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November 2, 2021

CIA SETS ESG DISCLOSURE STANDARD

The CFA Institute’s final ESG (environment, social, and governance) disclosure standards for investment products focus on products and don’t cover asset managers’ ESG disclosures at the firm level. They also don’t address the naming or labelling of investment products; nor do they target issuers’ ESG reporting. The voluntary standards, which were developed after two rounds of public consultation, aim to ensure full and fair disclosure of environmental, social, and governance considerations in products’ objectives, investment processes, and stewardship activities. The group hopes that standardizing disclosures will address a variety of problems that have accompanied the rise of ESG investing including investor confusion due to overlapping product categories and a lack of standard terminology, along with greenwashing, which is when firms intentionally or inadvertently mislead investors about a product’s approach to ESG investing. The standards are designed to be used in a wide range of investment products, including investment funds, ETFs, insurance-based investments, and managed account strategies. They are also intended for all asset classes (public and private, debt and equity, real estate, and infrastructure), active and passive strategies, and for various approaches to ESG (such as exclusion, screening, impact investing, and stewardship). Margaret Franklin, president and CEO of the CFA Institute, says, “The complexities of the ESG investing landscape remain vast. We must identify ways to mitigate greenwashing and preserve the integrity of the information being shared about ESG investment products to make them more understandable and comparable to the end investor,” she said, adding that the standards represent a step in that direction.

November 2, 2021

JOURNEY TO CARBON NEUTRAL NOT SIMPLE

When COP26 commences, 128 asset managers, representing $43 trillion in assets, will have committed to a carbon neutral investment strategy by 2050, says Morningstar. However, it says the journey for these firms is not a simple one. In its report, ‘Asset Managers and Net Zero Investing,’ it says managers know they have the power to push for systemic change through more active ownership and advocacy ‒ recognizing that their ability to meet targets depends on commitments and action by other financial system stakeholders. However, they feel less equipped to commit to portfolio targets because corporate disclosure and emissions data is still weak or inconsistent. It’s likely that there will be wide variation between managers’ action plans, from the portion of assets in scope for 2030 targets to the metrics used to track engagement progress and systemic impact. Nonetheless, managers are increasing their use of widely accepted frameworks and rapidly evolving target setting methods and have clear and aligned expectations for government actions that would support the net zero investment movement.

November 2, 2021

BENEFITS ATTRACT CANDIDATES

Despite a tight labour market, only 52 per cent of job descriptions mention benefits, highlighting a missed opportunity to attract more candidates as including benefits leads to a 22 per cent increase in apply rate, says Appcast’s ‘Job Ad Content: How Benefits Impact Candidate Attraction’ report. It also shows the offer of regular, incremental bonuses proved to boost apply rates by over 150 per cent, which is more than any other benefit. However, efforts to entice candidates with signing bonuses and stressing behavioural health benefits had minimal impact on apply rates. In fact, it says pet insurance positively impacted apply rates by 37 per cent. Overall, job ads that mentioned none of the benefits had an aggregate apply rate of five per cent. Job ads with one or more of benefits had an aggregate apply rate of 6.1 per cent (22 per cent higher). In a job seekers’ market, including benefits within job ads presents an opportunity for employers to improve candidate attraction, it says.

November 2, 2021

ESG MAKES MARK ON PRIVATE ASSETS

ESG investing has already made a significant mark on the private capital industry, says a report from Preqin. ‘ESG in Alternatives 2021: Navigating the Climate Crisis’ says the desire to integrate environmental, social, and governance (ESG) principles runs high with private asset investors and managers, as 76 per cent of investors have seen an increase in demand for their organization’s ESG capabilities over the past 12 months. However, implementing ESG policies has been a challenge due to a lack of data, unified standards, and common definitions. This makes it difficult to assess the quality of ESG investments, increasing the risk of greenwashing.

November 2, 2021

PASSIVE ESG OPTIONS INCREASE

Investors looking for passive exposure to the financial markets have more options than ever with respect to environmental, social, and governance (ESG), says a survey by the Index Industry Association (IIA). Its fifth annual global benchmark survey shows the number of indices overall have risen by roughly five per cent year-on-year, slightly faster than the three per cent observed in the 2020 survey. Teasing apart the data, it found the number of ESG indices rose by 43.2 per cent, compared to a 40.2 per cent rise from 2019 to 2020.

November 2, 2021

SUSTAINABLE ADOPTION NEARLY UNIVERSAL

In EMEA, sustainable investment evaluation and adoption by asset owners is nearly universal (97 per cent), up from the 72 per cent in 2018, says FTSE Russell’s 2021 global asset owner survey. The figures for North America also show an increase from 2018 to 2021 (39 per cent to 68 per cent). Climate and carbon issues are global priorities with 67 per cent of asset owners saying that climate and carbon are sustainability issues that are a priority focus for their organization. Mitigating long-term investment risk (64 per cent) is the number one reason for considering sustainable investment, but asset owners face barriers when implementing into their strategies. Lack of standardization in ESG data is the most commonly cited barrier to increased sustainable investment adoption (59 per cent). It says the continued growth and mainstreaming of sustainable investment have become a core consideration for asset owners around the globe. Yet regional differences in adoption approaches, areas of priority focus, and views on regulation persist. Sustainable investment continues to be a rapidly evolving, dynamic space – with a positive outlook.

November 2, 2021

CPP INVESTMENT BOARD INVESTS IN STUDENT HOUSING

The Canada Pension Plan Investment Board (CPP Investment Board ) has made an initial investment of $549 million in a joint venture with real estate manager Round Hill Capital to invest in European student housing. It will invest in high-quality, purpose-build student accommodation across continental Europe.

November 2, 2021

MENTAL HEALTH IS FOCUS

The CFA Society Toronto will be ‘Focusing on Mental Health: An Overdue Discussion for the Investment Community.’ The objective of the event is to raise awareness around mental health, discuss the concept of wellness through case studies and examples relevant to finance/investment professionals, and provide coping mechanisms and actionable takeaways to prevent/manage mental health conditions. It takes place November 3. Information is at https://web.cvent.com/event/c606ae32-0884-4bf6-a8a6-8480c8c1494d/summary?_cldee=amhvcm55YWtAcG93ZXJzaGlmdC5jYQ%3D%3D&recipientid=contact-a222de83b615e811a958000d3af44134-9c06e179995045358b17fec09794dd1b&utm_source=ClickDimensions&utm_medium=email&utm_campaign=21Programming&esid=eb8ebfe2-5e36-ec11-8c64-0022486db509

November 1, 2021

EMPLOYERS ADDING TO HEAD COUNT

Nearly half of employers (47 per cent) expect to add employee head count within the next 12 months, says Gallagher’s ‘2021 Benefits Strategy & Benchmarking Survey – Canada Edition.’ As employers focus on restoring or increasing pre-pandemic staffing levels, it’s clear that they are also seeking to expand existing benefit offerings to retain and compete for talent. In fact, attracting and retaining employees in a competitive workforce (52 per cent) emerged as the top benefits-related challenge in 2021 compared with Gallagher’s 2020 survey, which found that employers prioritized controlling costs (55 per cent). An immediate focus for many employers remains the emotional wellbeing of their workforce. As an underlying support mechanism, nearly two-thirds (65 per cent) of employers offer flexible working hours, with more than half now allowing telecommuting. Employers also advanced mental health to top-priority status as employees faced new responsibilities and unexpected changes during the pandemic. As a result, 88 per cent expanded coverage to include other specialist services that fall under the psychology umbrella (social workers, psychotherapists, clinical counsellors, and other specialists). Overall, by 2023 more than half of employers (54 per cent) plan to expand wellbeing and related support programs to enhance total rewards and, in turn, employee and organizational wellbeing.

November 1, 2021

ALBERTA LICENCING CAPTIVE INSURERS

The Alberta government has introduced legislation providing for the licensing and supervision of captive insurance companies in Alberta, becoming only the second province, after British Columbia, to permit captive insurers, says a report from Stikeman Elliott LLP. A captive is an insurance company established by a single shareholder or group of related shareholders which typically insures only the risks of that shareholder or group. Captives often then further transfer, or ‘reinsure,’ the risks to other traditional insurance companies inside or outside Canada. Historically, most Canadian captives have been formed in certain U.S. states, Caribbean jurisdictions, or Bermuda, all of which have specific captive insurance legislation and actively market themselves as preferred homes for captives. Only a few dozen captives have ever been formed in British Columbia. The proposed act draws on the British Columbia captive legislation as well as the captive legislation in key U.S. and offshore jurisdictions and the Insurance Act (Alberta). Uniquely among those jurisdictions, it permits a captive to be formed either as a limited partnership or as a traditional corporation incorporated under the Business Corporations Act (Alberta). Under the proposed legislation, a captive may be formed as a ‘pure’ captive, an ‘association’ captive, or a ‘sophisticated insured’ captive. Most of the key operating and supervisory provisions will be contained in regulations to be finalized in 2022.

November 1, 2021

PANDEMIC HIGHLIGHTS ‘GREAT RESIGNATION’

The pandemic has highlighted a stark divide in how different demographics in the U.S. experience work, says Mercer’s ‘2021 Inside Employee Minds’ study. In what has been termed ‘The Great Resignation,’ the findings showed that attraction and retention challenges are likely to continue in certain segments of the workforce where there is a disconnect between what employees want and what employers are offering. While the ‘Great Resignation’ implies a mass exodus of workers across demographics, a ‘Great Reckoning’ signifies that only particular groups of workers – those who feel their employers are not meeting their needs – are considering leaving their job. Only 28 per cent of respondents reported they were considering leaving their current employer, which is consistent with historical patterns – typically about three in 10 workers are considering leaving at any given point. However, certain groups are experiencing work much differently than others; frontline, low-wage, minority, and lower-level employees are more likely to leave, at rates significantly higher than historical norms. “In many organizations, frontline and lower-level employees have been underinvested in and not considered a priority. Wages have historically stagnated behind inflation as employers competed to hire these workers at the lowest possible cost. But the pandemic has shown that this same group of workers not only kept business afloat, but were critical in keeping our nation running,” says Melissa Swift, Mercer U.S. transformation leader. “Employers now need to think differently about frontline and lower-level workers and deliver a compelling value proposition that addresses their needs.”

November 1, 2021

MANITOBA MODIFIES FORMULARY APPROACH

Manitoba is changing the process it uses for modifying the list of drugs on its provincial formularies, says an Eckler ‘GroupNews.’ Amendments to the Pharmaceutical Act and the Prescription Drugs Cost Assistance Act allow updates to the Manitoba Drug Interchangeability Formulary and the Manitoba Drug Benefit Formulary to be made by policy rather than by regulation. This will reduce the time for the government to add or remove a drug to a formulary and be more responsive when new medications are made available or when there are drug shortages. As a result, benefit plan sponsors and members could experience savings as new drugs would be covered more quickly by the public plan as Manitoba Pharmacare is first payor for drugs.

November 1, 2021

DEMAND FOR ALTERNATIVE BUDGETS GROWING

Demand for new sources of data among institutional investors is driving double-digit growth in annual budgets for ‘alternative data’ and putting new emphasis on internal data management capabilities, says a study by Coalition Greenwich. It describes alternative data as unique, non-traditional data sources that can add valuable explanatory power to both quantitative and fundamental investment models. Approximately 45 per cent of the investment professionals participating in the study report their firms now use alt data in their investment process and portfolio construction. Almost another quarter of the respondents say they plan to start using alt data in the next 24 months. However, despite the growing enthusiasm for alternative data, ‘Alt Data for Investing: Not So Alternative Anymore’ found most investment professionals are not satisfied with how well alt data is being incorporated into their investment decisions and research processes. Alt data are often “unstructured,” drawing from text and other media that can be difficult to organize and interpret. As a result, data management processes such as data acquisition, tracking, and validation are becoming increasingly important to investors.

November 1, 2021

REM PROJECT EXTENDED

CDPQ Infra, a subsidiary of Caisse de dépôt et placement du Québec, has published a notice to the market for its Réseau express métropolitain de l’Est (REM de l’Est) project. It is currently at the consultation and detailed planning stage with construction work expected to begin in 2023. CDPQ Infra is responsible for the planning, financing, construction, and operation of infrastructure projects in Québec and abroad. Launched in 2015, CDPQ Infra is currently carrying out the first phase of a mega infrastructure project, the Réseau express métropolitain (REM), which represents the largest public transit project in Quebec in over 50 years. The REM is a 67-kilometre light metro system spread across the greater Montreal area with 26 stations, which will double the size of the city’s current metro system. CDPQ Infra is a subsidiary of Caisse de dépôt et placement du Québec, responsible for the planning, financing, construction, and operation of infrastructure projects in Québec and abroad.

November 1, 2021

JONES HEADS NEW UNIT

Dave Jones is president of Sun Life Health, a new business unit. He will be responsible for shaping the Canadian health solutions market.

November 1, 2021

TARGET DATE FUNDS EXAMINED

‘Introducing Canada Life’s Sustainable Target Date Funds’ will be the focus of a Benefits and Pensions Monitor Meetings & Events session. George Turpie, senior vice-president, group retirement savings and investments; Craig Christie, vice-president, institutional investment solutions, group customer; Tyler Wiley, assistant vice-president, investment funds, wealth solutions; and Christine Wellenreiter, director, strategy and market support, group retirement savings and investments, will examine its approach to responsible investing and its new ESG-focused portfolios. It takes place November 18. Information is at https://register.gotowebinar.com/register/4932077527918212108

November 1, 2021

COMMUTED VALUE INTEREST RATE ASSUMPTIONS

The interest assumptions required to calculate commuted values and marriage breakdown values for an event which occurs in any month up to and including November 2021 are now available at www.an-actual-actuary.com. An Excel spreadsheet on the website includes the following worksheets:

  • Current CV Rates December 2020 CIA

  • Current Marital Values January 2012

  • Current Annuity Proxy

  • Current Interest on Contributions

  • Historical Ontario (Bill 133) Prior Rates

  • Historical CV Rates December 2020

  • Historical Marital Values 2012

  • Historical Annuity Proxy

  • Historical Revised CV Rate 2011-02

  • Historical CV Rate February 2011 CIA

  • Historical Marital-May 2009 CIA

  • Historical ‒ CV 2009 CIA

  • Historical ‒ CV 2005 CIA

  • Historical ‒ CV 1993 CIA

October 29, 2021

EMPLOYERS EMBRACE I&D

Aon’s ‘2021 Inclusion & Diversity (I&D)’ survey has found employers are embracing I&D principles to promote a high-performance workforce culture that is respectful, empowering, aware, and supportive of the unique contributions of all employees. The majority of organizations have deemed I&D a priority and are looking for ways to address it at an organizational level. In fact, these principles are increasingly cemented into overall workforce strategy. However, the extent to which they are being applied in the employee benefits space is less clear. This may be partly due to the fact that most companies reported their current programs already meet the needs of their workforces. It found 74 per cent believe their retirement savings program is sufficient for all and 62 per cent say the same for their benefits offerings. However, about two-thirds have not taken, or are unsure whether they have taken, any steps to ensure their programs are operated to promote or achieve I&D objectives. These responses indicate that many organizations’ programs are still built on a one-size-fits-all mentality.

October 29, 2021

BÂTIRENTE MOVES TO MEET CLIMATE GOALS

As a recognized leader in responsible investment, Bâtirente has taken concrete steps that bring it closer to meeting its goals set for 2025. The engagement undertaken one year ago is part of its commitment to ensuring its portfolios’ resilience and performance in response to climate change. Greenhouse gas emissions must be reduced, it says. At the same time, it needs to facilitate the funding of solutions while convincing companies to commit to increasing their energy efficiency and migrating to renewable energy. Overall, its portfolios’ carbon footprint for 2020 is 17 per cent less than that of its benchmark portfolios. The 14 per cent decrease in carbon intensity after two years is in line with its target. It also significantly increased its impact investments to actively contribute to environmental solutions and take part in the transition to a low-carbon economy. Its partner, Æquo, Shareholder Engagement Services, held dialogues with 32 companies on various climate themes. As well, it is a partner and founding member of Climate Engagement Canada (CEC) as well as a signatory to the new Canadian Investor Statement on Climate Change drafted by the Responsible Investment Association (RIA).