Canadian Pension Fund Urged to Use Investments to Influence Corporate Ethics

Source: Ottawa Citizen

A recent decision by directors of the Canadian Pension Plan (CPP) to reject “scores” of shareholder proposals for ethical investment highlights the tension between maximizing investor dollars and urging multinational corporations (MNCs) to take steps to ensure that their operations meet external environmental, social justice, and economic sustainability standards (such as the United Nations’ Millennium Development Goals and Principles for Responsible Investment). This decision has ignited the ire of non-governmental organizations (NGOs) like the Sierra Club, Amnesty International, and Friends of the Earth.

CPP is a pension fund managed by the Canadian government. More than 16 million Canadians have made contributions to the fund and it is now a “global player” in the world investment market, and is worth over $100 billon. It had conceded that it should use its prowess to promote corporate responsibility and had committed to engaging in ethical investment last year.

The CPP board of directors justified its decision to reject the proposals because they “duplicated existing information, were too costly, too broad in scope or…not useful to shareholders.” CPP responded to criticisms by noting that improvements could be made in the board’s proxy voting process.
While the fund did support some shareholder-backed proposals for ethical investment, they rejected 80% of the environmental and social justice proposals offered.

1. How effective do you think investment funds like CPP can be in influencing corporate behavior?