Ontario passes long-awaited ESG investment requirement for pension funds

Canada’s responsible investment groups welcome the move as a “boon”

Ontario has become the first Canadian province to require its local pension funds to disclose the extent to which they are investing sustainably. The requirement, which is part of the Ontario government’s recently amended “Pension Benefits Act,” has now taken effect.

Specifically, the requirement states that pension fund administrators must prepare a statement of investment policies and procedures (SIPPs) which contains “information about whether environmental, social and governance (ESG) factors are incorporated into the plan’s investment policies and procedures and, if so, how those factors are incorporated.”

Canada’s Responsible Investment Association (RIA) welcomed the requirement, saying it could be a “great boon to responsible investment in Canada, particularly if other provinces follow suit.”

That is currently not the case, though Peter Chapman, Executive Director of Canada’s Shareholder Association for Research and Education (SHARE), says he expects other provincial governments to take a closer look at the issue.According to him, the province of Manitoba has a provision concerning ESG disclosure among its pension funds, but it’s non-binding.

Chapman also told RI in late October that the largest pension funds in Ontario backed the move. “ESG issues are already on their agenda,” he said. “And they tend to have strong policies on accountability. So there is no inconsistency in that regard, and it is not a significant reporting burden requirement.”

One of Ontario’s biggest schemes is the C$140.8bn (€100.6bn) Ontario Teachers’ Pension Plan (OTPP), which already publishes an annual review of corporate governance issues dear to it. These include board diversity, director term limits and aligning executive pay with performance.

The ESG disclosure requirement for Ontario’s pension funds ends 14 years of discussion on the issue. During this period, SHARE was a leading advocate of the move, and Chapman says it should help beneficiaries better understand how their pension funds were addressing the full range of risks. Amended Pensions Benefit Act