February 2006: Your Pension Contributions at Work

CPP is investing in bombs, tobacco, and corporate criminals
February 1, 2006

We Canadians like to think that we play a benevolent role in the world as humanitarians and peacemakers. But is this impression always accurate?

One place that reveals another side of Canada is the Canada Pension Plan Investment Board (CPPIB). The CPPIB--the investment arm of the Canada Pension Plan--was established in 1997 to invest surplus pension contributions so that the pensions of Canadians would be assured into the future. Today the CPPIB controls one of the largest investment funds in the country, with assets of more than $90 billion. Over half of CPPIB assets are held in publicly-traded stocks of Canadian and foreign corporations.

An investment program funded through compulsory worker contributions raises the obvious question of whether the CPPIB is using socially responsible criteria in making its investment decisions. But the CPPIB uses no such criteria. On the contrary, it has refused to screen investments on the basis of social, human rights, or environmental factors. The result is that our pension contributions are being invested in the world’s leading arms manufacturers, in companies that have been prosecuted for criminal activities, in the tobacco industry, and in companies complicit in human rights abuses overseas.

Officially, Canada did not join the U.S.-led invasion of Iraq. But all Canadian workers who pay into the Canadian Pension Plan are involuntarily contributing to the U.S. invasion and occupation of Iraq. With the U.S. military budget growing by $100 million or more a year, the war has been a bonanza for the arms trade. The CPPIB holds investments in the top seven corporate beneficiaries of this spending orgy. For example, CPPIB holds investments in Lockheed Martin, the world’s largest weapons producer. Lockheed is involved in virtually all aspects of weapons production, including nuclear. One of Lockheed’s newest sidelines, through its subsidiary Sytex, is recruiting contract “interrogators” to work side-by-side with the U.S. army in Iraq and Guantanamo Bay. (Such private sector interrogators have been implicated in the torture scandals in Abu Ghraib prison.)

Other U.S. arms manufacturers, such as Raytheon (CPPIB: $4 million), Northrop Grumman (CPPIB: $5.4 million), and General Electric (CPPIB: $323 million) have also increased their profit margins considerably through their involvement in war production.

The war in Iraq has been good for companies with close connections to the Bush administration. Dick Cheney’s former company, Halliburton (CPPIB: $8 million), has received at least $7 billion in Iraq-related contracts. Canadian companies are also doing well. The ammunition manufacturer SNC-TEC, a subsidiary of Quebec-based SNC-Lavalin (CPPIB investments: $160 million), is providing millions of bullets for U.S. forces in Iraq. The Coalition Against the Arms Trade (http://coat.openconcept.ca/cpp/) has identified almost $2 billion of CPPIB investments in 50 Canadian companies supplying the U.S. military.

The CPPIB portfolio includes companies that have been found guilty of criminal offenses. Monsanto (CPPIB: $8 million) recently paid a US$1.5 million penalty related to bribery in Indonesia. Halliburton (CPPIB: $8 million) is facing numerous investigations for fraud, bribery, over-billing, and price-rigging. The U.S.-based drug plan manager Caremark RX (CPPIB: $10.5 million) agreed to pay US$137.5 million to settle federal lawsuits, and still faces charges in nine U.S. states. Wal-Mart (CPPIB: $19.5 million) was recently convicted of contravening child labour laws in the U.S., and General Electric (CPPIB: $323 million) has been found guilty of multiple cases of fraud—no fewer than 63 of them in the 1990-2002 period.

The CPPIB is also investing in companies profiting from civil conflict overseas. The Canadian company Ivanhoe (CPPIB: $17 million) operates the largest mining complex in Burma (Myanmar) on a 50-50 deal with Burma’s military government. In 2004, Ivanhoe provided $23 million in profits to the Burmese junta, which is widely regarded as one of the most ruthless dictatorships in the world.

The CPPIB also holds investments in the energy giants UNOCAL (CPPIB: $1.7 million) and TOTAL-SA (CPPIB: $176.3 million), which jointly constructed the Yadana pipeline from Burma to Thailand. Both companies recently reached out-of- court settlements for forced displacement, forced labour, rape, and murder associated with the pipeline project.

Physicians for a Smoke-Free Canada estimates that 45,000 deaths annually in Canada are attributable to tobacco. Yet the Canada Pension Plan has more than $90 million invested in the tobacco industry. The former president of the CPPIB expressed sympathy with anti-tobacco advocates, but said that CPPIB’s only goal is to earn good returns, apparently from any source.

In October 2005, the CPPIB announced a policy on “responsible” investing, claiming it will encourage good corporate behaviour with respect to environmental, social, and governance factors. But the CPPIB will not screen stocks, either to exclude companies with anti-social records or to favour companies with good records on human, environmental, and workers’ rights. The CPPIB sees such an approach as posing “artificial barriers” to investment decision-making.

The CPPIB admittedly has an obligation to invest wisely to ensure the future of the Canada Pension Plan. But it also has a responsibility to invest in ways that are in the public interest. These obligations are not contradictory. Public pension plans around the world are implementing ethical investment strategies, and there is no reason why Canada’s public pension plan cannot do the same.

(Peter Gillespie—[email protected]-- is acting executive director of the social justice organization Inter Pares—www.interpares.ca-- which works in Canada and internationally to promote understanding and action on the causes and effects of poverty and injustice. Inter Pares has joined with other civil society groups to campaign for the adoption of ethical investing policies by both public and private pension plans, especially the Canada Pension Plan. For more information and resources, see these websites: Coalition Against the Arms Trade—www.coat.ca; CorpWatch—www.corpwatch.com; and Physicians for a Smoke-Free Canada—www.smoke-free.ca)