Canada’s CPPIB pushes back against responsible investment bill, MP says

The Canada Pension Plan Investment Board (CPPIB), which invests on behalf of one of the world’s biggest retirement funds, is pushing back against a parliamentary bill which proposes an overhaul of the fund’s approach to responsible investment, according to the MP behind the move.

Last week representatives of the C$356bn (€236bn) CPPIB met with Alistair MacGregor, the New Democratic Party (NDP) MP who introduced the bill, to thrash out differences on what the bill is proposing.

CPPIB was set up by an act of parliament in 1997 to manage the funds that are not needed to pay beneficiaries of Canada’s public pension scheme, the CPP.

The new bill proposes amending the Canada Pension Plan Investment Board Act to stipulate that “no investment may be made or held in any entity that has performed acts or carried out work contrary to ethical business practices or has committed human, labour or environmental rights violations”.

According to MacGregor, the amendment proposed in Private Member’s Bill C-431 would ensure the fund’s investment policies, standards and procedures are “in line with ethical, human rights, and environmental considerations”.

But during the meeting, the board – which asked to meet with MacGregor after he introduced the bill in February – maintained that its policy on responsible investing with ESG principles, and on engaging with companies rather than divesting, was a better way to influence and change corporate behaviour.

MacGregor – the NDP’s spokesperson on agriculture – said: “They were concerned that a quick withdrawal from bad assets might have a negative effect on maximizing returns for CPP beneficiaries.

“In the end, I think we had to agree to disagree.”

At the time of introducing the bill, MacGregor said: “Despite the recent United Nations report showing that urgent changes are needed in order to keep global warming to a maximum of 1.5°C, the CPP Board is investing billions of dollars in the oil and gas sector.”

He also lambasted the board’s investments in arms manufacturers, two private US companies that run American prisons and incarcerate the majority of detained immigrants, and other companies implicated in human rights abuses.

The CPPIB is mandated to invest in the best interests of CPP contributors and beneficiaries by maximising returns without undue risk of loss – a mandate that, according to MacGregor, the bill will not seek to change.

MacGregor said: “My bill sets out a principled legislative framework while ensuring investments are still made to maximize returns without undue risk of loss to people throughout the country.
“The Canada Pension Plan is an important part of our country’s retirement system, but Canadians expect that the investments which ensure its continued funding are carried out with certain principles in mind.”

At the bill’s Second Reading on June 13, the house will debate and vote on the principle of the bill and whether to send it to the Standing Committee on Finance.

Upcoming federal elections in October, however, mean the bill is unlikely to progress to consideration in committee and Third Reading under the current parliament.MacGregor said the bill could be reintroduced by other MPs or by himself – subject to re-election – in the future.

This isn’t the first time that the CPPIB has come under pressure to reconsider its responsible investment policies.

Earlier this year, an academic report called for the federal government to amend the CPPIB Act to align the fiduciary duty provisions with the Canada Business Corporations Act (CBCA).

And in 2009, a separate bill proposed amending the act to add that CPPIB investments must be in line with the Corporate Accountability of Mining, Oil and Gas Corporations in Developing Countries Act. The bill narrowly failed to pass.

CPPIB declined to comment directly on the meeting with MacGregor, but directed RI towards an op-ed by Senior Managing Director, Michel Leduc.

Leduc wrote: “[Ministers created] CPPIB to invest CPP money in capital markets to achieve growth sufficient to give Canadians the benefits they were promised.

“CPPIB has its own in-house Sustainable Investing group that helps factor ESG considerations into investment decisions. They also engage with the companies we are invested in, encouraging businesses to manage these issues better. We believe that organizations that address these issues effectively are more likely to endure and create value over the long term.

“We are working to be a leader in understanding the investment risks and opportunities of this global challenge. This work includes understanding the shift to lower-carbon energy markets. In the past two years, we’ve announced plans to invest more than $3 billion in renewable energy and became the world’s first pension fund to issue a green bond.”

MacGregor’s office commented: “From our perspective, a more proactive approach of due diligence in their investment practices is still needed, which is what Bill C-431 seeks to achieve.”

“They are a board that is governed by the statute, and as a legislator I am within my rights to try and amend the act. We’ll have a debate in Parliament as to whether my idea has any merit or not.”
Meanwhile, fellow Canadian pension giant Caisse de dépôt et placement du Québec (CDPQ) has today announced a partnership with BP on renewable energy. The fund, which runs CA$310bn for public pension and insurance plans in Quebec, has agreed a £150m debt investment into solar assets owned and managed by Lightsource BP. The credit facility will initially be used to finance a portfolio of more than 100 solar projects globally, with more than 700MW of combined capacity.

“Over time, the facility could expand with further investment from CDPQ funding assets developed through the Lightsource BP pipeline,” said the fund, which has been the leading voice on sustainable investment in the Canadian pension world over recent years. In March, the fund upped its 2020 low-carbon asset targets from $26bn to $32bn, as part of its wider ambitions to support a transition to a low-carbon economy.

Its Executive Vice-President, Legal Affairs and Secretariat, Kim Thomassin, is one of the four members of the Government-supported taskforce on sustainable finance, that is due to release its recommendations in coming weeks.