Fiduciary Duty Limits Response to Ukraine

While a long list of companies has left Russia in response to its invasion of Ukraine, pension funds can’t just leave because of ethics, “they have a fiduciary duty,” says Randy Bauslaugh, co-chair of McCarthy Tétrault’s national pensions, benefits, and executive compensation practice, and national pension funds group.

Speaking on ‘Avoid Doing Business with a War Criminal: The Divestment Dilemma’ with Bob Rae, ambassador and permanent representative of Canada to the United Nations, at ‘An Exclusive Evening With Renowned Ukrainian Artist Mykola Zhuravel’ presented in partnership by the Canadian Corporate Counsel Association (CCCA), the Canadian National Exhibition Association, and Benefits and Pensions Monitor, he said Canadian plans have a legislated purpose – to provide lifetime income in consideration for services rendered. From a financial perspective, unlike corporations, they cannot let ethical considerations be the basis of their decisions.

Uncertain or Volatile

However, financially, “this does not look like a friendly environment for pension funds. They are wary of anything that looks uncertain or volatile and can see the impact‒companies are leaving,” he said. From a pension fund perspective, Bauslaugh said this isn’t like the South African ethical investment issue over its apartheid policies from the ’80s. “This is more concrete. We can actually see what the economic effect is likely to be. It is very volatile with companies leaving left, right, and centre and you don’t want to be the last one holding the bag,” he said.

Another point is Canadian funds don’t have a lot invested in Russia. One of the biggest investors in Russia from a pension fund perspective is CalPERS, the California Public Employees Retirement System in the U.S. It has about $1 billion invested in Russia, but this is less than one per cent of all of its assets. “So pulling out at this point, which is what they’re pro- posing to do, makes a lot of sense because why do you want your money hanging around, knowing you could get nothing at the end?”

As well, the goal with a pension fund isn’t to “knock the lights out” and maximize the returns for pension members. It is to get a reasonable rate of return without undue risk of loss, having regard to all of the relevant circumstances.

Rae said Russia   launched   the   war of aggression against Ukraine with the “alleged” purpose of achieving what it calls “the denazification and demilitarization of Ukraine.” While it is described “as a special military operation, there is nothing special about it. It is a war and that war involves trying to bomb every city in Ukraine to terrorize the population and to undermine support for the government of Ukraine in its resistance to the invasion,” he said.

He believes popular opinion, “not necessarily what states and governments do,” but the popular opinion of the world has been galvanized by the resistance and courage of the Ukrainian people and by the nature of the Russian attack that he called “brutal,” breaking every rule of war and convention in the way war is to be conducted in terms of maximizing the protection of civilians.

‘Pariah State’

As a result, Russia is now a “pariah state” that has behaved in a way that is intolerable for the international community to accept and must be held accountable by doing “everything we can to ensure those who are responsible are held accountable. We’re now at a point where there is no going back. We’ve gone this far and need to recognize the fight against tyranny takes a long time and, once started, you can’t stop,” he said.

Zhuravel, and his partner, Daria Tishchenko-Zhuravel, witnessed firsthand the turmoil during the 2014 revolution and the ongoing political tensions that have reached a boiling point with Russia’s attack on Ukraine. He said this art is his weapon. “Those that live in Ukraine see and feel what Russia is. This was my response to show the true face of the evil and how we see the aggressor,” he said. He is calling on everyone not to invest economically or culturally in Russia. “Don’t spend any dollars on Russia,” he said.

He and Tishchenko-Zhuravel exhibited and worked as artists in residence at the CNE’s Withrow Common Gallery in Toronto, ON, during April and May.