Inside Queen's unpublished foreign investments

Diverging from new policy, pension plan's foreign investment portfolio remains unpublished

Controversial investments dot the Queen's Pension Plan's foreign portfolio. Through two third party investment firms—one based in Bermuda, the other in the United States—Queen's invests more than half a billion dollars internationally.

When Queen’s passed a new responsible investment policy in 2017, it promised to publish its complete holdings across all portfolios. In the following two years, it didn’t.

Through multiple Freedom of Information requests, The Journal has obtained some of these unpublished holdings from third-party fund managers. These investments—including holdings in an internationally sanctioned state-run Russian bank, an energy firm alleged to have knowingly misled the public on climate change, and the widely shunned tobacco industry—run the gambit.

The University’s management of Queen’s Pension Plan (QPP) and its foreign investment portfolio has failed to live up to the new policy’s transparency provision. It also remains invested in third-party pooled funds with controversial holdings, none of which are made readily available to the public.

Two third-party firms—State Street Global Advisors and Orbis Investments Management—are responsible for investing the Pension Plan’s foreign portfolio, managing more than half a billion dollars in assets.

The omission runs counter to the new policy, which directly mandates Queen’s maintain published lists of holdings information for the Pension Fund, Pooled Endowment Fund, and Pooled Investment Fund on its website.

In an interview, Brian O’Neill, Queen’s director of Investment Services, said adding the holdings of external managers to Queen’s published reports would be “an enormous administrative undertaking.” He later added it “doesn’t mean we can’t do it.” 


In an interview about the policy, Art Cockfield, a law professor at Queen’s with a background in international finance, told The Journal the University either “needs to comply with its new policy, or change the policy.”

Though Queen’s doesn’t select the individual investments it makes through pooled funds, it does select which fund managers it uses, and therefore, where that money ends up.

Over the last three decades, groups on campus have repeatedly challenged Queen’s to divest from controversial holdings. However, the new responsible investing policy is inclusionary, meaning it doesn’t allow for outright divestment from particular industries or companies.

Instead of divestment, the policy commits to take “environmental, social, and governance” factors into consideration, what’s referred to as “ESG” investing. Investors use the three factors to measure a company’s ethical impact and sustainability.

“We have no requirement for any of our investment managers to exclude a particular sector or sub-sector for moral or ethical reasons,” O’Neill said. “The policy specifies that engagement is considered best practice as opposed to divestment or negative screening.”

O’Neill said the new policy has a provision to allow community members to “make representations on ESG” to Queen’s Board of Trustees about particular companies or industries.

But because the Pension Plan’s foreign investments aren’t made readily available to the public, appealing investments in industries unique to those funds—like tobacco—wouldn’t be accessible to the Queen’s community.

Technically legal

The Orbis portfolio includes a $5.7 million stake in Kremlin-owned Sberbank of Russia. The bank was sanctioned by Canada in 2014, in response to the country’s annexation of Crimea. Sberbank also faces economic sanctions from Ukraine, Switzerland, Japan, the EU, and the United States.

As a result of increased international sanctions against Sberbank and Russia’s financial sector in early 2018, Queen’s investment in the bank had lost more than 40 per cent of its value by April of 2018.

According to the regulation dealing with Russia under Canada’s Special Economic Measures Act, no Canadian person is permitted to “finance new equity investments, including shares, securities or ownership interests” in entities scheduled under the Act. Sberbank has been scheduled since 2014.

Chris Horwood, an investment counsellor at Orbis, told The Journal the investment in Sberbank doesn’t violate the sanctions because Queen’s shares in the bank were issued before the sanctions were imposed in 2014. Since then, Sberbank hasn’t issued any new shares, meaning the sanctions “wouldn’t apply” to Queen’s investment, Horwood added.

On Jan. 9, 2017, Queen’s entered into a new limited partnership with Orbis, moving its $233 million investment into a different Orbis fund, which the University currently uses.

Although it did so without violating Canadian sanctions, when the limited partnership took affect and the funds were transferred, the University was trading in Sberbank shares while the bank remained widely sanctioned for providing “material support” to the Russian government.

Five months after Queen’s entered into a new limited partnership with Orbis, James Dorr, Law ’87 and managing director of Orbis, was appointed to sit on the Faculty of Law Dean’s Council.

In an email to The Journal, Horwood wrote Dorr “had no involvement” with the University’s switch to the new limited partnership. Dorr didn’t respond when reached for a comment.

 Orbis Investments Management headquarters in Hamilton, Burmuda.
(Credit: Google Street View)

“[The sanctions] do not prohibit trading in Sberbank shares that were issued prior to Sberbank’s addition to the sanctions list in 2014—regardless of whether that trading takes place in 2015, 2019 or thereafter,” according to Horwood.

In an interview, Cockfield said the “lousy” optics of Queen’s investment in Sberbank meant the University should prevent similar investments in the future.

“As a basic issue, we must comply with the law. If there’s a sanctioned foreign company, then we shouldn’t use technical arguments to get around international law,” Cockfield said.

‘Set the stage before you can go out and dance on it’

The QPP has multi-million dollar investments in five of the 20 companies found to be responsible for nearly 30 per cent of global industrial emissions since the mid-1800s, according to a 2014 study by climate reasercher Richard Heede.

One of those companies, Peabody Energy, is the world’s largest coal mining and exploration company. Through Orbis, the University has a nearly $4 million stake in Peabody, which isn’t published in public holdings reports.

In 2015, an investigation into Peabody by New York State’s attorney general found the company had misled investors and the public for years about the risks associated with climate change.

The Orbis portfolio also includes a similar-sized investment in Apache Energy, a crude oil exploration and production company. In 2013, an Apache pipeline leaked 9.5 million litres of toxic industrial wastewater into the northern Alberta wilderness.

The leak is considered one of the largest disasters of its kind in North America. The investment in Apache isn’t disclosed in public holdings reports either.

Approaching two years since its implementation, the new responsible investing policy could be up for its first fight.

Nick Lorraway, chair of Queen’s Backing Action on Climate Change, is working to mount a challenge to the policy.

“Through this policy, it is incredibly difficult to change the status quo. So we need to change the policy so we can,” Lorraway said. “Divestment [at Queen’s] was possible in the ’80s, it was possible in the early 2000s—why wouldn’t it be now?”

In pursuing divestment, Lorraway stressed the community’s need to understand Queen’s total financial exposure to fossil fuels. But because Queen’s doesn’t publish third-party holdings, that information isn’t currently accessible.


As for Lorraway, he remains committed to challenging the new responsible investing policy to allow for divestment of controversial holdings.

“You need to set the stage before you can go out and dance on it,” he said.

Though a Freedom of Information request from The Journal seeking the University’s total investments in fossil fuels was originally rejected, O’Neill said in an interview his office would commit to providing the data.

Tobacco, internationally

One of the most widely supported student-led divestment campaigns over the last decade has been against universities holding stake in tobacco companies.

Successful campaigns have pushed the University of Toronto, Harvard, Stanford, Johns Hopkins, and dozens of other campuses across North America to divest.

Though Queen’s doesn’t cite tobacco investments in any of its public holdings reports, through Orbis, it owns a $4 million stake in British American Tobacco and a similar-sized stake in Imperial Brands.

In 2012, the three largest tobacco companies in Canada—JTI-Macdonald Corp, Rothmans Benson & Hedges, and Imperial Tobacco Canada, a division of British American Tobacco—were slapped with the largest class action lawsuit in Canadian history.

Three years later, in 2015, a Quebec Superior Court Justice awarded smokers in the province $15 billion in damages.

Tobacco companies have also increasingly been excluded from institutional ESG indexes, meaning they’re considered too controversial to engage with.

Morgan Stanley Capital International (MSCI), which compiles investment indexes for institutional fund managers, wrote in a report last year nearly 40 per cent of the group’s ESG indexes exclude tobacco altogether.

Despite the shift away from investing in the industry, tobacco companies remain in Orbis’ portfolio.

The future of the pension plan

Over the next two years, the QPP is set to merge with two other Ontario university pension funds in an effort to address its looming solvency issues and poor performance.

The new jointly sponsored fund—the University Pension Plan (UPP)—will reshape the QPP’s governance, structure and investing policy.

“[The UPP] gives the employees and administrations of the Universities joint governance and a voice for all aspects of the plan, including the investment policy,” Paul Young, chair of the Queen’s University Faculty Association’s (QUFA) pension committee, wrote in an email to The Journal.

As the joint fund takes shape over the next year, it’s unclear exactly how the UPP’s new governing body will select third-party fund managers—making Orbis’ future with Queen’s uncertain.

In an email, Horwood wrote Orbis’ future with the Plan and the UPP “will ultimately be a decision made by those responsible for the new jointly-sponsored plan and I am sure Queen’s University will be part of that decision.”

Last spring, QUFA ratified an agreement to enter the new Plan, clearing a major hurdle. According to the UPP website, it aims to be operational by July 1, 2021. Other union groups from the three member institutions are slated to continue votes on the Plan this summer.

It’s currently unclear whether it plans to publish its third-party holdings.


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