The Chair, Conservative, Kevin Sorenson]

That's it for the time.

I'll go to Mr. Lunney.

[James Lunney, Conservative, Nanaimo—Alberni, BC]

Thank you, Mr. Chair.

First, I want to say about CPP and your response as an investor in advancing CSR and ESG principles, an excellent presentation there. I've been reviewing your report on CSR, and I would like to pursue that a little further, but I have a question first that I want to get on the table. If I have time, I'll come back to a question I have for you.

Mr. Wisner, as a legal expert in international law, you had raised the issue of procedural fairness. I wanted to ask you about one of the clauses in the bill that directs the minister to receive complaints regarding Canadian companies engaged in mining, oil, and gas activities from any Canadian citizen or permanent resident, or any resident or a citizen of a developing country in which such activities have occurred or are occurring.

Now, that's a clause in the bill. I'm wondering, does this not suggest to you that complaints could come from not only any Canadian citizen, but from residents of foreign states, including some that aren't even residents or involved directly in the country involved? Or they could come from competing companies that perhaps might raise complaints about a competitor. Does this kind of a concern--asking a minister to direct this--raise the possibilities for abuse that would cause a lot of negative publicity for a company and a lot of confidence shaking in terms of their ability to invest? I just want your take on that if you would.

[Robert Wisner]

That is absolutely right. It's one of many provisions in the bill--which I did not have enough time to address in my comments--that is drafted in a very broad and ambiguous way.

In most statutes there's some kind of requirement that someone who files a complaint somehow be affected in some way by the activity that is being complained about. This bill gives standing to people who have no direct interest in any of these matters. They can be any resident of Canada or any member of the developing country where activities are taking place, and even if they're not close to the project or are not affected in any kind of direct way by the project, for whatever reason they can file a complaint and that complaint must be reviewed and assessed and investigated by the minister.

The threshold for deciding whether an investigation must occur is set very low under this bill. As a result, any cleverly crafted complaint that simply meets a bare prima facie test--as it's called in legal language--can trigger a ministerial investigation, and that investigation is public. That becomes known in the host government and will immediately raise issues about the permits that the company has and their ability to obtain necessary permits. It will raise issues in Canadian capital markets. It will dry up financing long before the actual decision by the minister is rendered.

[The Chair, Conservative, Kevin Sorenson]

Thank you.

Mr. Dale, did you want to comment on that?

[Ian Dale]

Just to return to Mr. Dewar's question about SEMA.

Clearly, as my colleague, Mr. Raymond, pointed out, our policy on responsible investing, similar to the UN principles, came into effect in 2005 and 2006. This was really a sea change in the way investment organizations around the world looked at these kinds of issues. So we were concerned about them back to that date, and it wasn't specific to SEMA.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Dale.

Mr. Lunney.

[James Lunney, Conservative, Nanaimo—Alberni, BC]

Thank you.

I wanted to suggest that I think it's very commendable that CPP has engaged in the process. I understand you're involved in helping develop the UN principles on responsible investment and you're collaborating with a whole range of other institutes. This whole field is a developing field of engagement over the last decade.

I wanted to ask for your comment about the movement by the Canadian government. We have a national contact point. We're engaging with the OECD guidelines. You've mentioned others, like the equator principles that are in place. But there's a new role of a CSR counsellor that is being engaged to help in measuring these things. It doesn't provide obligations to CPP.

I just wondered if you'd comment on the role of a CSR counsellor. Mr. Dewar talked about an ombudsman, and we're calling it a counsellor; it's just something else in this role. I'd like your comment on whether this will help.

[Donald Raymond]

I'd just highlight that there are a range of principles that are designed to operate at the corporate level and certain ones that are designed to operate at the investor level. I'm not that familiar with this; I'm guessing it operates at the corporate level. Things like the UN PRI and the extractive industries transparency initiative, those things operate at the investor level.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Raymond.

Mr. McKay.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Chair.

Thank you, witnesses.

I wanted to ask CPPIB questions with respect to some of your investments here. There's Banro Corporation in the Democratic Republic of Congo. You have $351 million in the Bulyanhulu gold mine in Tanzania. There are other investments here, also in the DRC. You have an investment in the Veladero mine in Argentina, where Argentina's national ombudsman called for a halt to the company's operations, and apparently you continue. EDC has money in that and CPP has money in that. In New Guinea, you have considerable investment. And Norway's government pension fund dropped its shares in the company as a result of waste disposal practices. Based on an in-depth analysis of the operations, the pension fund's council on ethics concluded that the investment amounted to an unacceptable risk of the fund contributing to “serious environmental damage”. The council added that the company's assertions that its operations do not cause long-term and irreversible environmental damage carry little credibility.

I was curious, Mr. Raymond, how CPPIB continues to make these investments when others have found these investments to be in breach of various environmental and human rights standards.

[Donald Raymond]

Sure. Let me start by highlighting some of the important differences between the Norwegian petroleum fund and the CPP fund. First of all, the Norwegian fund is derived from government oil royalties and revenues and is essentially government money, whereas the fund that we manage is not government money. It is owned by Canadian contributors and beneficiaries, as employers.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I'm not sure how that's a distinction with a difference. Surely, Canadians are as interested in how their funds are handled ethically as is the Government of Canada, or the Government of Norway for that matter.

[Donald Raymond]

And flowing from that governance distinction, the Government of Norway has put in place an ethics council and they have decided to screen 20 companies out of 8,000. We, on the other hand, operate at arm's length from government and have instituted a responsible investing policy that applies to all 2,900 companies in which we invest. By divesting, Norway loses any opportunity to engage with these companies to try to promote better ethical practices in those jurisdictions.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I appreciate that your investment might be quite minimal; nevertheless, a sovereign nation has found that its investment cannot be sustained in a particular company, and we continue to invest in that company.

[Donald Raymond]

As I say, they have an ethical screening mandate. Ours is a fiduciary mandate based on risk and return. Contrary to the characterization of the member, we don't invest directly in mines in those countries. We invest in public companies who may have small operations in those countries. We believe that by encouraging better transparency on the risks of operating in those countries, shining a light on those practices will lead to better environmental and ethical performance by companies.

[John McKay, Liberal, Scarborough—Guildwood, ON]

So a modest investment with a modest flashlight is better than simply withdrawing.