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September 1, 2022

FUNDS SUPPORT ISSB STANDARDIZATION

Nine Canadian pension funds support the International Sustainability Standards Board’s (ISSB)’s proposed enhancement and standardization of sustainability-related financial information disclosures and climate-related disclosures. The submission from AIMCo, the British Columbia Investment Management Corporation (BCI), the Caisse de dépôt et placement du Québec, the Healthcare of Ontario Pension Plan HOOPP), the Investment Management Corporation of Ontario (IMCO), OMERS, the Ontario Teachers’ Pension Plan, PSP Investments, and the University Pension Plan Ontario (UPP) says doing this will unlock opportunities and mitigate risks, supporting their mandates to deliver long-term risk adjusted returns. “To deliver on our mandates, we need the disclosure of consistent, comparable, and reliable information on climate change from companies,” they say. However, they do suggest a few changes to provide more clarity and enhance the recommended disclosure. It should eliminate the use of the concept of “significant” and focus instead on materiality throughout the standard. For example, it refers to material information for significant risks and opportunities and guidance regarding materiality follows. However, guidance regarding significant is not provided. As well, governance and risk management disclosures should not be subject to a materiality test. Descriptions as to how a reporting entity approaches its governance and risk management for identifying material sustainability-related risks and opportunities is relevant to investors. The process an entity uses to determine what information and topics are material enough to disclose is in itself material information that is critical for investors. It is not sufficient to leave users to assume that an entity’s lack of disclosure about certain sustainability risks and opportunities indicates that it has actively determined them to be immaterial without any insight into how such determinations were made or how governance oversight was exercised. They recommend that the ISSB follow the Task Force on Climate-Related Financial Disclosures’ approach with respect to governance and risk management disclosures not being subject to materiality. The submission can be found at ISSB Submission | AIMCo.

September 1, 2022

SENIOR EMPLOYEES EXPECT BENEFITS

Increasing longevity, combined with changing working patterns (such as entering the workforce at later ages), means we can expect a greater proportion of people to work past the age 65, says an Eckler ‘GroupNews.’ However, those choosing to work past age 65 want to ensure that they keep the same compensation package as employees under age 65 doing the same work. So far, plan sponsors have generally resisted extending benefits to actively working employees beyond age 65 as they fear the cost of doing so would be too expensive. Of the benefits typically offered by plan sponsors, continuing long-term disability benefits after age 65 is more challenging than continuing health or dental benefits. However, in some cases it may not be as cost prohibitive as expected. While greater numbers of people become disabled at older ages and, as a result, the ‘gross’ cost (before any offsets) of providing disability benefits increases as members age, most disability benefits can be offset by other disability or pension payments the member receives. Benefits can be reduced by CPP disability, for example, or pension payments from an employer-sponsored defined benefit pension plan. Both can significantly reduce the net cost of providing disability benefits after age 65. Plan sponsors might also consider setting a limited benefit period, for example, two or five years, should an employee become disabled at age 60 or older; reducing disability coverage amounts provided after age 65. Another move is to implement a plan design that provides disability coverage that increases with years of service. If a plan sponsor determines that disability benefits will no longer cease at age 65, they will also need to decide on a revised age at which benefits will terminate. The impact of extending disability beyond age 65 will differ significantly by a plan sponsor and is highly dependent on factors such as plan demographics and whet