The SIO is calling for rules to require federal pension plans to become transparent on their social and environmental policies and how they use the power of their shareholder votes.

The call to action is in response to a national consultation announced by the federal government in May of federally-regulated defined benefit pension funds, which include the major national industries such as banking, airlines and utilities.

The SIO is asking its members – and in fact all Canadians – to support this campaign by writing letters to the federal government.

Under current rules, Canadians have no way of knowing if their pension plans are invested in problematic industries such as gambling, pornography and the military or in promising new sectors such as renewable energy. Pension plan members also have no right of access to information on the shareholder votes cast by their funds – and whether their funds are supporting questionable corporate mergers, excessive executive salaries or limits on sweatshop contractors and greenhouse gas emissions.

“This era of closed pension management may soon be coming to an end,” said Eugene Ellmen, Executive Director of the Social Investment Organization. “If the policymakers follow the lead of European and US lawmakers, Canadians with federal private pensions will have access to information on how their pension funds invest their assets, and how they vote their shares.”

In a brief to the federal government outlining its position, the SIO makes three key points:

• 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 environmentalpolicies are in place, and how their pension plans have voted their assets.

“Pension plan members have a vital interest in knowing that their pension plans are being properly managed – including knowledge of the important long-term non-financial factors that could increase the risk to their pension assets or future added value,” states the SIO brief.

On proxy voting, the brief states: “The SIO believes that not only do pension funds have a fiduciary duty to vote their shares on behalf of their plan members, but that plan members have a right to know how their assets are being voted. The fiduciary duty that funds have to cast their votes appropriately is only meaningful if it is accountable, and the accountability mechanism is to the trustees that oversee the plans. Without disclosure of voting policies and records, pension plan members and their trustees have no way of knowing if plans are in fact acting according to their fiduciary duty when voting their shares. Transparency on voting policies and records is essential.”

In its brief, the SIO calls for regulations that would require pension plans to disclose their social and environmental policies, as well as their proxy voting policies and voting records. The social and environmental disclosure rules are similar to recent legislation in the UK, France and Germany. The proxy voting rules are similar to rules now in effect for mutual funds in Canada and the United States.

“Such disclosure would provide important new information to plan members about the long-term management of their pension assets,” states the brief. “As well, it would provide a level of transparency that would enhance the practice of social and environmental assessment and proxy voting through the investment community in Canada. This would result in better risk management in the future and improve long-term pension fund returns.”

For a copy of the federal government consultation paper, visit:

http://www.fin.gc.ca/news05/05-037e.html.

For a copy of SIO’s brief to the federal government, click:

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

For a copy of SIO’s sample letter, click:

http://www.socialinvestment.ca/News&Archives/Sampleletter.htm

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