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October 2, 2019


DB Plans Face Funding Contributions

Defined benefit pension plans would have to increase their current service funding contributions by close to 20 per cent based on lower expectations of future long-term returns on the asset mix underlying the ‘Mercer Pension Health Index’ in 2019. The solvency position of Canadian DB pension plans dropped only slightly in the third quarter of 2019. The index, which represents the solvency ratio of a hypothetical plan, decreased to 105 per cent on September 30 down from 106 per cent at the end of the second quarter and surprisingly up from 102 per cent at the beginning of the year, despite all-time low long-term interest rates during the quarter. The median solvency ratio of the pension plans of Mercer clients was at 94 per cent, down from 95 per cent on June 30, and up from 93 per cent at the end of 2018. Positive equity market performance throughout 2019 and a September rebound in long-term rates prevented a potential 14 per cent decline in the index at the end of August driven by the lowest yields on long-term bonds in 60+ years. A remarkable drop of 74 basis points in long-term Government of Canada bond yields at the end of August drove a 15 per cent increase in liabilities in 2019. “Most DB pension plans in Canada weathered the storm over the summer and some came out stronger, but there are worrisome signs on the horizon,” says Andrew Whale, a principal in Mercer Canada’s financial strategy group. The ultra-low level of interest rates and uncertainty in the equity markets have significantly lowered the expectations for future long-term asset returns in a typical DB pension plan’s portfolio. This perfect storm will likely result in higher cash and financial reporting costs for many plan sponsors in the coming years. In addition to any existing deficit funding, a DB pension plan with a typical asset mix could face an increase in its current service funding contributions by 15 per cent to 20 per cent based on recent decreases in the expected rates of return.

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ACPM Questions OSFI Benefit Reduction

The Association of Canadian Pension Management (ACPM) says a proposal for reducing benefits in defined benefit pension plans in the Office of the Superintendent of Financial Institutions draft ‘Instruction Guide’ needs clarification of “would” and “could.” These have distinct legal meanings, it says. Specifically, “would” has been interpreted by courts and others to require that there be a reasonable basis to believe that something will happen; whereas “could” merely implies a possibility that something may happen. As well, s. 10.1(2)(a) protects from reduction “pensions benefits accrued before the date of the amendment.” These words imply that the effect of an amendment be ascertainable on the date of the amendment. In the context of an amendment that deals with a pension benefit that is conditional or contingent on future unknowable factors, like CPI, an amendment that does not reduce a member’s pension benefit credit and therefore is reasonably likely to provide an equivalent pension benefit to the member over the long term following the amendment should not be considered a reducing amendment. It recognizes that a reducing amendment may be used to correct instances of plan underfunding. However, it says OSFI should not always require evidence of financial need in order to use its authority to allow a reducing amendment. Instead, it encourages OSFI to consider the wider context within which the amendment is occurring. For example, as a means of encouraging annuity purchases, OSFI could provide a framework for reducing amendments that occur in the context of an annuity purchase where the amendment addresses a benefit design that is expensive or impossible to replicate through an annuity purchase.

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CDI Allocation Doubles

The average allocation to cashflow driven investment (CDI) eligible assets, such as infrastructure and private and multi-asset credit, has more than doubled since the beginning of 2018, says an analysis based on data drawn from RiskFirst’s risk management platform PFaroe. Over the recent years, an increasing number of asset managers and consultants in the defined benefit pension space have been advising clients on the merits of incorporating CDI strategies in their broader portfolio allocation strategy. CDI matches the timing of the underlying cash inflows on the asset side with the cash outflows on the liability side, in an attempt to provide better returns, on a risk-adjusted basis, than the traditional portfolio asset combinations of equities and bonds. The analysis could suggest that investors and consultants are anticipating a recession in the next 12 to 24 months, making the case for steady cashflow and fixed income assets stronger to ensure a well-funded DB pension plan. “While no one knows for a fact when the next recession will kick in, our data shows that one thing is certain: CDI is not just an idea, but a strategy whose time has come. As CDI becomes more important, ready access to asset and liability data and being aware of both broader asset and liability trends is becoming increasingly integral to both the asset owner and the growing asset manager client base,” says Matthew Seymour, CEO at RiskFirst.

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Mental Health Centre Refreshes

The Great-West Life Centre for Mental Health in the Workplace is now Workplace Strategies for Mental Health. “For over a decade, Canadians have known our organization as a leader and catalyst focused on enhancing workplace mental health and well-being for everyone at no cost,” says Mary Ann Baynton, director of strategy and collaboration at Workplace Strategies for Mental Health. “Now is the perfect time to refresh our look and feel as it coincides with Healthy Workplace Month as well as the fact that Canada Life, which funds all our free resources, rebranded earlier this year. Our new brand better aligns with our website address, making it easier to find resources to make positive change.” The refreshed brand identity will be rolled out to existing online and social media platforms. It will also be incorporated into new communication materials and tools as they are developed. The next part of the organization’s journey includes offering a simplified website experience, slated to launch in fall 2020.

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Slavery Initiative Sets Out Actions

An international initiative has released a report recommending actions for the financial sector to mobilize against modern slavery and human trafficking. The Financial Sector Commission on Modern Slavery and Human Trafficking ‒ known as the Liechtenstein Initiative ‒ is a public-private partnership between the government of Liechtenstein, the Australian Department of Foreign Affairs and Trade, and the Center for Policy Research at United Nations University, a UN think tank. Its report which includes 30 separate actions for the financial sector ‒ including investors, insurers, regulators, and other sector representatives ‒ calls for investment in innovation for prevention, provision, and enablement of effective remedies for modern slavery and human trafficking; enforcement of laws; creative use of leverage to mitigate and address modern slavery and human trafficking risks; and knowledge of those risks. It also includes an implementation toolkit to assist financial institutions in putting those themes into action.

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SSQ Covers Genetic Tests

SSQ Insurance now offers coverage of pharmacogenetic tests as an option in group insurance. These tests help analyze how a person’s DNA will react to a prescription drug, making it easier for attending physicians to identify the most appropriate drug for each patient. The coverage aims to make life easier for its insured customers by helping them access optimal treatment and for its policyholders by making it possible to better control the cost of drugs. “Since the treatment of disease is evolving toward personalized solutions for individual patients, pharmacogenetics is quickly becoming a must,” says Éric Trudel, senior vice-president of strategy and product management, at SSQ Insurance. At the policyholder’s request, and in accordance with a reimbursement maximum they will choose, the new clause may be added to their health insurance coverage. To be eligible, pharmacogenetic testing must be prescribed by a physician and carried out in a duly authorized laboratory in Canada. The results of genetic tests are used to identify the most appropriate drugs for the treatment of such conditions as attention deficit disorder (ADD), psychological illnesses, and chronic diseases like hypertension and chronic pain.

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‘ESG Indicators’ Foster Engagement

Preqin’s ‘ESG Indicators’ intends to foster greater transparency and engagement on environmental, social, and governance (ESG) factors. Its establishes a common benchmark for measuring ESG factors across funds over time and enables investors and fund managers to analyze their portfolios against their ESG and financial performance targets. The indicators leverage widely accepted frameworks, including the Sustainability Accounting Standards Board’s (SASB) factors and the UN Sustainable Development Goals Index. It applies those frameworks to its proprietary industry taxonomy, private capital deals data, and fund-level performance database. This allows it to generate baseline ESG scores for a portfolio, based on the industries and geographies of the underlying assets.

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CPPIB Develops San Jose Property

Boston Properties, Inc., a publicly traded developer, owner, and manager of Class A office properties in the United States, and the Canada Pension Plan Investment Board (CPPIB) have formed a joint venture to develop Platform 16, a 1.1-million-square-foot Class A urban office campus near Diridon Station in downtown San Jose, CA. CPPIB will have a 45 per cent ownership interest in the joint venture. Boston Properties will retain the remaining 55 per cent ownership stake and provide customary development, property management, and leasing services.

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Bugeja Has New Role

Micheal Bugeja (CEBS) is senior benefits analyst at People Corporation. He joined the firm in 2016 as a benefits analyst from Great-West Life where he was a financial analyst.

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Ontario Looks Toward 2020

CPBI Ontario will be ‘Looking Towards 2020: The Challenges for a New Decade.’ Thought leaders including Ali Ghiassi, vice-president of industry affairs and government relations at Canada Life; Karen Millard, a senior director at Willis Towers Watson; Fabrice Morin, executive vice-president, Canadian operations, at the Great-West Life Assurance Company, London Life Insurance Company, and the Canada Life Assurance Company; and Mike Sullivan, adjunct professor at the University of Toronto; will review and discuss changes going into 2020. It takes place November 14 in Toronto, ON. For information, visit Towards 2020

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October 1, 2019


Base Salaries Expected To Rise

Employers in Canada are expecting base salaries to rise by an average of 2.7 per cent in 2020, says Morneau Shepell’s 2020 ‘Salary Projection Survey.’ This is an increase from the actual 2.6 per cent average increase in 2019. The forecast includes increases in salary structure, length of service, cost of living and merit pay, and excludes salary freezes and promotional adjustments. The expected 2.7 per cent increase is higher than the projected rate of inflation for the year. In July, the Bank of Canada noted that consumer price index inflation is expected to rise to about two per cent by the end of 2020. When looking at economic growth, the Bank of Canada projects the Canadian economy will grow by just 1.4 per cent in 2019. “While the Canadian economy is projected to see slowed growth in the coming year, we’re expecting to see continued wage increases as a result of the tightening labour market,” says Anand Parsan, vice-president, compensation consulting practice. “Employers are optimistic about the anticipated growth in 2020. We have seen a steady rise in projected base salary increases over the past few years, with actual numbers equal to or above our forecast since 2017.”

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Solvency Positions Decline

As bond yields declined and asset returns stalled in response to global economic uncertainty, the solvency positions of Canadian defined benefit pension plans declined slightly in the third quarter, says Aon’s latest median solvency ratio survey. While overall solvency remains high, the decline in yields and murky economic picture should be seen as a “warning sign” for pension plan sponsors, it says. “Bond yields continued to fall in the third quarter and the risk that equity returns are going to follow them is become more and more clear,” says Erwan Pirou, chief investment officer for Aon’s delegated investment solutions in Canada. “Economic uncertainty seems to have set in to financial markets, which means we don’t foresee a sustainable rebound in yields anytime soon. That’s increasing plan liabilities at the same time that the return horizon for equities is looking murky.” While plan sponsors are increasingly turning to alternative investments in search of yield and diversification, they need to consider every means to take risk off the table, including hedging strategies.

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UTAM Supports CIA Statement

UTAM (University of Toronto Asset Management) wholeheartedly lends its support to ‘Time to Act: Facing the Risks of a Changing Climate,’ a public statement released by the Canadian Institute of Actuaries (CIA). The statement calls on governments, business leaders, and investors to take immediate action towards meeting the Paris Agreement target of limiting increases in global average temperature to well below 2°C above pre-industrial levels. To help manage the financial impacts associated with climate risks, Canada’s actuaries call on the federal government to oversee the development of national data collection and closure related to the financial impacts of climate-related events such as floods, windstorms, and wildfires; all levels of government to require all entities to implement financial disclosure of climate-related risks and opportunities under the Task Force on Climate-related Financial Disclosures (TCFD) by 2021 and for corporate entities to adopt the TCFD framework voluntarily as soon as possible; and investors and business leaders to include environmental, social ,and governance (ESG) factors in their decision-making. Daren Smith, UTAM’s president and CIO, says “Canada’s actuaries have a unique perspective on climate risks and impacts and their insights can meaningfully contribute to the evaluation of proposed climate change solutions.”

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Liquid Alt Assets Grow

CAASA (Canadian Association of Alternative Strategies & Assets) data shows at least $5.1 billion in liquid alts at present. How much of that is seeding by mutual funds (which is allowed in the new rules) and how much is real/investor buying will be more obvious in time, it says, but it’s a sizeable amount compared to the estimated $25 billion that is in Canadian onshore, offering memorandum hedge funds. A number of traditional mutual funds, as well as larger and smaller hedge fund managers will be issuing new product over the next few months.

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Mental Health Experts Gather

The Rotman School of Management is bringing together hundreds of senior business leaders, mental health advocates, medical professionals, students, academics, and industry representatives to raise awareness and discuss the impact of mental health on the Canadian economy. The conference will highlight the resources and supports currently available, focus on solutions that are working at home and abroad, identify challenges and opportunities for improvements, and find new ways to design innovative policies and workplace best practices in order to manage the growing burden of mental health. It takes place November 26 in Toronto, ON. For information, visit Mental Health

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September 30, 2019


Annuities Legislation Limits Access

The Pension Investment Association of Canada (PIAC) strongly supports the introduction of variable payment life annuities (VPLAs) and advanced life deferred annuities (ALDAs) into the realm of registered accounts, saying it believes they have the potential to meaningfully improve the options available for managing longevity risk for Canadians who save for retirement outside of traditional defined benefit plans. However, it says, in comments to the federal ministry of finance on its draft budget legislation in this area, its main concern from a policy perspective is that the budget legislation appears narrowly drafted to limit VPLA access to a registered pension plan context. PIAC has a broad membership of large and small plans so while the in-plan solution will be of potential interest to its members with large defined contribution pension plans, it is unlikely companies sponsoring smaller DC plans will be able to establish and administer an in-plan VPLA. However, but they may be interested in establishing programs with third-party providers who can serve as aggregators of smaller pools. This model is more likely to succeed if there is a broader scope of permitted aggregation structures beyond the PRPP, which is the only other structure permitted outside of a registered pension plan based on the draft legislation. It says the PRPP model has failed to gain meaningful traction in the Canadian market, notwithstanding the potential merits of the model, and is not permitted in all Canadian jurisdictions. As drafted, it believes the legislation will preclude meaningful take-up by companies sponsoring smaller DC plans and make it very difficult for third party providers to design scalable products for individuals saving through RRSPs.

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Political Turmoil Concerns Investors

Global institutional investors are increasingly concerned over how ongoing political turmoil will affect portfolio performance over the next 12 months, says a study by Schroders. It found over half of investors believe that events such as Brexit and the ongoing trade war between the US and China will have a negative impact on their investments. In 2017, just over 30 per cent of investors expressed this as the main concern for portfolio performance, while last year 44 per cent said they feared the impact of geopolitical chaos. The global economic slowdown also came high on the list of major worries ‒ with 32 per cent of investors saying it was likely to affect their portfolio performance compared to 27 per cent a year ago, the study found. The survey also found that investors were less concerned over how higher interest rates would affect portfolio performance with 55 per cent citing it was an issue, compared to 64 per cent last year. Other factors such as monetary policy tapering, regulation, and the risk of cyber-attacks have also fallen in importance over the last 12 months.

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Managers Realizing Role Of Big Data

Faced with fee compression, rising costs, compliance burdens, and shifting investor demographics, Canadian asset managers are quickly coming to realize the role big data and advanced analytics can play in their operations, says a KPMG in Canada report. Nearly half (48 per cent) now view data and analytics (D&A) as the industry’s most significant opportunity to understand their clients and retain business, up 18 per cent from last year. “In an era of digital revolutions, crowded markets, and regulation creep, now is not the time for complacency,” says James Loewen, partner and national sector lead for asset management at KPMG in Canada. “If you’re a retail fund manager, it’s getting harder to compete, so you have to innovate either your product lineup or technology to be able to survive.” ‘It’s decision time’ says the asset management industry in Canada has been slow to adopt big data despite the real and actionable insights other industries are already using to their competitive advantage, the report says. Traditionally, D&A investments were focused on achieving back office cost and process efficiencies. Today, as digital transformation blurs the lines between the front office and the back office, companies are leveraging data and advanced analytics to mine client data, unlock market insights, and design informed investment strategies.

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Lack Of Opportunities Hurts RI

Almost half (46 per cent) of European professional investors say a lack of responsible investing (RI) opportunities will prevent the sector from becoming mainstream, says a survey by NN Investment Partners (NNIP). It also found that 44 per cent of respondents felt there was a lack of research and information surrounding RI, while half believed that risk within RI was more difficult to manage than within traditional investments. It shows that asset managers needed to increase their efforts to improve the visibility of their responsible investing approach and expand the range of RI opportunities available to investors. Managers also have to improve transparency when reporting environmental, social, and governance (ESG) criteria.

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Biosimilar Switch Policy Missing Critical Inputs

British Columbia Pharmacare’s non-medical switch policy for biosimilar drugs is missing critical inputs from the patient and healthcare practitioner communities, And considering that it did not consult patient organizations, this is not surprising, says Crohn’s and Colitis Canada. The province will switch patients using certain biologic drugs Remicade to biosimilar versions within a six-month timeframe. This will affect approximately 1,700 British Columbians (including children), though this number does not include those in B.C. currently under compassionate use funded by the manufacturer who will also be affected. “The gap between this policy and patients’ needs and concerns in particular is massive,” says Mina Mawani, president and CEO of Crohn’s and Colitis Canada. Its position is that a non-medical switch is not in the best interest of patients. This should be a decision made by a physician and patient together. Crohn’s and Colitis Canada questions the B.C. decision when other viable options are available that do not affect patients currently well-managed on biologic treatment. “Cost savings do not have to be on the backs of vulnerable patients,” says Mawani. “Some payers have found a way to both promote the uptake of biosimilars and also access savings from updated pricing of biologic treatment. The precedent has been set: this is patient-centred care – a non-medical switch is not necessary for the purpose of sustainability of healthcare in Canada.”

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Schwartz Featured At Dinner

The CFA Society Toronto’s ‘2019 Investment Dinner’ will feature a fireside chat with Gerry Schwartz, chairman, founder, and chief executive officer of Onex Corporation. It takes place November 7 in Toronto, ON. For information, visit Fireside Chat

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September 27, 2019


OCIO Option In Challenging Times

Uncharted economic times, mounting regulatory pressures, a heightened need for innovative investments, and shifting market dynamics have made the role of the plan sponsor more complex. One option to navigate these challenges is to use an outsourced chief investment officer (OCIO), says Eric Menzer, senior portfolio manager and global head of pension and fiduciary solutions with Manulife Investment Management. In the presentation, ‘Navigating complexity with an Outsourced Chief Investment Officer (OCIO),’ at the Benefits and Pensions Monitor Meetings & Events ‘Pension Risk Strategies’ session, he said outsourcing the investment aspect of the plan “doesn’t mean plan sponsors have to give up full control, they still have fiduciary responsibilities.” Fortunately, OCIOs offer a lot of solutions and capabilities. Menzer offered some advice as to what sponsors should look at when considering this option. Sponsors should look at whether the provider use active or passive strategies and the track record as well as the size and breadth of the asset allocation team. Other areas to consider include expertise in liability driven investing (LDI), alternative investments, and knowledge of integrated retirement platforms which would include cost controls, administrative efficiencies, and investment solutions. Each area has challenges and opportunities and the OCIO provider should focus on an integrated platform, have global asset allocation expertise, and fully understand how to best integrate and LDI strategy utilizing both public and private assets. Ultimately, said Menzer, “an OCIO manager should add value to the plan objectives. Our message is to look for a holistic platform.”

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Pension Policymakers Need To Catch Up

Pension policymakers need to play catch-up in Canada’s changing pension landscape, says a report from the C.D. Howe Institute. ‘The Quest for Sustainability in Contingent Pension Plans’ says that at the same time contingent pension plans ‒ plans where the pension benefit is linked to the plan’s financial health ‒ are becoming more prevalent, the term ‘sustainability’ has entered the pension lexicon. It says as contingent pension plans play an increasingly important role in delivering retirement benefits, they need to be uniquely managed, communicated, and regulated. “We need pension standards that will assist in the goal of achieving sustainable contingent pension plans, not impede it,” says Barbara Sanders, an author of the report. Designing a meaningful and effective regulatory environment starts with acknowledging the multitude of existing and valid sustainability objectives and the variety of associated management practices. The report concludes long-term sustainability would be best served by a move away from prescriptive regulation of financial management decisions. At the same time, the report recommends strengthening requirements in the areas of governance and member communication.

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Investment Possible With Dry Powder Funds

At this point, the number one concern for both private market investors and fund managers is the competition for deals, says Dino Bourdos, portfolio manager, head of investment solutions with Guardian Capital. Speaking at Benefits and Pensions Monitor Meetings & Events’ ‘Pension Risk Strategies’ session, ‘Public Market Investment Solutions to Address the Private Market Conundrum,’ he said there has been a significant shift out of equities and into alternatives over the last 20 years and the proliferation of private market offerings has made them more accessible for plans of all sizes. Private market assets currently represent roughly 60 per cent of total alternatives and that is projected to grow to roughly 70 per cent by 2023. As a result of oversubscribed deals and a large number of unsuccessful bidders, the investor can have a longer wait for allocated capital to be called. Being out of the market while waiting for capital calls is less than ideal, especially considering the direct and opportunity cost implications. “Of the $2.5 trillion of new growth in the last five years, $2 trillion is in dry powder. This is a big deal,” he said. A high conviction, concentrated global equity strategy could be a reasonable proxy to use as a parking lot solution. Portfolio engineering can manage volatility and downside risk in public markets; dynamic management creates a floor that makes the investment journey smoother. It takes advantage of the predictable behaviour of stock market price action and creates a natural step up in the floor through time. It can be systematically implemented to deliver on the desired outcome of safety and be engineered for downside protection.

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Seniors Choosing To Keep Working

A growing number of seniors in Canada today are choosing to remain in – or return to – the paid labour market to manage their multiple financial responsibilities and, for some, to provide support to younger generations, says the Vanier Institute of the Family. With October 1 National Seniors Day and International Day of Older Persons, it is recognizing and celebrating older adults across Canada and around the world and their significant and diverse contributions to families, communities, and, increasingly, workplaces. It says according to the 2016 census, one in five seniors in Canada worked at some point in 2015, 30 per cent of whom worked full-year and full-time. In 2016, the average retirement age in Canada was 63.8 years – a slow but steady increase from a low of 60.9 years in 1998. In 2017, surveyed Canadians aged 60 and older who worked or wanted to work were nearly split on the question of whether it was ‘out of necessity’ (49 per cent) or ‘out of choice’ (51 per cent). Nearly three in 10 surveyed working seniors surveyed in 2018 (28 per cent) reported that they provide financial support to their children.

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ESG Continues Global Growth

There is a rapidly growing business case behind considering ESG (environment, social, and governance) in investment decisions and people are mobilized around it because it is good for the community and good for the bottom line, says Cynthia Shaw-Pereira, lead consultant, client solutions and business development at BNY Mellon Global Risk Solutions. Speaking at Benefits and Pensions Monitor Meetings & Events’ ‘Pension Risk Strategies’ session, ‘The Rise of ESG: Risks, Opportunities, and Obligations,’ she said that today, the non-financial issues ESG covers are just as important as the financial ones. ESG is another factor that can be used when investing and investors need to look at their area of focus and what lens they are using to decide if ESG is right for them. At this point in time, ESG is prominent in Canada, driven by its relevance to investment performance. It is, however, quite big in the UK and Europe “and a lot of work is being done globally to move this forward.” Global ESG initiatives include the UN PRI (Principles for Responsible Investment), the TCFD ‒ Task Force on Climate Related Financial Disclosures, the EU Commission Action Plan, the Paris Accord, and the IORP II Directive 2019, a key European regulation for workplace pension funds. Currently, there are $2.1 trillion in responsible investments assets under management (AUM) in Canada with a 41.6 per cent growth over a two-year period. It encompasses 50.6 per cent of all Canadian AUM. Going forward, investors are increasingly bullish on ESG and new responsible investment products continue to be developed. There are also a variety of drivers such as the incorporation of climate risk into investment strategies, financial opportunity, and making an impact. Shaw-Pereira said investors should think about how ESG is informing oversight of their assets and decide how it might be part of their investment strategy.

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Policy Response Tool Created

A UN-backed investor group has created a tool ‒ the ‘Inevitable Policy Response’ ‒ meant help to businesses, investors, and governments account for policies likely to exist as soon as the mid-2020s that will change the global energy mix. Historically, the pace of global policy change has been glacial. However, the next few years may see a torrent of changes and investors are likely unprepared. Market trends, increasing social pressure, and a mechanism spelled out in the 2015 Paris Agreement that encourages countries to assess and tighten their climate goals make it more likely than before that new regulations will come to pass. Widespread adoption of these policies would significantly reduce projected emissions ‒ though they may still fall short of what scientists say is necessary to keep warming below 1.5 degrees Celsius. It concludes that coal will peak globally by 2022 at the latest, oil by 2028, and natural gas around 2040.

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CAAT Offers 'Modern DB Plan'

Canadians still need and want pension plans and the vast majority value a predictable income in retirement – which is basically a DB benefit, says Jeff Kissack, vice-president, pension solutions, with CAAT Pension Plan. In his presentation, ‘DBplus ‒ A Complete Derisking Solution,’ at the Benefits and Pensions Monitor Meetings & Events ‘Pension Risk Strategies’ session, he said Canadians, especially Millennials, are willing to pay for these features. Unfortunately, there are a lot of problems with traditional DB plans and plan sponsors ultimately cannot afford these plans. “They are too onerous, expensive, and volatile for employers to manage.” Many sponsors turned to DC plans, but they have their own issues. “The challenge is to find a solution with DB predictable income, but with fixed costs and cash accounting that will run efficiently,” he said. “This led to CAAT ‒ and a modern DB plan.” Benefits of merging with CAAT include the option to merge past service or join future service only. It is a multi-jurisdictional plan that replicates existing DB benefits and CAAT handles all communication. The contribution rate is fixed at five to nine per cent with inflation enhancement (conditional on the funded status of the plan) of 75 per cent of the CPI. It offers a survivor benefit and pension buy-back. CAAT currently has 56 employers and 55,400 members and continues its growth. The merge is dependent on employee approval. “You can give us all your liabilities and we’ll take it over from there,” said Kissack.

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Report Projects Major Challenges For Healthcare

In a report commissioned by the Canadian Medical Association, the Conference Board of Canada projects major challenges for healthcare in Canada. Unless the federal government steps up funding, it says provinces/territories will be hard-pressed to maintain the current level of healthcare, let alone meet the growing demands associated with an aging population. ‘The Fiscal Health of Canadian Governments’ says with Canada’s economic growth slowing in tandem with an aging population, healthcare is unsustainable and hard choices will be forced upon lower tier governments. In this context, Canadians should be concerned about future cuts to services, causing even greater disparities and dire outcomes. The CMA is calling on all federal political parties to commit to a demographic-based top-up to the Canada Health Transfer, to provide extra funding to provinces and territories based on population aging; a seniors care benefit, to help cover additional out-of-pocket expenses for seniors and their caregivers who currently spend over $9 billion to care for their loved ones; a $1.2 billion primary healthcare transition fund to support the medical home model to improve access to primary care; and, support for a pan-Canadian medical licensure, to expand virtual care and deliver healthcare to people in remote areas.

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Mental Health Stigma Still Exists

While more Canadians are recognizing depression (53 per cent) and anxiety (41 per cent) as disabilities compared to last year (47 per cent and 36 per cent), a stigma around mental health still exists, says an RBC Insurance survey. Three-quarters of working Canadians say they would either be reluctant to admit (48 per cent) or would not admit (27 per cent) to a boss or co-worker that they were suffering from a mental illness. Furthermore, the proportion who say they would not admit they were suffering from a mental illness is almost three times as high as it is for a physical illness (27 per cent versus 10 per cent) The top reasons for either not admitting or being reluctant to admit a mental illness are believing that there is a public stigma around mental health (45 per cent); not wanting to be treated differently (44 per cent); not wanting to be judged (40 per cent); and fear of negative consequences such as losing their job (36 per cent). “It’s encouraging to see that Canadians are making the connection between mental illness and disability, most likely because of educational efforts and the openness of those who are willing to share their personal struggles,” says Maria Winslow, senior director, life and health, at RBC Insurance. “However, it’s apparent that the perception of stigma still exists, which impedes some people’s ability or willingness to speak up and seek help.”

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Private Sector Climate Coalition Launched

The governments of the United Kingdom and Jamaica, Willis Towers Watson, the Global Commission on Adaptation, and the World Economic Forum have launched a private-sector led ‘Coalition for Climate Resilient Investment.’ The coalition, the first of its kind as a financial-sector led initiative, brings together over 30 organizations across the investment value chain to address climate resilience challenges. It aims to transform infrastructure investment by integrating climate risks into decision-making, driving a shift toward a more climate resilient economy for all countries, including the most vulnerable.

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Impact Investing Examined

CAIA Canada and PRMIA will present ‘Invest with Impact.’ Michelle Peterson, a director of Oikocredit Canada; Jennifer So, associate portfolio manager at BMO Global Asset Management; and Mike Winterfield, founder and managing director of Active Impact Investments; will cover topics such as impact investing versus responsible investing; approaches including active/passive, public/private, and equity/debt; and for-profit impact investments. It takes place October 22 in Vancouver, BC. For information, visit Impact Investing

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September 26, 2019


Amazon Rainforest Concerns UTAM

UTAM (University of Toronto Asset Management) has signed an investor statement expressing deep concern about the escalating crisis of deforestation and fires in the Amazon rainforest in Brazil and Bolivia. In total, 230 investors – representing approximately US$16.2 trillion in assets under management – have become signatories. The statement is part of the ‘Investor Initiative for Sustainable Forests (IISF).’ A working group of Ceres’ Investor Network and a joint collaboration with the Principles for Responsible Investment, it aims to raise awareness of deforestation’s potential financial risks and its environmental and social impacts. The IISF also fosters investor engagement with companies to eliminate deforestation from company supply chains. Along with its fellow signatories, UTAM views deforestation and its associated environmental impacts as systemic risks to portfolios. The reduction of deforestation is a key solution to managing these risks and contributing to sustainable financial markets in the longer term. It calls on companies to redouble their efforts and demonstrate clear commitment to eliminating deforestation within their operations and supply chains.

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Fitness For Duty Applied To Cannabis

Forty-one per cent of organizations have employee alcohol and drug testing protocols in place that are applicable to cannabis. Of these, 91 per cent list fitness for duty ‒ the ability to perform assigned duties without limitations from drug use, fatigue, or other stressors ‒ as a main motivator for testing, says the Conference Board of Canada’s ‘Fit for Duty: Alcohol and Drug Testing in Canadian Workplaces.’ “Testing for cannabis in the workplace is complex, mainly due to the unclear connection between consumption and level of impairment” says Monica Haberl, senior research associate at the Conference Board of Canada. Additionally, the consequences of impairment vary based on the industry or safety level. The report says cannabis is a challenging substance to test for, mainly due to the unclear connection between consumption and level of impairment. To test positive for cannabis means cannabis is present in the body, but it does not necessarily mean the individual is currently impaired. As well, there is no ‘one size fits all’ policy. Although there is a common goal, not all workplaces are equal and, as such, consequences of impairment vary based on the industry or safety level. There is also no perfect test. Employers should implement the testing method that best reflects their alcohol and drug policy and alcohol and drug testing should be part of a bigger program. Testing practices should be complemented by resources and support for employees who may have a true substance use disorder, require medical accommodation, or need further education.

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Climate Change Could Reduce Returns

Costs of coping with climate change are likely to lower the long-term investment returns Australian institutional investors can anticipate by 25 basis points, says Frontier Advisors’ ‘Annual Secular Outlook.’ It marks the first time climate change has prompted the investment consultant to lower its estimates of Australia’s risk-free rate. The revision effectively lowers its long-term target for that rate to 4.5 per cent. While many policy paths could be taken to tackle the problem, it opted to embed a ‘best-case scenario’ into its forecasts, which assumes that governments will meet pledges they made to the 2016 Paris climate accord to limit the rise in global warming to two degrees centigrade. “If actions to limit temperature rises by reducing carbon emissions are not achieved, then the outcome for the economy and investments will be much worse,” it says.

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Sponsors Focusing On Retirement Readiness

After years of focusing on helping employees accumulate savings in their defined contribution retirement plans, there is now increasing focus by plan sponsors on retirement readiness ‒ usually by measuring and informing participants about how much income they will be able to replace in retirement, says Cerulli Associates. However, DC plan participants still don’t understand how to draw down their savings during retirement. Its survey found participants age 45 and older were “generally clueless” as to what they will do with their accumulated savings. Jessica Sclafani, director, investment solutions group, at MFS Investment Management, says that fully one-quarter of respondents explicitly answered, “I don’t know what I will do with my 401(k) account savings.” And another one-quarter say they “will ask my existing financial adviser for advice.” However, it says a Willis Towers Watson survey shows 30 per cent of employers say have adopted one or more lifetime income solutions, up from 23 per cent in 2016. And a survey from Alight Solutions indicates more employers are expanding distribution options in their DC retirement plans to help employees with draw down strategies in retirement.

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Volynsky Leads OCIO

Rachel Volynsky is chief investment officer for Mercer (Canada). Based in Toronto, ON, she will lead its OCIO (outsourced chief investment officer) investment team in Canada. She brings 20 years of capital allocation experience to the role in senior roles with major investment firms in Canada and the U.S. and one of the largest pension funds in North America.

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Social Finance Forum Pairs Profits With Purpose

The MaRS Centre for Impact Investing’s ‘Social Finance Forum’ attracts more than 500 investors, entrepreneurs, finance professionals, charity leaders, and public service visionaries who believe profits can be paired with purpose. Now in its 12th year, it takes place November 6 to 8 in Toronto, ON. For information, visit Social Finance

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