Canada’s Ontario to oblige pension funds to disclose ESG in new SIPP rules

The Canadian province of Ontario is scheduled to become the first in the country to oblige its pension plans to publish a Statement of Investment Policies and Procedures (SIPP) and publicly state whether the SIPP takes ESG (environmental, social and governance) issues into account. The SIPP introduction could act as a major boost to the take up of responsible investing in Canada and act as an incentive for other Canadian provinces to follow suit given that Ontario is the country’s most populated province. Ontario includes the largest single-profession pension plan in Canada, the $100bn Ontario Teachers’ Pension Plan, which invests the pensions of 289,000 active and retired teachers and already has a well developed responsible investment policy. The Ontario Ministry of Finance this week published the Government’s budget documents, which included the SIPP statement: “The [Ontario] government proposes to require plans to file Statements of Investment Policies and Procedures (SIPPs) with the regulator and disclose whether or not their SIPPs address environmental, social or governance factors.” The concept of a similar Statement of Investment Principles (SIP)was first introduced in the UK more than a decade ago. It came into law in the UK Pensions Act 2004, which requires trustees of occupational pension plans to disclose in their Statement of Investment Principles whether they adhere to an SRI approach to investment. Similar rules also apply in France, Germany, Belgium and Sweden. Legislative discussion on SRI issues in Ontario has been gradually progressing for a number of years. In 2008, a report by the Ontario Expert Commission on Pensions recommended that pension funds should say whether, and if so, how, socially responsible investment practices were reflected in the plan’s investment approach. That came after Canada’s federal pension regulator, the Office of the Superintendent of Financial Institutions (OSFI), had required pension plans to disclose how they vote their proxies at shareholders’ meetings on SRI issues. Peter Chapman Executive Director at Canada’s Shareholder Association for Research and Education, said: “The Ontario Government has taken a leading position on this issue and we expect that other jurisdictions in Canada will follow soon with similar disclosure requirements.”