After 14 years of discussion, the Ontario Government in Canada looks set to bring in legislation that will require pension funds registered in the province such as the Ontario Teachers’ Pension Plan, one of the world’s largest institutional investors, to reveal whether, and if so how, environmental, social and governance (ESG) considerations are taken into account in investment policy.
The government is currently consulting on making the change to regulation 909 under the Pensions Benefit Act. Peter Chapman, executive director of Canada’s Shareholder Association for Research and Education (SHARE), told Responsible Investor the issue was now at the “11th hour”, and that it would likely go ahead as support was quite broad.
If it does happen, the change is expected to come into effect in January 2015.
Chapman said there had been a long history to the push for pension funds to disclose ESG activity, and that SHARE had made a number of representations since 2000 on the issue.
He said it would be a first for a Canadian province: “In Manitoba there is some provision on ESG issues, but no requirement for disclosure and is permissive in considering ESG issues.” He expected other Canadian provinces would now be looking at the issue.
Chapman also suggested 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.”
Chapman said the proposed regulations would improve transparency for pension plan beneficiaries and help them understand better how their pension fund was addressing the full range of risks. “We are happy it is moving forward and we’ve been on the record recommending it for a long time. A number of other people in Canada have been promoting this. We are one voice among many and this is a positive step for Canadian pension funds.”
Jane Ambachtsheer, Global Head of Responsible Investment at consulting firm Mercer Investments, who is based in Toronto, said the development was in line with numerous other jurisdictions and reflected a growing awareness that ESG factors are important drivers of risk and opportunity. “The proposed legislation in Ontario does not dictate how investment trustees should implement ESG in investment policy but it is a catalyst to think about the question. I see it as a positive development.”
The proposed amendment was originally put out for consultation at the start of the year, but there was a revision period following an election in Ontario and representation from stakeholders. The new consultation ends this month. Previous RI coverage