Voices are beginning to rise against the use of ESG (environment, society and governance) criteria by pension funds to which taxpayers must absolutely contribute. Among our neighbors to the south, several states have begun to question, even to attack this method of management.
Posted at 12:00 p.m.
The Press recently estimated that the Caisse de depot et placement du Québec (CDPQ) had, by liquidating certain oil assets too early, missed the opportunity to make hundreds of millions of dollars1. This story, and the entire Celsius Network saga earlier this summer, has led some players to ask several questions about the management of the Caisse’s finances, and about certain political decisions concerning its investments. While the Caisse announced this week that it will have a negative return of 7.9% on its investments in 2022, it is legitimate to question the impact of its decisions on the retirement of Quebecers.
Although it has historically had acceptable returns, the CDPQ does not have the legitimacy to make moral decisions regarding the management of its assets on behalf of all Quebecers.
Whether it is investing or divesting in fossil fuels or deciding whether or not to invest in companies that meet ESG criteria, decisions are made by the board of directors composed of members who have their own personal values and interests. and who, although appointed by the government, are legally independent of it and not accountable to the people.
The cause of the problem: the Quebec Pension Plan
The decisions made by the CDPQ would not be problematic if they did not affect all Quebecers. However, the contribution to the Quebec Pension Plan (QPP) is compulsory for all Quebec workers. All people who have ever had a job in the province therefore have funds under its management. The existence of the QPP is justified by the fact that all Quebecers presumably have an interest in paying a contribution amount each week, in exchange for a pension amount that will be increased upon retirement.
However, this is not necessarily the case. Apart from the various moral considerations, there are also several complications of a financial and economic nature.
This way of doing things does not maximize everyone’s well-being. Some Quebecers may have personal situations that this uniform solution disadvantages. The way of doing things was perhaps appropriate when the QPP was founded in 1966, but in 2022, in a world with the Internet, streaming information and online brokerage platforms, the relevance of such an obligation is becoming less and less appropriate.
Some may need the funds to pay debts or start a business, others may see more profitable investment opportunities than those identified by the Caisse. Some, with a very good understanding of finance, may think they can get a better return by taking care of their own money. The reason, in the end, is not very important.
As long as the person withdrawing from membership understands that they could be penalized when they retire, it is not up to the Caisse de depot to dictate to someone how to prepare for retirement. We have no right to oppose free and informed choices.
All of these people end up with less well-being because of the current coercive structure of the Quebec Pension Plan. The solution to resolve this inefficiency, without harming the operation of the QPP and the CDPQ for the majority who end up winning, is simple: allow Quebecers to disaffiliate from the QPP.
Let Quebecers be in control of their finances
By giving Quebecers the free choice to participate or not in the Quebec Pension Plan, all these inefficiencies are resolved. Quebecers who so wish would be free to dispose of their money as they see fit, at their own risk and peril.
Quebecers who do not wish to support a particular industry or company could thus more easily disengage and save for their retirement in funds that correspond to their values.
The Caisse’s moral decisions, and their negative impact on performance, should not be imposed on Quebecers. Let them make their own choices.