Foreign Affairs Committee on Nov. 17th, 2009

[Donald Raymond]

Mr. Chairman, I would be happy to respond to some of the comments.

First of all, the CPP Investment Board is a relatively young organization. I joined in 2001 and there were 12 people. This has been an evolutionary process in building out our capabilities. We had a socially responsible investing policy when I joined and then as a result of us actually taking quite a leadership role within Canada, and even internationally with working with the UN to develop the United Nations principles, we actually have been a leader in Canada in developing responsible investing policies. We are very concerned about these issues, in large part because we believe that companies that perform well on environmental, social, and governance issues tend to make better investments over the long run. So in this regard our interests are very much aligned with the interests of Bill C-300.

We do, as the member pointed out, take this from an investment risk and return perspective, and that's required by the Canada Pension Plan Investment Board Act. In fact, it states quite clearly our objective is to maximize return without undue risk of loss, and furthermore that we cannot undertake any other inconsistent activities. It's a very fundamental investment premise that screening companies, in other words removing companies from your possible set of investments, will either increase risk or reduce return. On that basis, we believe that screening--in fact many NGOs and others in the social investment arena would agree with this statement--is less effective than engagement with companies, because when you sell a company, when you sell their shares in the first case you're selling them to someone else, so it doesn't actually affect the company at all, and secondly you lose the right to have any voice with the company.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Thank you.

Mr. Andrews and Mr. Wisner, it seems to me that you are not on the same wavelength. Mr. Andrews, you say that we must do more to build host country governance capacity whereas you, Mr. Wisner, say that doing so would be interference on Canada's part.

Mr. Wisner, I would have preferred to have your presentation in writing. The material you presented to us was quite technical.

Then you tell us that the countries in which Canadian companies invest have laws on human rights and on organized labour. I feel that we are really not on the same planet.

[Robert Wisner]

First of all, let me try to answer your question about the translation. I do apologize. There is a written text, but it is still being translated. I have been told that a copy will be distributed to the members of the committee by the weekend.

I'll speak in English because I'm going to refer back to my notes.

As I made it clear, I don't believe there's any contradiction at all between the remarks that I presented and Mr. Andrews' remarks. We both agree that host countries' governance capacity can be improved. So we're both on exactly the same page as far as that goes.

I did not suggest that giving countries assistance to enforce their own laws is somehow a violation of their sovereignty. On the contrary, I encourage the Canadian government to continue to pursue that policy, which they have set out to do. My comments were that Bill C-300 does not actually provide them with assistance to increase their governance capacity. It couldn't do that as a private member's bill, as it can't allocate the funds. What Bill C-300 tries to do is something else, which is it tries to actually set laws that apply in other countries, and that is a different thing.

In terms of whether I live on the same planet as everybody else, there was a distinction in my remarks between laws and the degree to which they are enforced. In terms of the laws, I can refer you to a survey, and it's referred to in my written submission, on 32 jurisdictions around the world. It's a summary of their laws, including many countries in Africa and poorer countries. It describes the detailed laws, including environmental, labour, and other standards, that are applied in those countries. Now, there is a distinction, as I mentioned, between the laws in the books and the degree to which the government officials have the technical capacity, political ability, and financial ability to enforce those laws. If that is what the issue is, the solution to it is to provide them with the assistance to do that.

[The Chair, Conservative, Kevin Sorenson]

Thank you.

We'll go to Mr. Goldring.

[Peter Goldring, Conservative, Edmonton East, AB]

I want to make a comment on Mr. Rae's earlier comments that it appears the Canada Pension Plan could consider the provisos in this bill when it does forms of investment. With that, I just want to point out that the way I am reading this, it is not a suggestive bill, it's an instructive bill. When we look at section 10 here, it's very clear that it's not only “shall take into consideration the provisions”, but it “...shall ensure that the assets are not invested...whose activities have been found...to be inconsistent with the guidelines...”.

So it is absolutely not suggestive; it's instructive. And that creates huge problems, I would imagine, because then you have to determine whether that corporation is in compliance or not.

And furthermore, when we go back to the issues under the other instructions on the bills, where the corporations have a determination of frivolous or vexatious responses within eight months, the minister has to provide reasons for this determination and publish these reasons. So there is even a reverse onus on the minister to not only give clarity to whether a company is in contravention, but also to publish reasons for that clarity. I would think that in itself would be very onerous to try to do.

Mr. Andrews, within eight months you might have some frivolous and vexatious accusations. What happens to a business in an eight-month period? And is that enough time for a business to determine whether they just want to fold? You related one example of one business that gave up the ghost on it. How many other businesses are going to decide--let's say the Canada Steamship Lines of the Canadian mining industry--to pick up their tools and relocate to Barbados? How much of this impact is there going to be on the Canadian mining industry?

[The Chair, Conservative, Kevin Sorenson]

Mr. Andrews.

[Anthony Andrews]

Thank you, Mr. Chairman.

We have heard from some of our members that they consider Bill C-300 serious enough that they would contemplate relocating their head offices elsewhere if this comes into law.

[Peter Goldring, Conservative, Edmonton East, AB]

Barbados.

That certainly should be a concern for everybody. And if that isn't enough of a concern, we also have the implication here that the corporations subscribe to all the international laws and all laws of various countries that even the Canadian government has difficulty subscribing to for various reasons. But to compel corporations to subscribe to laws that even the Canadian government doesn't subscribe to, doesn't that pose a huge complication as well?

[Anthony Andrews]

I think it does. But I think a much more complicated issue is how are you going to conduct an investigation and hold companies in compliance with respect to guidelines in situations that are very flexible and change from one site to another? That's the most difficult situation I can imagine with this Bill C-300.

People need to recognize that companies are held accountable on a number of different levels. You can start with the international laws, agreements, and conventions that exist, the financial institutions, and the equator principles that I know everybody around here is familiar with.

We've been talking about host country governance laws and regulations. Regional and municipal governments hold companies accountable where they operate. Local communities hold companies accountable as well.

If a local community is objecting to your project--you have not brought them along with it--they can slow it down very seriously. They can force you to walk away from your project. Communities have this power. They hold companies accountable, and there have been examples of this.

And finally, there are investors. Investors hold companies accountable as well. If, for instance, a company doesn't do its community engagement properly and there are delays to the project or the company has to walk away from it, the investors will punish the company through withdrawal of investor loyalty and their share prices will drop significantly. That's what I call accountability.

These companies are accountable on many different levels.

[Peter Goldring, Conservative, Edmonton East, AB]

With regard to the commentary from the Canada Pension Plan of removing from the bill all references to them, is it fair to say that really there's more of a systemic problem with the bill, that it's much more than that?

I mean, certainly one might say that you amend it by removing references to CPP, but really there are more systemic problems with this bill, throughout it, that are problematic to industry, problematic to our understanding of our Charter of Rights and Freedoms and our corporate responsibility. There are problems all the way through this bill.

[Anthony Andrews]

I absolutely agree with that. There are systemic problems. For that reason, we don't think it's amendable. It's like cutting an apple open, seeing a big bruise, trying to cut that out, seeing another one under it, cutting that one out, and then realizing that you have nothing left.

Our biggest issue with this bill is the fact that it's an investigative punitive process. It's an investigation that will be conducted by the Government of Canada, the most senior representative of the Government of Canada, and there will be immediate reputational damage to any company that comes under investigation, even if they are innocent. This can have all kinds of repercussions, in particular in the host country.

[Peter Goldring, Conservative, Edmonton East, AB]

So to be charitable, trying to do the right thing--we all do have an interest in doing the right thing, as citizens of the world--but using a sledgehammer to drive a thumbtack, you're going to hurt your own fingers.

[Anthony Andrews]

I think so.

If you want to add a level of accountability that does make some sense, I think the ombudsman approach is a good approach. This was the approach that was suggested by the CSR round table advisory committee group. A collaborative approach that looks at a situation, including all parties and not just a single party, and tries to make resolution of that dispute, I think is a very constructive approach. It will add some benefits.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Andrews.

Mr. Dewar.

[Paul Dewar, NDP, Ottawa Centre, ON]

Thank you, Chair.

I note that the last comments made by your witness were not heeded by the government. In fact, there was a request from many to put in place an ombudsperson. But I won't dwell on that.

I want to start with questions to our friends from the CPP.

In terms of the collective investments of CPP, are there are still holdings in Ivanhoe, in TransCanada, in Canadian Helicopters? Are we still investing, or is the CPP still investing in those corporations?

[Ian Dale]

Two of those three.

[Paul Dewar, NDP, Ottawa Centre, ON]

Which two?

[Ian Dale]

I could tell you a story, actually, to get back to the other member's--

[Paul Dewar, NDP, Ottawa Centre, ON]

Perhaps I could just get the answer. I have a very little amount of time.

[Ian Dale]

All right.

It's not in CHC, and I'll tell you why. It's an example of engagement. Last year, in conjunction with another investor, we looked at making a significant investment in Canadian Helicopters that had a very small part of their operation in Burma. It was looked at through the due diligence process, and through that process it was determined that the risk of operating that business was not worth pursuing it. So the company and the investors withdrew their operations from Burma.

[Paul Dewar, NDP, Ottawa Centre, ON]

Right. But if we could go back in time, when CPP first invested in those portfolios, were they aware that there was business being done in Burma? Had you screened the investment as to whether or not they were investing in Burma?

[Donald Raymond]

First of all, it's important to recognize that from a large global investors perspective, we invest with a policy of diversification that includes, as I said, 2,900 companies. We're not selecting each individual company.

You can think of it as getting passive exposure, just as one would in the Canadian equity market investing in the TSX 60, where you own exposure to each of the underlying 60 companies. We do the same thing with companies around the world, including emerging markets. That's part of our overall diversification strategy.

As a result of that--

[Paul Dewar, NDP, Ottawa Centre, ON]

So is that no or yes?

[Paul Dewar, NDP, Ottawa Centre, ON]

My question was, were you aware of the fact that these companies were involved and had investments in Burma?

[Paul Dewar, NDP, Ottawa Centre, ON]

Yes, you were? Okay.

I'm trying to lay out the fact that these Canadian investments and pension funds were investing in Burma, in some cases a 50-50 split of assets with the junta, where there was a clear determination by the government to actually have Canadian companies withdraw investments, quite rightly, through SEMA—not existing investments, and that was something I was hoping they'd go further with.

I mention that because there was an indication that screening isn't something we should do, and I would lay out that example as something that probably most Canadians, if they were aware that this was happening.... And certainly many Canadians became aware, and it took a brutal crackdown by a repugnant regime for Canadians to become aware of it. What we're trying to do here is lay out fair rules so that everyone is going to be aware of what the responsibilities are.

And I have to say that some of the things that have been laid out here, as if we are going in to tell people how to conduct their affairs.... Yes, you can lay out that argument, but many have disagreed. We've heard lawyers come forward and entirely disagree, with all due respect, with what we've heard today.

What we're trying to do here is ensure that in cases like I've just laid out, there are clear responsibilities, clear rules, and that the good work that has been done by various people around this table is going to be furthered, and to an extent that, when there are concerns about Canadian companies abroad, there's a manner in which we can deal with them.

You've just laid out for me the reasons why we should have this. It wasn't, quite frankly, until the government invoked SEMA that CPP was really forced to do what it has done. I know you might disagree with that, but I'm stating that because we've heard from you and I'm just laying it out.

One of the things that concerns me—and I turn to our other witnesses—is the fact that we've had other jurisdictions do this. We've had jurisdictions say, “You know, when it comes to our country's brand abroad, we want our companies to perform in a certain way”. In fact, Norway has put in certain provisions on standards, in terms of their pension funds.

I'm very concerned that you think if this bill passes you're going to instruct people not to invest in Canada. That worries me, but that's your right to do so. It says that we have eight months or more to figure out regulations. How is this bill going to stranglehold anyone who's doing the right thing? There is a process here; it isn't going into a country and saying “Thou must do this”. There is a process to say that our Canadian companies who are performing in these countries have to abide by certain standards. What are you afraid of here?