Project 3
Assessing the Impact of Economically Targeted Investments by Pension Funds

Description

Economically targeted investments (ETIs) are innovative investments in smaller-scale enterprises that simultaneously fill a capital gap within the economy, deliver an appropriate risk-adjusted rate of return, and provide a collateral benefit to a broader community of stakeholders, be they employees, suppliers, customers, communities, or the environment. ETIs have a long history in the United States, but in Canada there are few examples of this type of investment of pension funds.

This study has two objectives: first, to examine the impact of existing ETIs, and second, to provide a model of how ETIs could operate in Canada. To realize the first objective, the financial return of several identified ETIs in Canada will be assessed over a ten-year time period from 1990 to 2000. In addition, the study will apply the social accounting framework in an effort to capture the collateral benefits generated by these ETIs - benefits that are not evident in standard financial metrics and that may apply to a broader group of stakeholders, including the broader community and government.

Given the small number of ETIs in Canada, ETI financial-return data from the U.S. will also be examined using the relatively large database on ETI projects collected over the last ten years through Hamilton Lane, one of the largest money managers of alternate investment. While the U.S. analysis will not constitute a comparative study, it will provide further detailed financial data from which to draw conclusions about the appropriateness of ETI investing by pension plans.

To satisfy the second objective (the creation of a model for ETIs that could be applied by labour trustees in Canada), a detailed examination will be undertaken of the California Initiative, an approach to ETIs currently underway at the California Public Employees Retirement System (CalPERS), one of the largest pension funds in the world. The California Initiative, providing investment in under-served capital markets in California, is a collabourative activity involving several pension plans, firms, communities, and the State government. This project will examine the applicability of this collabourative approach to ETI investing for Canadian jurisdictions and will develop a related policy document.

For further information, please contact Tessa Hebb: thebb@attglobal.net

Outputs

Papers

Hebb, Tessa, & Clark, Gordon L. Public Sector Pension Funds and Urban Revitalization. School of Geography and the Environment, University of Oxford, Mansfield Rd, Oxford, OX1 3TB, United Kingdom.

Manley, Kathryn, Hebb, Tessa & Jackson, Ted. (2005). Targeted Investing: Financial and Collateral Impacts. Paper presented at Pensions at Work Conference, Toronto, Canada.

Academic Presentations

Hebb, Tessa. (2005, April 8). Public Sector Pension Funds and Urban Revitalization. Association of American Geographers Annual Conference, Denver, Colorado.

Jackson, Ted, Hebb, Tessa, & Manley, Kathryn. (2005, October 14). Economically Targeted Investment: Financial and Collateral Impacts. Pensions at Work Conference, Toronto, Canada.

Jackson, Ted. (2004, October 17). The Financial and Collateral Impact of Economically Targeted Investments: What Impacts Matter Most?. Pensions at Work Conference, Winnipeg, Canada.

Bibliography

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