Canada lacks measures to prevent public pension funds from investing in companies in the People’s Republic of Chinese (PRC) allegedly involved in human rights violations, stated a recent report from a House of Commons committee that is calling for the implementation of protective measures.
Major institutional investors overseeing public pension funds, like the Canada Pension Plan Investment Board (CPPIB) and the Public Service Pension Plan Investment Board, operate independently from the government based on their own investment strategies. The CACN noted that in this capacity, these pension institutions may conduct due diligence in line with their respective investment policies before making decisions. While this may involve consideration for human rights matters, there is currently no mandatory requirement to do so.
The CACN report, titled “The Exposure of Canadian Investment Funds to Human Rights Violations in the People’s Republic of China,” stems from a series of five committee meetings conducted between Nov. 29, 2022, and June 19, 2023. The focus of these sessions was to delve into the exposure of Canadian investment funds to equities and bonds from China associated with human rights violations.
Recommendations
To counter the absence of safeguards in pension fund investments, the CACN proposed several policy recommendations. Among them is the suggestion that Ottawa explore potentially creating an official list of companies considered unsuitable for investment.The committee also urged the federal government to collaborate with provinces in creating a list of Chinese companies that would be off-limits for Canadian public pension funds to invest in, based on their perceived risks to national security, corruption, or severe human rights violations. Canada should also work with the United States and other allies to develop common approaches to human rights implications of public pension plan fund investments, it said.
Additionally, the CACN said the government should, by 2024, introduce legislation to enhance enforcement measures, with the goal of eliminating forced labor from Canadian supply chains and fortifying the prohibition on importing goods produced by forced labor.
The CACN also suggests that the government introduce legislation requiring federally regulated public pension plans to conduct and report enhanced due diligence for all investments in authoritarian states. This legislation should include penalties for non-compliance, it said.