Pension funds challenge expectations of sustainable investing

Pension fund managers who are slow to incorporate sustainable investment standards risk failing in their “fiduciary responsibility” to members of the pension plans they are tasked with managing.

Martin Valeris
Journalism

This is one of the views heard during the symposium on “Challenges and Prospects for Pension Plans in 2022” held Wednesday in Montreal by the Institute for Management of Private and Public Organizations (IGOPP).

“Take the impact of climate change. It becomes a systemic risk in the financial sector for asset management. As a result, pension fund managers who remain passive on this issue increase the risk of litigation or lawsuit for breach of their fiduciary liability,” said Bruno Caron, partner at the law firm. Miller Thompson is an expert member of the Canadian Climate Law Initiative, which brings together professionals and academics from the legal sector.

“The scale of the social and economic impacts of climate change is becoming increasingly measurable. We also see that it can affect the sustainability of pension plans with expected reductions in yield depending on whether key international goals of lower carbon emissions and the transition to a green economy are achieved. Or not,” Asia said. The Office of the Superintendent of Financial Institutions (OSFI) and Canada Pension Plan (CPP), which is the federal counterpart to the Quebec Pension Plan (QPP).

However, IGOPP speakers agreed that the challenge of integrating responsible investing principles and ESG (Environment, Society and Governance) standards remains complex for pension plan managers.

Especially as the entire finance and accounting community continues to develop more accurate and better harmonized accounting and regulatory standards at the international and national levels.

The creation of the international accounting standards body relating to sustainable development, i.e. ISSB, dates back only to last year. [le bureau des Amériques de l’lnternational Sustainability Standards Board sera établi à Montréal]. And in Canada, a project of the Canadian Sustainable Economy Accounting Standards Board has been in consultation since December 2021,” said Genevieve Beutchmin, Vice President of Professional Support at Ordre des CPA du Québec.

Preoccupation with ‘doing well’

Meanwhile, Asia Peleg, chief actuarial expert at OSFI, indicated that the federal regulator is about to release “draft guidelines” on sustainable investing for asset managers and pension plan managers.

“There is growing concern about ‘doing the right thing’ with regard to sustainable and responsible investing among pension fund managers, and not doing so in any way,” testified Serge Germain, Director of the University of Sherbrooke’s Pension Plan Committee. , which has accumulated 1.3 billion in assets among 6,500 employees – shareholder and retiree.

Retirement plan committees are often made up of volunteers with limited resources to properly incorporate sustainable investment principles and ESG criteria. In addition, their monitoring priorities are primarily oriented towards the long-term, while the integration of standards or ESG-type standards often fall under short-term goals or expectations, noted Pierre Bergeron, Senior Consultant and Partner at PBI Actuarial Consultants.