Ethical Investing at CBU

By Doug Lionais

ethical investingOver the past couple of years there have been a number of expressions of interest for some form of ethical investing within the CBU pension plan. The policy and issues committee has undertaken some efforts to explore ways to bring an ethical approach to retirement savings at CBU.

The Pension Committee is responsible for overseeing the CBU pension plan. Over the past few years there have been some requests to include at least some ‘ethical’ or ‘green’ funds into the investment mix for CBU. Our pension plan provider (SunLife) and our pension consultant (Mercer) have indicated that it would be very difficult to bring in ethical funds and that they are not much different from typical funds in any case.

There were two primary reasons. First was because there are minimum investment amounts required to bring in a new fund and it is very unlikely that there would be sufficient interest at CBU to invest the minimum amount. Secondly, the ethical funds available use a very low bar of ethics. They use a method of negative screening where stocks related to (for instance) alcohol, drugs and tobacco are screened out. Therefore, and depending upon your ethical stance, there are numerous other corporations and industries with contested ethical approaches that would be included. At the time these inquiries were made, it was determined by the pension committee that providing such funds was not feasible nor did it achieve the desired result.

On December 3rd, 2010, the Policies and Issues committee hosted Peter Chapman from SHARE to present on responsible investing. Responsible investment is defined as investment that integrates environmental, social and governance (ESG) issues. Mr. Chapman outlined two broad approaches to responsible investment: asset selection and asset ownership. Asset selection involves the choice of assets in the plan and may use the following strategies:

  1. Screening – negative screening; positive screening; or best in sector screening
  2. ESG integration – ESG value weighting
  3. Double Bottom line – financial and social returns

The second approach, asset ownership, involves the active management of assets under ownership and includes:

  1. Proxy voting
  2. Shareholder engagement – active communication with corporations under control.
  3. Policy initiatives (market wide) – participating in advocacy networks (i.e. PRI)

What can CBU’s Pension Plan do?

  1. Become a Principles of Responsible Investment (PRI) signatory. PRI is a UN network that advocates for six basic responsible investment principles.
  2. Include ESG on service provider contracts.
  3. Ask managers (i.e. Sunlife) to have an ESG strategy.
  4. Review proxy voting.
  5. Request quarterly or annual report on ESG from manager.

There are also some for who any stock investing comes with ethical concerns, at least when purchasing large funds with numerous individual holdings. To that end the Policy and Issues committee has begun some explorations for avenues of retirement saving outside of the current pension plan structure. This option is the most challenging to pursue but the committee is exploring institutional precedents.

It would help the policy and issues committee to know what ethics you wish to apply to your pension plan. Respond to the poll below and/or send us an email to let us know your feelings.

Know More:
Woods, C; Urwin, R Putting Sustainable Investing into Practice: A Governance Framework for Pension Funds JOURNAL OF BUSINESS ETHICS, 92: 1-19 Suppl. 1 2010
Sethi, SP Investing in socially responsible companies is a must for public pension funds – Because there is no better alternative JOURNAL OF BUSINESS ETHICS, 56 (2): 99-129 JAN 2005

2 comments to Ethical Investing at CBU

  • Pam Seville

    Good luck with the recommended ethical changes to responsible investing. I strongly agree with your recommendations.

  • Doug Grant

    There are many options for ethical funds available in the open market. Among the most economical in terms of Management Expense Ratio are the no-load D-class Community Values funds from Phillips Hager North. The MER’s on these funds are at most 1.27%. Until Sun Life makes equivalent funds available, members could adopt the strategy of minimizing contributions to the pension plan itself, and maximizing contributions to an RRSP. It is unlikely that Sun Life would be able to offer such a fund with an MER as low as those on the existing funds they offer within the plan.

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