Madam Speaker, I congratulate the member for Winnipeg Centre for bringing this opposition day motion forward to the House of Commons. It is a good discussion to have.
What we are talking about is ethical or social investing as it relates to the Canada Pension Plan Investment Board. The motion basically says that the board should be guided by ethical investment policies which would ensure that our pension investments are socially responsible.
We need to go back some years. If we look at the mid-1990s there was a lot of concern that the Canada pension plan was not viable, not actuarially sound, and our government undertook a whole series of consultations. As a result of that, a program was put in place to put the Canada pension plan on a much sounder footing. That included: changing the contribution rates; adjusting, to some extent, the benefits; and allowing the Canada Pension Plan Investment Board to invest, not only in fixed income securities but also to invest in equity investments.
What has been the result of all that? If we look at the actuarial report of December 2000, the actuary concluded that the legislative contribution rates, which were 9.4% in 2002 and 9.9% in 2003 and thereafter, were sufficient to pay for future expenditures and to accumulate assets of $142 billion by 2010. In 2050 the assets are projected to be $1.578 trillion, or 5.9 times the annual expenditures.
The actuary went on to say that under the current schedule of contribution rates, the funding level is expected to increase significantly over the next 20 years with a ratio of assets to the following years' expenditures growing from 2.4% in 2002 to 5.3% in 2020.
When Canadians approach me, and perhaps other members of the chamber, and ask if the Canada pension plan will be there for them and their children, because of the actions of our government in 1997, the actuary is saying yes, the Canada pension plan will be there for them. That is after taking into account the demographics where a much more elderly population will be emerging in Canada over the next few decades, but our Canada pension plan will be on a sound footing. To those who have worried about that, I think this gives a lot of relief.
The Canada Pension Plan Investment Board is a board that manages, on behalf of contributors, the portfolio of assets under its administration. It is also comprised of representation from the provincial finance ministers, so it is a joint board that effectively is in the fiduciary capacity of managing these investments.
In the last session, Bill C-3, which was passed by the House, will allow the fixed income securities to be transferred from the federal government and put under the control of the Canada Pension Plan Investment Board.
What have the results been of allowing the Canada Pension Plan Investment Board to get into managing both equities and fixed income securities? We do know that the equity markets went into the doldrums a few years ago and that the Canada Pension Plan Investment Board's portfolio was hit by the same sort of bad news on the stock markets. However if we look at the nine months ending December 31, 2003, we see that assets available to the Canada pension plan earned $8 billion, producing a rate of return of 13.9%. That is all CPP assets, including the $35 billion in fixed income securities currently administered by the government and subject to Bill C-3, which will transfer those securities under the control of the Canada Pension Plan Investment Board.
During that same time period, the portfolio managed by the Canadian Pension Plan Investment Board earned a return of 26%. If we look at the benchmarks against which the plan compares its performance against some of the standards in the industry, in 2003 we see that Canadian equities earned 17.3% and the benchmark was 17.5%. It was slightly lower there. In terms of non-Canadian equities, the benchmark was 28% and the actual was 27.6%. In real estate the benchmark was 9.2% and the investment fund actually had a rate of return of 50.7%. Overall, against the benchmarks, the performance exceeded the benchmarks of 20.3% return and it achieved a return of 21.1%.
Why is this relevant? Why is this important? This is important because this board has under its administration some $55 billion that is there earning income and providing benefits to Canadians, now and into the future. It is important the pension fund be sound and that it achieve a good return.
If the CPP is not there for Canadian citizens who retire in the future, they will be looking to the government for other types of support. This is a pension plan funded by employees and employers, so it is important that these trustee funds are managed in an optimal way.
I understand the point of the motion and I know the member for Winnipeg Centre has done some excellent work on this but I do have some difficulty with it.
First, we need to understand that the Canada Pension Plan Investment Board is mindful of ethical investing. It is guided by some of those principles and, from its experience, it knows that those companies that are committed to good labour relations, to a good, strong performance in human rights and to sustainable management in terms of the environment, will be the best investments to make in any case.
The problem I have with the specifics of the motion is when it states:
...investments are socially responsible and do not support companies or enterprises that manufacture or trade in military arms and weapons, have records of poor labour practices, contribute to environmental degradation, or whose conduct, practices or activities are similarly contrary to Canadian values.
Let us just look at the first part of that. That part of the motion says that any company that manufactures military equipment would not be eligible. I question that in the sense that we do know in this world, unfortunately, there is conflict. We do know that there are weapons produced. We do know that companies manufacture weapons. Is it not somewhat naive to say that an investment plan should not invest in companies that manufacture this type of equipment? However abhorrent we find war and conflict to be, this is the reality.
The motion goes on to state that companies with records of poor labour practices should also be excluded. I ask hon. members: Who will decide whether the labour practices are good or bad?
While it would be fair to say that some companies might have a reputation for having bad labour practices, if we could actually measure that, it is very much a judgmental thing. We have certain companies in certain sectors which have very strong unions and some very militant unions, and some companies have very militant management. We have sectors where the margins and profitability are very low so that management takes a very tough stance. We have unions with very strong membership and leadership that produce some very difficult demands in terms of allowing for the enterprise to be economic. Who decides that the company has a history of bad labour practices?
Who decides, when the motion talks about those companies contributing to environmental degradation, that a company has crossed a certain Rubicon, that they are not environmentally responsible?
Perhaps if we looked at every company in Canada or around the world, every company would be guilty at some point in time of having some slip-ups in the area of environmental management. Does that mean that they are contributing to environmental degradation? I suppose by strict definition it would.
Finally, the motion states that those companies should be excluded “whose conduct, practices or activities are...contrary to Canadian values”. Again, who decides that? I think it is very judgmental.
As I said, the board itself is guided by this type of thinking. For example, if a company is a clear violator of human rights and clearly has unfair employee practices, then in the obvious cases I think the board would be guided by that. When we get into this grey area where it would be open to debate and subjectivity, this is where I think the problems with this motion emerge.
There has been discussion about Talisman Energy Inc. and its work in Africa. Presumably Talisman would not be an ethical investment. Perhaps we in the House could all agree on that; I do not know. With the change of time, though, I would point out that what is good today might not have been good yesterday or vice versa. At one point in time, Nelson Mandela of South Africa was considered a terrorist. Now he is considered a hero.
Too, we have the question about tobacco. Should the Canada Pension Plan Investment Board invest in companies that produce tobacco? Again, we have this hypocritical notion, I might say, and I think we are all guilty of it: we tax tobacco very heavily, which we should do, but then we also allow tobacco to be produced, which gives Canadian citizens the right to choose freely. Could we actually say, then, that companies which produce tobacco---and we are saying in Canada that it is not a prohibited substance, so companies can produce it--would be unethical companies to invest in? It seems somewhat hypocritical to me. If we are going to say it is unethical and contrary to public values in Canada, then maybe we should outlaw tobacco, which I am not necessarily espousing here in the House.
These are the kinds of questions we have. Would we allow, then, the Canada Pension Plan Investment Board to invest in companies that produce liquor? We know that alcohol produces a problem if used to excess.
What about those companies that manufacture birth control products or contraceptive products?
What about those companies that actually cut down trees? Maybe that would be unethical according to some.
Who decides these things?
What about the mining companies? They mine ore and provide jobs and are companies that act in a very responsible way.
While I understand the intent of the motion from the hon. member for Winnipeg Centre and the NDP, I think the motion is flawed.
I recall that some years ago when I worked in the forest sector we were trying to get the forest industry and the forest unions to invest in silviculture. The government then was facing deficits and there was not enough money to replant, so we embarked on an initiative to work with the companies in the industry and with the labour unions.
When we went to the labour unions, we said, “If everyone puts a little water into this vessel we can replant trees, with the industry putting in its share, the government putting in its share and the unions putting in their share”. What we ran up against was the fact that the unions rightly said, “We cannot accept a rate of return that would be less than an optimal rate of return. We owe it to the people. We are entrusted with these funds to earn the optimal return”.
I think that on behalf of Canadians this board is entrusted to earn an optimal return so that we can safeguard our future and our children's future and so that we can have a pension scheme and a retirement income scheme that Canadians can call upon when they retire.
While I believe the motion is well intentioned, I think it would be contrary to the best interests of Canadians who are contributing to the Canada pension plan. By taking this action, we would end up with returns that are less than optimal. It seems to me that all of us in the House should be fighting for those principles and those policies which will ensure that all Canadians have a decent retirement income scheme when that day comes for them. On that basis, I will be voting against the motion.