I’m asking for your support to help bring about some needed transparency to Canada’s national employer pension plans. It’s an issue that goes beyond dollars and cents. Although it has some very bottom-line impacts on our future economic security, it also affects the kind of corporate responsibility that will help to shape our society and our collective future.

Let me explain.

In May, the federal government announced a consultation on defined benefit pension plans under federal jurisdiction. The consultation is examining some thorny issues, such as how to respond to the pension deficits that plague some plans and who owns pension surpluses. But we are hoping that the consultation will also deal with the issues of transparency in investment policies and how these massive funds use their voting power.

We are putting forward three simple principles in this consultation:

• Social and environmental policies and proxy voting benefit pension plans by reducing long-term risk and enhancing returns.
• Pension plans have a fiduciary duty to take social and environmental factors into account, and to vote their holdings on behalf of their beneficiaries.
• Pension plan members have a right to know what social and environmental policies are in place, and how their pension plans have voted their assets.

We believe that there is a growing consensus in the investment community that social and environmental analysis is an important tool in reducing long-term risk and increasing long-term value. In fact, the traditional view that these issues are unimportant is quickly becoming outdated; some would say that pension funds are opening themselves to legal liability by ignoring these issues. Therefore, in order for pension plan members to have confidence that their trustees and advisors are properly managing their assets complete disclosure on these issues is necessary. It should be the rule governing all pension funds.

We have a unique opportunity with this consultation to make progress on these issues. The  consultation affects pension plans under the federal Pension Benefits Standards Act (PBSA). It only affects a minority of plans – about 10 per cent of Canada’s registered pension assets are affected – but some of the largest national plans are included under these rules. The PBSA is also a model for provincial pension legislation. Progress in this area will mean progress in the future.

I’m asking you to write a letter to the consultation expressing support for pension reform.

The reforms we are looking for are quite simple.

We want rules to require pension funds to disclose whether they take social and environmental issues into account in their investment policies. We also want rules to require pension funds to disclose their proxy voting policies and how they cast their votes.

Why are such rules important? Why has it taken so long to get these rules in place?

If the Enron and WorldCom disasters have taught us anything, it is that a system of accountability is important to prevent corporate abuse. Closed investment management means that institutional investors are less likely to scrutinize the activities of corporations. Unaccountable investment management can lead to abusive corporate management.

With greater accountability rules on investment management comes greater scrutiny of corporations that make up the stockholdings of these investors. Greater public scrutiny of investment policies and voting may not have prevented abuses like Enron and WorldCom but it would have made them much less likely by making pension funds and other institutional investors more conscious of their investment and voting practices.

Pension plan members have a right to know about the social responsibility policies of their pension plans and how they use their voting power.

I invite you to help us take the first step in creating these new policies by writing a letter to the consultation. Your voice in Ottawa will help to bring about investment and voting transparency in Canada’s national pension plans.

Sincerely

Eugene Ellmen

Executive Director, SIO

For a sample letter to the consultation, visit

http://www.socialinvestment.ca/News&Archives/news-805-Sampleletterfederalconsultation.htm

For a copy of SIO’s brief, visit:

 http://www.socialinvestment.ca/Policy&Advocacy/Pension Disclosure 0805 Brief.pdf

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