A new requirement coming into effect for Ontario pension plans to explain how they are incorporating environmental, social and governance (ESG) factors into their investment decisions reflects a growing expectation that pension plan managers consider more than financial outcomes for their beneficiaries, said Ed Waitzer, a partner with Stikeman Elliott LLP in Toronto at the 2015 Institutional Investment Forum hosted by Jarislowsky Fraser Global Investment Management in Toronto on Thursday.

In late 2014, the Ontario government amended the Ontario Pensions Benefits Act. In the updated law, pension plans must state whether ESG factors are incorporated into their statement of investment principles and policy principles and if so, how, starting on Jan. 1, 2016.

Furthermore, the amendment implies that if a plan member has not included ESG factors in its statement of investment principles, it must be prepared to explain why, according to Waitzer, who’s the Jarislowsky Dimma Mooney chair in corporate governance: “What’s interesting is this [amendment] didn’t attract a lot of debate.”

Indeed, a recent survey by Ernst & Young LLP suggests that the financial services sector is starting to value companies that consider more than just numbers. For example, 80% of institutional investors from across the globe surveyed by E&Y consider mandatory board oversight of non-financial reporting to be “essential” or “important,” compared with the 36% who said the same in 2014.

Governments are also paying more attention to ESG matters. For example, Mark Carney, governor of the Bank of England governor, recently hosted a one-day meeting on the theme of “building real markets for good people.” The event was so popular that it was simultaneously broadcast to a number of different cities, said Waitzer.

“This is the Bank of England,” he said, “joined by a number of others at the [European] Central Bank viewing their role as one of taking leadership and reasserting the social utility of financial services and markets.”

The courts and securities regulators are also interested in whether financial markets participants are playing fair. For example, the New York State’s attorney general investigated Thomson Reuters Corp. in 2013 because the company was pre-selling research to high-frequency traders (HFT). Thomson Reuters has since stopped providing HFTs with early access to the research.

“Since the financial crisis regulators and courts have demonstrated a willingness, almost a zeal, to sanction conduct that is technically legal but is perceived as unfair because it doesn’t meet the test of reasonable expectation,” said Waitzer.