The Canada Pension Plan reserve fund, which is predicted to swell beyond $160 billion within a decade, should be forced into ethical investments rather than supporting companies such as military suppliers and tobacco makers, states a new motion tabled in the Commons by the NDP.

In light of recent reforms to the program to ensure it can support the retiring baby boom generation, increased premiums have boosted the fund to its current $64.7-billion. NDP MP Pat Martin said the ballooning fund means its investments now have a significant impact on the economy and Canadians should have a debate over whether the Canada Pension Plan Investment Review Board needs guidelines regarding how it invests their money.

"There are lots of Canadians who refuse to invest in tobacco companies for all kinds of ethical reasons who will be really upset to learn there's nothing stopping the CPP from doing that," said Mr. Martin.

CPP funds have gradually been transferred to the board since it was created in 1999 with a mandate to invest in private equities.

The NDP MP points out that many Canadians pride themselves for not supporting the U.S.-led war in Iraq, yet the fund has about $600-million invested in U.S. military contractors, such as Lockheed Martin, Boeing, Raytheon and General Dynamics.

"It's absolutely shocking. I mean, part of the Chretien legacy was staying out of the war in Iraq. Well, we've been inadvertently participating in the war in Iraq all along through our Canada Pension Plan. It's disingenuous to Canadians."

The motion introduced by Mr. Martin last week calls for the Canada Pension Plan Investment Review Board to be "prohibited from investing in companies and enterprises that manufacture and trade in military arms and weapons, have records of poor environmental and labour practices or whose conduct and practices are contrary to Canadian values."

With the current session of Parliament expected to be cut short for an election, the motion is not expected to come to a vote in the near future, but NDP leader Jack Layton has said the idea will be part of his party's campaign platform.

Mr. Martin argues that if the CPP is going to be investing in the stock market, it should use "ethical funds" which have various screens to weed out companies such as military contractors, tobacco and alcohol producers and companies engaged in child labour.

"The ethical mutual funds have in some cases outperformed the general funds, but what we need to take into

account with our pension plan is that we could be achieving necessary secondary objectives that may be more difficult to measure," he said.

Mr. Martin's other investment suggestions include using the fund to build social housing and then collecting returns through mortgages, lending money to municipalities for green infrastructure like public transit and generating profit from the interest, or funding energy retrofits for government buildings and collecting the energy savings.

Mr. Martin said his motion was inspired by a recent study by the Coalition to Oppose the Arms Trade, which linked CPP investments to top U.S. military contractors.

Fred Ketchen, director of equity trading for Scotia McLeod, questioned Mr. Martin's proposal, pointing out that "ethical" mutual funds have traditionally underperformed traditional funds. Also, Mr. Ketchen said maximizing returns for Canada's seniors could be considered a social goal in itself.

"I know that it's tough for those people who may think that some of their Canada Pension Plan money is being invested in God knows what -- Rothmans or Molsons or Lockheed Martin or Boeing -- but I thought the Canada Pension Plan was supposed to represent all Canadians," he said.

Mr. Ketchen said ethical funds will likely always underperform traditional funds because they go against the main rule of investing, which is to have as diverse a portfolio as possible.

"I admire people who have that philosophy but if I was running a pension plan, I'd be looking for the best results that I could get from all sectors with diversification," he said. Mr. Ketchen added that Canadians should not be surprised that the CPP has lost money since entering the stock market, because it has been a down period for all investors.

CPP Investment Board spokesman John Cappelletti said federal legislation requires the board to focus only on maximizing returns and that changing the legislation would not be easy.

"It would take more than Parliament," he said, pointing out that the federal government would also have to secure the support of two-thirds of the nine participating provinces representing two-thirds of the population.