With the help of a rebounding world economy, SSMU has begun to generate more and more revenue through its investments in corporations.
SSMU’s investment portfolio – ranging from investments in banks like RBC and BMO, to telecommunications companies like Telus and Bell, and energy companies like the Power Corporation of Canada and the TransCanada Corporation – is managed by Ken Lester, CEO of Lester Asset Management and a professor in McGill’s Faculty of Management. The portfolio is regulated by SSMU’s Financial Ethics Review Committee (FERC).
“Our mission is [for investments] to generate $100,000 of revenue per year,” said Nick Drew, VP Finance and Operations.
Drew said that the value of an investment “usually fluctuates depending on the success of a business,” and therefore attributed the growth in SSMU’s investment revenue to the general recovery of the economy. Drew said the value of SSMU’s investments had dropped down to $1.5 million last year, but bounced back to around two million dollars over the summer.
“SSMU has investments in a number of different portfolios. It really is a diverse investment portfolio,” said President Zach Newburgh.
SSMU’s investment portfolio was started in 2008, from the $1.8 million the Society received after being bought out of their share in Haven Books, the former SSMU-operated off-campus bookstore.
“We thought it was the best way to put our money away,” said Drew. “It’s one of the lowest-risk portfolios [you can have].”
Drew said that SSMU rarely changes its investment portfolio, but that when there are changes, they are usually based on recommendations from Lester.
“Sometimes we’ll drop a company, and buy a new one. It’s generally based on what Ken [Lester] believes,” said Drew. “He usually contacts us and asks us for permission first.”
SSMU monitors the ethical standards of the companies they invest in through FERC. A SSMU by-law mandates the Society to “avoid” investing in companies with material interests in “socially harmful areas” like guns and tobacco, human rights abuses like child and sweatshop labour, and environmental harm like pollution and habitat destruction.
SSMU also prioritizes investment in companies with “a proven track record of” positive contributions to the environment, the promotion of sound employment practices, and high standards of corporate governance and transparency.
“We are in the process of currently investigating ethical investments – determining which companies we should be investing in and which we should not, and we are weeding out those which we shouldn’t, to ensure that our investments are at the standards set by our constitution and at the standard that is expected by the student body,” said Newburgh.
Any member of SSMU can ask FERC to investigate a company in which SSMU invests over $10,000. In past years, FERC had met on an ad hoc, case-by-case basis, but Drew is requiring them to meet at least once a year for 2010-11.
Drew identified environmentally harmful areas as “a very grey area” and “something FERC needs to look into.”
Last year, FERC investigated RBC’s involvement in tar sands corporations, but this year Drew concluded that the bank’s activities did not warrant divestment. Drew also said that the FERC report was “a bit biased” against RBC, as it only referenced one source, instead of a variety of sources that would corroborate the information.
According to an email from RBC’s Client Care Specialist Paula LeBlanc to Drew, RBC was “actively working toward support for a number of water-related projects in Northern Alberta, where the oil sands are located.”
“Banks do not control the pace and nature of energy sector growth, and we do not believe it is responsible or reasonable to eliminate potential funding for entire sectors of the economy. RBC subjects our lending and investment banking activities to a suitable level of social and environmental due diligence. … We check that our clients in the energy sector (and other sectors) are appropriately managing and reducing their impacts, and we support them in those efforts,” LeBlanc wrote.
“RBC is the worst bank we’re involved in. … [But] it’s not a company you want to divest [from],” said Drew. “We have to invest in banks.”