Background

With institutional investors’ growing influence on financial markets, we are seeing an increase in owners’ power to influence and improve the social, environmental and governance standards of the firms in which they invest. Today’s institutional investors are increasingly concerned with long- term share value. It has been determined that raised social, environmental and governance standards of firms can increase share value over time. As a result institutional investors including banks, insurance companies, mutual funds, pension funds, foundations and endowments are developing responsible investing policies or socially responsible investing policies that look for ways to have a positive impact on society as a whole, while simultaneously reducing risk in the investment portfolio and adding to long-term returns.

This initiative seeks to provide these institutional investors and other interested stakeholders with a variety of tools and instruments that will enable them to actualize these investment policies in their portfolios. Such tools and instruments are developed from leading-edge international research on best practice in corporate engagement and responsible investing. By the end of the initiative it is anticipated that more institutional investors in Canada will have developed corporate engagement and responsible investing policies and programs within their investment portfolios. To be successful in this endeavour these investors must move away from the rhetoric that currently surrounds these issues and toward implementation. This is where our knowledge mobilization will take place.

We will bring together international researcher centres that are working on these topics in conjunction with a major United Nations program, the UNEP Principles for Responsible Investing. We will use that research to develop instructive case studies, templates, financial instruments, course materials and curriculum. These tools will be available through Web based applications for practitioners and other stakeholders in this arena. We will develop a national database and provide Web-based database mining tools for the sector. We will host two international symposiums on this topic in year one and year three and a national conference in year two.

It is anticipated that this knowledge mobilization initiative will have a direct effect of encouraging increased use of corporate engagement and responsible investing by institutional investors across Canada. It will provide institutional investors with concrete tools by which to implement their policies and programs. It will offer instructive case studies from which these institutions can learn. It will bring international expertise in the topic to Canadian institutional investors and other stakeholders. It will provide educational course materials to facilitate other institutions to take up this subject. Through the national conference held in Ottawa, it will explore the public policy implications of institutional investors’ corporate engagement and responsible investment policies and practices.

The aim of this knowledge dissemination is to have more institutional investors undertake corporate engagement and responsible investment practices within their investment portfolios. To do so requires knowledge drawn from case studies, accessible templates for implementation, research on the impacts of this activity on long term shareholder value. This knowledge will be disseminated to institutional investors including pension funds, mutual funds, banks, insurance companies, foundations and endowments, to deepen their understanding of corporate engagement and responsible investment and where applicable to develop programs and activities based on best practice research in this arena.

We will work with leading national and international organizations advancing the field of corporate engagement and responsible investing. These networks include an international academic network of university research centers that we are already collaborating building on the United Nations Environment Program Principles for Responsible Investment. This UNEP program has global signatories with assets totaling over $11 trillion who are using their influence to improve their environmental, social and governance (ESG) standards of the firms in which they invest.

This Knowledge Impact in Society initiative will provide access to world-class university-based research. It draws from a number of international sources in gathering effective tools and instruments for corporate engagement and responsible investing. These resources will be disseminated through our extensive partners’ networks and other channels including the Internet. Our intended result is to have institutional investors take up these tools and instruments including a searchable database and catalogue of on going activities by institutional investors in responsible investing. In order to undertake this activity, all stakeholders must have access to easily understood material that provides concrete resources for implementation of these ideas.

Context

Canadian institutional investors are currently in the early stages of development in corporate engagement and responsible investment practices. That said, eight of the largest ten Canadian pension funds (representing $500 billion of assets) have adopted Socially Responsible Investment or Responsible Investment policies in the last three years. While this trend has been prevalent in Continental Europe, the United Kingdom, and the United States since 2000, we are now seeing increased interest in corporate engagement and responsible investing in Canada. Many Canadian institutional investors are also recent signatories to the Carbon Disclosure Project calling for greater disclosure on corporate greenhouse gas emissions and reduction strategies. In addition our largest financial institutions are developing strong Corporate Social Responsibility (CSR) policies. Many Canadian banks are signatories to such global compacts as the Equator Principles and in 2007 several chartered banks have established socially responsible investment programs (Royal Bank and Toronto Dominion). While formally adopting these codes, most institutional investors in Canada and indeed internationally, are uncertain in how to actualize these policies and programs within their investment portfolios. They require examples drawn from case studies in order to understand how these policies can be best implemented in their portfolio. They need quantitative data on the impact of improved ESG standards on the firms in which they invest. They also require templates to use in implementing their policies and a database of available resources.

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