CPP Fund Bans Investments Tied to Abuses

Summary#

This bill would change how the Canada Pension Plan Investment Board (CPPIB) invests. It tells the CPPIB to set policies that ban making or holding investments in entities linked to certain human rights, labour, environmental, weapons, or corruption issues (Bill s.1, new s.35(2)). It would take effect on a date set by the Governor in Council, as provided under the Canada Pension Plan (Coming-into-Force clause).

• Bans CPPIB investments in any entity if there are reasons to believe it has committed human, labour, or environmental rights violations (new s.35(2)(a)).
• Bans investments in entities that produce arms or munitions prohibited under international law (new s.35(2)(b)).
• Bans investments in entities that ordered, controlled, or directed acts of corruption under named Canadian laws (new s.35(2)(c)).
• Applies to both new and existing holdings; the CPPIB could not “make or hold” such investments (new s.35(2)).
• Requires the CPPIB board to embed these bans in its investment policies, standards, and procedures (new s.35(2)).
• Effective date to be set by order of the Governor in Council; not automatic on Royal Assent (Coming-into-Force clause).

What it means for you#

• Households (CPP contributors and beneficiaries)

  • No change to CPP contribution rates or benefit rules in the bill text. The change is limited to investment policies (Bill s.1).
  • The CPPIB would screen and may divest from entities that meet the ban criteria once the bill takes effect (new s.35(2)).

• Workers and retirees with CPP savings

  • Your CPP payments and eligibility are not changed by this bill (Bill s.1).
  • Investment holdings in your CPP fund may shift as the CPPIB complies with the bans (new s.35(2)).

• Businesses and issuers seeking CPPIB capital

  • You may be ineligible for CPPIB investment if there are reasons to believe your entity has committed human, labour, or environmental rights violations; produces weapons banned under international law; or directed acts of corruption under the Criminal Code or the Corruption of Foreign Public Officials Act (new s.35(2)(a)-(c)).
  • Existing investee entities could face review and potential divestment by the CPPIB (new s.35(2)).

• Investment funds and managers serving the CPPIB

  • Mandates and side letters may need updates to ensure portfolios exclude entities covered by the bans. The CPPIB could avoid or redeem from pooled funds that hold excluded entities (new s.35(2)).
  • Expect increased due diligence requests to assess exposure to banned entities (new s.35(2)).

• Timing

  • The bill would come into force on a date set by the Governor in Council, per subsection 114(4) of the Canada Pension Plan (Coming-into-Force clause). The date is not stated.

Expenses#

Estimated net cost: Data unavailable.

• No explicit appropriation or spending authorization appears in the bill text (Bill s.1).
• The bill requires policy changes and possibly portfolio changes at the CPPIB; any administrative or transaction costs are not specified. Data unavailable.
• No publicly available fiscal note identified. Data unavailable.

Proponents' View#

• Strengthens responsible investing by making exclusions mandatory for serious human, labour, and environmental rights violations, rather than optional policy (new s.35(2)(a)).
• Prevents public pension money from supporting producers of weapons that are prohibited under international law (new s.35(2)(b)).
• Aligns CPP investments with anti-corruption laws by excluding entities that directed acts of corruption under specified statutes (new s.35(2)(c)).
• Reduces reputational and legal risk to the CPP by avoiding holdings in entities tied to violations or corruption, through a clear “no investment may be made or held” standard (new s.35(2)).
• Applies across all asset classes because it covers any “investment,” helping ensure consistent compliance (new s.35(2)).

Opponents' View#

• Investment universe could narrow, which may affect diversification and returns; the bill provides no impact analysis. Data unavailable.
• Key terms are undefined, including “reasons to believe,” “entity,” and “human, labour or environmental rights violations,” creating uncertainty and compliance risk (new s.35(2)).
• No time limit is stated on past conduct; even old violations might force divestment, which could trigger transaction costs. Data unavailable (new s.35(2)).
• Implementation may be complex for passive or pooled investments that hold many issuers; the CPPIB might need to exit or renegotiate such vehicles (new s.35(2)).
• Enforcement scope across supply chains, subsidiaries, or minority holdings is unclear, which could lead to inconsistent application or disputes (new s.35(2)).