Killer Pensions

Pension funds force Canadians to invest in war industries
July 1, 2012

In the microcosm of our daily lives, many Canadians make politically-conscious choices about what to buy. Whether it’s drinking fair trade tea or coffee, using eco-friendly cleaning products, eating locally-produced food, avoiding clothes made in sweatshops, or refusing to buy war-toys for their kids, many Canadians are voting with their pocketbooks.

By making all these penny-wise decisions, we assume the pounds will take care of themselves and, in the process, we’ll help build a better world. Putting our money into businesses we favour, while avoiding those that contribute to environmental, health or social problems, we try to walk the walk and not just talk the talk.

And, over the years, while running on the occupational hamster wheel of earning and consuming, we contribute to our pension funds in the hope that one day we’ll enjoy a secure and peaceful retirement.

Few Canadians, however, realize that our pension plans are forcing us to funnel our hard-earned cash into the coffers of the world’s most destructive and polluting companies. Canadian pension portfolios read like a veritable “who’s who” of multinational corporations that are on the pariah lists of virtually every existing movement for social betterment.

So, if you are looking for the world’s most environmentally unfriendly firms, the nastiest labour-rights violators, the most destructive mining and oil companies, the leading makers of junk food or genetically-modified killer-seeds, Big Pharma, or the largest tobacco manufacturers, then look no farther than your own pension fund.

If these companies don’t kill you, or shatter your hopes for a care-free retirement, consider the effects of the world’s largest weapons manufacturers.

Investments in War

Research by the Coalition to Oppose the Arms Trade (COAT) has found that Canada’s largest pension funds are heavily invested in the world’s leading war industries.

Look, for instance, at the Canada Pension Plan (CPP), the mandatory government-created retirement fund that operates in nine provinces outside Quebec. In its 2011 report, the CPP Investment Board (CPPIB) listed $380 million worth of direct investments in 24 companies that were on top-100 list of the world’s largest war industries, as ranked by military revenue. The Board’s 2012 figures, which also include indirect investments through index securities, swaps and other derivatives, reveal that the CPP’s stake in the world’s top-100 war industries is actually much larger. Using the CPPIB’s new, more inclusive, accounting methods, the CPP portfolio actually amounts to about $675 million worth of stocks in 36 of the world’s top weapons manufacturers.*

Most of the CPPIB’s war-industry stocks are concentrated in the very highest ranks of the world’s top-100 arms producers. In March 2011, the CPP reported that it held $65 million worth of shares in eight of the world’s top 20 war industries. However, a year later, with the inclusion of all its indirect investments, the CPPIB’s report disclosed that it owned $414 million worth of shares in 16 of the top 20 weapons industries. As such, the CPPIB’s new accounting method doubles the reported number of top-20 war industries in the CPP portfolio and reveals that CPP holdings in these companies are about six-times larger than previously stated.

The Bigger the Better

The CPP now owns shares – directly or indirectly – in 36 of the world’s top-100 war industries. Interestingly, CPP holdings reveal a particular emphasis on war industries with the very highest of military revenues. Although the CPP owns shares in just over one-third of the top-100 list, the companies it has chosen for us to own had combined military revenues of US$288 billion, or almost 70% of the top-100’s combined total.

The same is true of other large Canadian pension funds. Although the five largest retirement plans own shares in 49 of the top-100 war industries, the military revenues of these companies total US$333 billion. That’s 80% of the combined military revenues for the entire top 100.

This bigger-the-better pattern is seen in the fact that the higher a war industry’s ranking, the more likely it will be snapped up by Canadian pension fund managers. For example, the combined portfolios of Canada’s “Big Five” pension funds include:

10 of the top 10 = 100%

18 of the top 20 = 90%

21 of the top 25 = 84%

24 of the top 30 = 80%

31 of the top 50 = 62%

49 of the top 100 = 49%

The Quebec Pension Fund, which until this year was larger than the CPP, is also heavily invested in war technology. In 2011, it owned shares worth $583 million in 23 companies on the top-100 list of war industries. Of that, $428 million (73%) was invested within the list’s top 20.

Ethics vs. Profits

With the top-100 war industries’ combined military revenues weighing in at US$419 billion in 2010, it’s understandable that Canada’s pension-fund managers are eager to invest. Although war is indescribably gruesome and gory, replete with mass murder, genocide, ethnic cleansing, and other international crimes, the business of war is somehow considered a highly-respectable enterprise, at least in some circles.

And, of course, it’s also highly lucrative. Since someone is always going to profit from war, pension-fund managers want Canadians to have our share of the profits.

Investors overseeing Canada’s pension plans are the cream of the crop, with outstanding careers in a slew of corporate boards, banks, and other financial institutions, as well as the business departments of prominent universities. They are a good representative sample of corporate administrators who belong in what the Occupy Movement has aptly labeled the “Global 1%,” that small portion of the world’s élite who own, control, and profit from exploiting the world’s human and natural resources.

Although the CPPIB, like other Canadian funds, pays fine-sounding lip service to social, environmental, and ethical issues, they make it abundantly clear that their mandate legally obliges them to focus on making as much profit as legally possible, regardless of what product or service that a corporation provides.

That, after all, is why they get paid the big bucks. CPPIB Executive VP Mark Wiseman, for example, made more than $3.1 million last year. This, we’re told by the Globe and Mail’s Report on Business (ROB), is peanuts compared to the “superior compensation the private sector can offer.”

Since it’s beyond the CPPIB executives’ pay grade to consider ethical issues, it’s up to grassroots members of the 99% to look beyond hand-over-fist profit margins and examine complex moral issues -- like whether war investments are an acceptable way to create peaceful retirement nest eggs.

To pension fund administrators, it’s irrelevant that the military industries they invest in are the top suppliers of major weapons that have wreaked such havoc around the world by aiding and abetting the U.S.-led wars against Iraq, Afghanistan, Libya, and Yugoslavia.

The companies that are fuelling our pensions sell everything from warships, attack helicopters, and bomber warplanes, to the missiles, rockets, and bombs they wield. They also churn out a bewildering array of deadly hardware, from ammunition, small arms and machine guns to tanks, troop carriers, and artillery howitzers. And, lest we forget, these companies profit from the production of scores of the high-tech systems for everything from military communications and weapons guidance to mass surveillance and enemy targeting systems.

All these tools of war, and much, much more, are required in the arsenals of our military and its allies in order ensure that the sharpened end of the Global 1%’s pointy stick can surgically strike the bull’s-eye of the world’s 99%

Ethical Weapons Only, Please

Besides screening out companies that don’t make enough profit, the only other firms on these pension funds’ exclusion lists are those deemed to be downright illegal. Or, more specifically, as the Globe’s appropriately-named ROB explains, “Since 2005 [the] CPP has been able to buy anything that is legal in Canada.”

Because Canada’s previous Liberal government led the propaganda charge against anti-personnel landmines (APLs) -- while it simultaneously increased the export of every other kind of weapons system under the Canadian sun -- the CPPIB can’t be seen to invest in any companies that stoop to manufacturing APLs.

But this doesn’t stop the CPPIB from happily pouring money into numerous companies that build the all-important weapons-delivery systems, like the warplanes and artillery guns that deliver illegal APLs to their targets. So, although the CPP brags about not investing in companies that make APLs, they do invest in prime contractors whose war machines are required to drop the bombs, launch the missiles, and fire the munitions that are loaded up with illegal APLs.

And, while that may all be okay, according to their view of the strict letter of the law, it’s debatable when considering the law’s spirit. But let’s not quibble over how many APLs can balance on the warhead of a pinpoint-precision missile built by Lockheed Martin. There are, after all, many other ways to kill people, and APLs are only one of them. Take, for instance, nuclear weapons and cluster bombs.

Nuclear Weapons

Some Canadians might be perturbed to learn that their pension funds are invested in companies linked to nuclear weapons production.

In March 2012, the International Campaign to Abolish Nuclear Weapons published "Don't Bank on the Bomb: A Global Report on the Financing of Nuclear Weapons Producers." It examines 20 companies "involved in the design, development, manufacture, modernization, and maintenance of nuclear weapons and their delivery vehicles."

In 2011, a dozen of these companies were on the combined portfolios of Canada’s “Big Five” pension funds. In total, they owned about $230 million worth of shares in these 12 companies. While nine of these are members of the top-100 club of major war industries, three others are not: Gencorp, Larsen & Toubro, and Rolls Royce.

As for CPP shares in the nuclear-weapons industries, the CPPIB had direct investments of $75 million in seven such companies in 2011. The CPPIB’s report for 2012 reveals that when the fund’s indirect holdings are added to the list, the CPP’s portfolio actually includes three times that much, namely $225 million worth of shares in 10 nuclear-weapons related companies.

Cluster Bombs

The international cluster munitions treaty prohibits the use, transfer, and stockpiling of these explosive weapons which scatter sub-munitions over wide areas. Because many of the "bomblets" don’t explode upon impact, they lie – like landmines -- awaiting the touch of a foot, a farmer’s plow, or a child’s hand to detonate them. Currently, 71 countries have ratified the ban, while another 40, including Canada, are signatories but have refused to ratify it. So, although these abhorrent landmine-like bombs are illegal in many countries, Canadian pension funds are still free to invest in and profit from their manufacture, export, sale, and use.

As a result, Canada’s “Big Five” pension funds hold about $310 million worth of shares in 16 cluster-bomb manufacturers. According to the 2011 report “Worldwide Investments in Cluster Munitions: A shared responsibility,” these companies are all on the exclusion lists of pension funds, banks, and other financial institutions in many other countries, but not in Canada.

F-35 Warplanes

The world’s most significant up-and-coming weapons-delivery system, the F-35 warplane, is on many Canadians’ radar due to various price-tag controversies. Its horrendous ability to kill vast numbers of people, however, is largely ignored in mainstream accounting. This so-called “Joint Strike Fighter,” which is also a stealth bomber, has Lockheed Martin as its prime contractor. Although Canada’s purchase of these weapons is still up in the air, one thing is certain: Canadian citizens are deeply complicit in the production of this weapons system through our largest retirement-savings plans.

COAT research has found that at least 52 of the companies building F-35s are in the portfolios of Canada’s “Big Five” pension funds. And 31 of these companies are on the top-100 war-industry list. In total, Canada’s “Big Five” own over $2.4 billion worth of shares in F-35 contractors. A significant portion of these shares is held by the CPP, which owned $491 million worth of shares in about 30 such contractors in 2011. The CPPIB’s 2012 figures, which include indirect investments, reveal that the CPP owns F-35 shares valued at $815 million. About $540 million of these 2012 investments are in 22 F-35 contractors gracing the top-100 war-industries list.


When Canada’s largest pension-fund managers look to invest our money, they use their professional training to find companies that will maximize profits. The way the system is set up, they aren’t supposed to even think about the devastating effects that these companies’ products have upon people or ecosystems. Such issues are considered mere “externalities” of no concern to such savvy investors.

But we, the pension-fund contributors and beneficiaries, shouldn’t be hampered by such constraints on our ability to consider social, ethical, or environmental concerns. Upon learning of our complicity in such an unjust and destructive system of investments, should we not take notice, and do something?

And it isn’t just the war industries. There is something seriously wrong when our pension funds also support the world’s biggest tobacco companies and fast-food chains as they mass market unhealthy lifestyles and profit from products that contribute to numerous deadly diseases. There is something wrong, too, when our pension plans invest in extractive industries like oil and mining companies that destroy ecosystems and undermine the whole planet’s health, and in companies that exploit and abuse sweat-shop workers and undermine labour rights and other human rights.

As for the war industries, when our pension fund managers examine the bottom lines in their annual reports, they screen out any oblique references to war or environmental damage and see only the large returns coming from these weapons makers, which they euphemistically call “defence” companies.

But what are these corporations “defending”? Peace, democracy, human rights? Hardly.

Call them what you will, the world’s biggest armaments dealers equip the war-fighters of the Global 1%. They are, if you will, the enforcers, the death squads, the hitmen, the paid assassination teams which “defend” the world’s corporate rulers.

When corporations and their governments want to defend their perceived right to profit from oil, minerals, or other natural resources, or when they want to exploit the Third World’s slave-like working conditions and repressive labour laws, they turn to the institutions of war that deploy all the tools of violence that are churned out daily at great profit by the world’s war industries.

And, ironically, we, the Global 99%, also rely for our retirement not only on investments in some of the world's biggest corporations, but increasingly in those that supply and arm the world’s military war machines.

(Richard Sanders is coordinator of the Coalition to Oppose the Arms Trade [COAT] and editor of its anti-war journal Press for Conversion. For more information, readers may visit the COAT website which has several data tables exposing even more detailed information about Canadian pension plan investments in the world’s largest war industries. CCPA members who may wish to support COAT and read its journal can do so by making a donation or buying a $25 annual subscription. The COAT address is 541 McLeod Street, Ottawa, ON K1R-5R2)


* In its 2012 report on CPP investments the CPPIB, began a new method of tabulating its investments. Since its establishment in the late 1990s, the CPPIB has published annual reports which document the fund’s investments in corporations. Until this year, the number of shares and the value of these shares as disclosed in the CPPIB’s reports reflected the fund’s direct stockholdings in those companies. This, however, is no longer the case. This year, for the first time, the figures released by the CPPIB include both direct and indirect investments. This was explained in the 2012 CPPIB report as follows:


“[W]e have revised our disclosure standards. This year and going forward, in addition to physical equity positions, the public equity disclosure lists include exposures obtained through index securities, swaps and other derivative instruments. The net long positions are reported to provide a more complete view of our economic equity exposure to individual company names.”

Although this change in the CPPIB’s accounting method makes its reporting more transparent in some ways, it also makes it impossible to directly compare 2011 and 2012 figures. And, unfortunately, because the CPPIB’s annual reports now combine the fund’s direct and indirect investments, the public no longer has any way of knowing how many shares the CPP directly owns in any of the companies within its portfolio. The CPPIB’s reports would be much more transparent if they were to release separate data on the fund’s direct and indirect corporate investments.

Knowing how many of the CPP’s shares in specific corporations are directly versus indirectly held is relevant to Canadians wishing to encourage the CPPIB to follow its own lax policies on responsible investing. As Brigid Barnett, the CPPIB’s Responsible Investing Manager, notes: “It was never intended that our Policy on Responsible Investing would deal with these passive, indirect exposures and the Policy has never been applied in this manner.”


Canada’s “Big Five” Pension Funds

Canada Pension Plan (CPP): With assets of $161 billion, the CPP represents 18 million contributors and beneficiaries in all provinces except Quebec.

Quebec Pension Plan (QPP): With $159 billion in assets, the QPP represents 25 depositors, primarily public and private pension and insurance funds.

Ontario Teachers' Pension Plan: With assets of $117 billion, the OTPP represents 180,000 elementary and secondary school teachers, and 120,000 pensioners.

Public Sector Pension Investments: With $58 billion in assets, the PSPI represents public service employees, including the military and RCMP.

Ontario Municipal Employees Retirement System: With assets of $55 billion, OMERS represents 947 employers and almost 420,000 members, retirees, and survivors.