A new report shows that Canada is lagging other countries in integrating environmental considerations into investment, a situation caused largely by the lack of government-mandated disclosure of social and environmental issues.

Entitled Finance and the Environment in North America: The state of play on the integration of environmental issues into financial research, is a major survey of analysts, portfolio managers, investment consultants and brokers in North America. It shows that the Canadian investment sector is behind the US sector on this issue, and North America lags Europe.

“The research found that one of the most basic barriers to integrating environmental considerations into investment practices in North America was the absence of legislation or regulation requiring institutional investors to address such issues, such as exists in Europe, the United Kingdom and Australia,” said the report, released March 30 at the GLOBE Conference and Trade Show in Vancouver.

“Even if institutional investors choose to state publicly that they do not consider environmental issues, at a minimum, requiring them to disclose this puts the issues on the investment agenda.”

The first recommendation of the report is that governments should draft legislation requiring institutional investors, mutual funds, and foundations/endowments to disclose publicly how they consider environmental issues in their investment practices.

The report was commissioned by Environment Canada, and written by Sue McGeachie and Matthew Kiernan of Innovest Strategic Value Advisors, and Eric Kirzner of the Risk Management Institute of University of Toronto.

The report also calls for a wide-ranging reform of public policy in this area, including legislation to redefine the notion of fiduciary duty to allow for considerations of non-financial factors by investment trustees.

It also calls for a greater enforcement of existing environmental reporting requirements by corporations, and realignment of fiscal policy, compliance and market-based instruments to align environmental and corporate goals.

“These recommendations are focused on improving the ‘framework conditions’ that determine which changes are and are not possible within the investment value chain,” states the study. “In the absence of material improvements in the framework conditions, its is highly unlikely that change will occur spontaneously among the key actors in the institutional investment process.”

For an executive summary or a copy of the full report, visit

 http://www.ec.gc.ca/cei/default.asp?lang=En&n=DC145895-1.

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