ESG Investing by Pension Fiduciaries in Canada

Abstract

Canadian pension fund managers generally are subject to fiduciary duties requiring them to act with loyalty and care in the best interest of their beneficiaries. These duties have been interpreted by Canadian pension managers to allow or even require them to incorporate ESG factors into their investment policies and practices. The principal rationale for doing so is the belief that ESG factors enable fund managers to better manage risk and generate sustainable long-term returns for beneficiaries.

At least one Canadian province, Ontario, requires pension plans to disclose whether ESG factors are incorporated into the plan’s investment policies and procedures, and if so, how. This paper provides examples of how major pension fund managers have done that, not only in Ontario but other provinces.

Canadian pension fund managers appear to have been influenced by global initiatives advocating adoption of ESG principles. This paper describes some of such initiatives, particularly those aimed specifically at Canada.

Keywords: ESG, social investing, Canada, pension, investing, ESG investing, fiduciary, disclosure, ESG investments