Resources
Q. Is the incorporation of ESG considerations into investment decisions and practices a breach of fiduciary duty?
A. In October, 2005, the UNEP FI Asset Management Working Group (AMWG) in cooperation with Freshfields Bruckhaus Deringer, an international law firm, released the Fiduciary Responsibility Report. The report outlines a legal framework for the integration of environmental, social and governance issues into institutional investment.
In July, 2009, the UNEP FI AMWG released a follow-up report to the 2005 Fiduciary Responsibility Report. With the benefit of hindsight from the financial meltdown, the Fiduciary Responsibility Report takes advantage of the ‘unique opportunity to recast some of the most basic tenants of fiduciary investment’. In particular the report highlights the practical aspects of integrating environmental, social and governance issues into institutional investment.
Q. What are Canadian Universities doing to incorporate ESG issues in their investment processes and ownership practices?
A. While Canadian universities lag behind their peers in Europe and the United States, research by the Carleton Centre for Community Innovation suggests RI has made it on their radar in recent years. A Scan of Canadian Universities conducted in 2009, demonstrates universities’ interest and in some cases, their commitment to integrating ESG into their investment processes and ownership practices.
For a summary of the scan, please see our presentation on the state of RI amongst Canadian University Pension and Endowment Funds.
Q: What are some of the best-practices in responsible investment at Universities in Canada and the U.S.?
A. Yale was one of the first institutions to formally identify the ethical responsibilities of the university as an institutional investor, publishing in 1969 ‘ The Ethical Investor: Universities and Corporate Responsibility’. To date, at least thirty-four colleges and universities in the United States have established committees on responsible investing related to their endowment and pension funds and many of these universities have adopted responsible investing policies (Responsible Endowments Coalition, 2010).
Recently, Canadian universities have followed this trend and are beginning to engage more actively in responsible investing initiatives that extend beyond traditional divestment campaigns. The Queens University Statement on Responsible Investing favours the corporate engagement approach to Responsible investing. Also see a presentation ‘Implementing a Responsible Investing Policy at Queen’s University’ made by Queens Representative Bill Forbes at the Canadian Association of University Business Officers conference in June, 2009.
In May 2009, the University of Toronto became the first university in Canada to establish an active Responsible Investing advisory committee. See the terms of reference for the advisory committee: University of Toronto Responsible Investing Committee Terms of Reference.
In the fall of 2010, the pension committee at Carleton University undertook a review of responsible investing that included a review of policies at other institutions, consideration of the United Nations Principles for Responsible Investing (UNPRI) and discussions with experts in the field of responsible investing. In September 2010, an amendment was made to the Statement of Investment Policies and Procedures for the Trust Fund under the Carleton University Retirement Plan (SIPP) that includes the following principles:
• That responsible corporate behaviour with respect to environmental, social and governance (ESG) factors can have a positive effect on long-term financial performance (to varying degrees across companies, sectors, regions, assets classes and time); and
• That taking into account ESG issues may better align the portfolio with the interests of our plan members.
The full text of the amendment can be found online at: http://www2.carleton.ca/finance-admin/ccms/wp-content/ccms-files/SIPPP_RI_Policy_Nov2010.pdf
Socially Responsible Investing- University of British Columbia, Peter Smailes
Q. What role do universities play in investing in the sustainability of their community?
In his presentation, ‘University Engagement in Social Finance, Fighting recession by investing in community sustainability‘, Edward Jackson asserts that university pension and endowment funds are important asset bases for social finance in affordable housing; social infrastructure; green energy; aboriginal economic development; and social enterprise. Universities can benefit from investing in community sustainability through improved public reputation and increased student and faculty recruitment.
Q. How can investors incorporate a wide range of perspectives on social and ethical views into their decisions and practices?
Developing a Responsible Investment Policy at the University of British Columbia, Omar Dominguez
Q. What are the most effective tools for incorporating ESG factors into investment decisions and practices?
A. The following resources have been developed by the Shareholder Association for Research and Education (SHARE). SHARE is a national non-profit organization originating within the labour movement working with institutional investors to promote socially, economically and environmentally responsible investment practices through research, educational activities, and advocacy.
The Active Trustee Practices Guide, assists pension trustees with incorporating more active trustee oversight in all aspects of a pension plans investment policy. The guide focuses on the implementation of proxy voting, shareholder activism, investment screening and economically targeted investing.
Acting Like Owners, SHARE
Putting Responsible Investment into Practice, A Toolkit for Pension Funds, Foundations and Endowments provides a definition of responsible investment and considers a range of implementation strategies that are available to institutional investors, including proxy voting, shareholder activism and investment screening. In addition, the toolkit discusses responsible investing in the context of fiduciary and legal requirements in Canada.
