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April 8, 2021

BANKING BOSSES CONFLICTED ON CLIMATE CHANGE

Canada’s banking bosses are too conflicted to take climate change seriously, says an analysis by DeSmog. It says the directors of Canada’s top five banks hold more extensive ties to polluting industries than their international counterparts and this may prove a barrier to taking specific steps to decarbonize their financing, as they have publicly promised. It studied the current and past connections of board members of the banks to the world’s most carbon-intensive industries. Its findings show Canada stands out in the analysis as the region with most ‘climate-conflicted’ bank directors who currently have ties to high-emitting sectors, compared to international peers. The research found that 62 per cent of Canada’s bank directors have current connections to high-carbon companies, compared to 44 per cent for the U.S. banks, 34 per cent for Europe, and 31 per cent for the UK. When past and present connections are included, more than 82 per cent of board members across Canada’s banks held positions in environmentally damaging companies. The analysis showed 35 per cent of directors were linked to the energy sector alone, revealing long careers spent in the oil, gas, and coal industries. DeSmog manages several climate change misinformation databases.

April 8, 2021

ANNUITY TOPS BILLION DOLLAR MARK

Willis Towers Watson, in collaboration with Sun Life, iA Financial Group, and Brookfield Annuity, has provided a group annuity buy-out transaction of $1.8 billion for over 6,000 members of the General Motors of Canada Company salaried pension plan who retired prior to June 1, 2020. Under an annuity buy-out, an insurance company assumes responsibility for making pension payments to plan members in exchange for a premium from the pension plan sponsor. This group annuity transaction involves the largest asset in-kind transfer in Canadian history. In this arrangement, most of the pension plan investments were not sold, but transferred to the insurance partners in kind. Marco Dickner, retirement risk management leader, Canada, at Willis Towers Watson, says, “This deal is ground-breaking because it demonstrates that Canadian insurers can now effectively meet plan sponsors’ needs for jumbo transactions, a milestone in the evolution of pension risk transfers in Canada.”

April 8, 2021

RISK ASSETS ADOPTED BACK INTO PORTFOLIOS

Sovereign wealth funds and other institutional investors are gradually adding risk assets back into portfolios as the COVID-19 pandemic lingers, with investors deploying some accumulated cash and reducing fixed income positions, says a report by the International Forum of Sovereign Wealth Funds and State Street. It found that institutional risk sentiment across asset classes also broadly improved in the period to March, particularly for foreign exchange, commodity-sensitive assets, and equity reallocations. Investors started 2021 with a more neutral stance across asset classes than the underweight positions in risk assets they held in 2020, the report says. Cash levels still remain high, but “there is evidence of a sustained rotation from cash and fixed income into equities since July 2020,” it says.

April 8, 2021

GLOBAL ESG ASSETS DOUBLE

With global ESG (environment, social, and governance) assets in mutual funds and ETFs (exchange traded funds) doubling in the five years to June 2020 and reaching almost US$1.7 trillion by the end of 2020, there is growing recognition that the financial system has a crucial role to play in the transition to a low-carbon and climate-resilient economy, says the EDHEC-Risk Institute. Its ‘Measuring and Managing ESG Risks in Sovereign Bond Portfolios and Implications for Sovereign Debt Investing’ publication sets out a formal framework for incorporating ESG criteria into risk management and investment decisions involving sovereign bonds. The main objective is to assess whether it is possible to incorporate ESG constraints through a significant improvement of the portfolio ESG score without a substantial increase in absolute and relative risk budgets, or a substantial decrease in expected performance. The study finds higher environmental scores for developed countries and higher social scores for emerging countries are associated with lower costs of borrowing for issuers and consequently with lower yields for investors. As well, negative screening leads to more diversified portfolios and lower levels of tracking error, while positive screening leads to higher levels of improvement of ESG scores, at the cost of an increase in absolute and relative risk budgets. It also shows a dedicated focus on absolute or relative risk reduction at the selection stage allows investors to reduce the opportunity costs along the dimension that is most important to them. Finally, ESG momentum strategies in sovereign bond markets can be used to further reduce some of the aforementioned opportunity costs.

April 8, 2021

LINK PARTNERS WITH PURPOSE

Link Investment Management Inc. has partnered with Purpose Advisor Solutions (PAS), a technology platform and services provider for independent financial advisors and portfolio managers, to offer group plan solutions in the Canadian workplace. Purpose has also invested in a Link financing round alongside an undisclosed group of investors. This strategic partnership will support independent portfolio managers and advisors by adding Link’s online employer experience platform ‒ which includes paperless plan administration and support for a wide range of group savings, pension, equity, and health spending plans ‒ to the ecosystem of services and digital tools provided by PAS. The partnership offers a wide range of plans, including defined contribution pension plans (DCPPs) and group TFSAs and RRSPs; plan support for employers, empowering them to select the plan that is right for their employees; and greater reporting and insights which can be used by advisors to help guide employee decision making.

April 8, 2021

CDPQ INVESTS IN SOLMAX ACQUISITION

Solmax, a global producer of polyethylene geomembranes for industrial and environmental applications, will acquire TenCate Geosynthetics, a global provider of geosynthetics and industrial fabrics, from Koninklijke Ten Cate in the Netherlands. The Caisse de dépôt et placement du Québec (CDPQ) and Fonds de solidarité FTQ, Solmax’s long-term financial partners, are both investing in this transaction.

April 8, 2021

COOKE LEADS HEALTH AND BENEFITS

Ken Cooke is senior director and leader of Toronto health and benefits at Willis Towers Watson. He had been with the firm for more than 18 years, joining it in 1998 from Aon.

April 8, 2021

LEGAL UPDATE PROVIDED

The CPBI Southern Alberta Region’s ‘Legal Update’ will provide updates on legislative and regulatory developments over the past year of interest to administrators of pension plans with Alberta members. April 27, Sean Maxwell, a pensions and compensation lawyer at Blake, Cassels & Graydon LLP, will outline recent case law developments involving pension and benefit arrangements and potential discrimination complaints that may arise in the context of such plans, and look at considerations for employers in developing COVID-19 related testing and vaccination requirements in the workplace. Information is at https://www.cpbi-icra.ca/Events/Details/Southern-Alberta/2021/04-27-Legal-Update

April 8, 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 April 2021 are now available at www.an-actual-actuary.com. An Excel spreadsheet on the website contains nine worksheets:

  • Commuted Values February 2011 CIA

  • Marital Breakdown: CSOP 4300 ‒ January 2012

  • Ontario (Bill 133) Prior Rates – Rates for Ontario Marital Breakdown with valuation date prior to January 1, 2012

  • Annuity Proxy for Solvency Calculations for Non-Indexed Fully-Indexed Pensions

  • Minimum Interest on Employee Required Contributions

  • HISTORICAL Marital Breakdown: CSOP 4300 ‒ May 2009 (Now Frozen)

  • HISTORICAL: Commuted Values ‒ 2009 Basis (Now Frozen)

  • HISTORICAL: Commuted Values ‒ 2005 Basis (Now Frozen)

  • HISTORICAL: Commuted Values ‒ 1993 Basis (Now Frozen)

You can use this spreadsheet to compare the interest rates which you may have calculated and/or you can download the spreadsheet to your own computer. Another actuary has already provided a peer review of the updated rates in this spreadsheet and determined that he/she agrees with the results.

April 7, 2021

STRONGER RECOVERY NOW IN CARDS

A stronger recovery is now in the cards for the global economy, thanks to policy support and COVID-19 vaccines. However, there is a dangerous divergence emerging across and within countries, says the International Monetary Fund (IMF). Its latest ‘World Economic Outlook’ is now projecting global economic growth of six per cent in 2021, up 0.5 percentage points from its January forecast and 4.4 per cent in 2022, up from 4.2 per cent. The IMF estimated that global growth contracted by 3.3 per cent in 2020. The upgrades in global growth were mainly because of improvements in the outlooks for advanced economies to 5.1 per cent this year from a previous 4.3 per cent estimate, and to 3.6 per cent in 2022 from a 3.1 per cent forecast. However, diverging recovery paths are likely to create wider gaps in the standards of living across certain countries versus pre-pandemic expectations. Low income countries are expected to record an average annual loss in per capita GDP for the period 2020 to 2024 of 5.7 per cent, while in emerging markets the loss is expected to be 4.7 per cent. These losses are reversing gains in poverty reduction.

April 7, 2021

TDAM JOINS ICGN

TD Asset Management Inc. (TDAM) has joined the International Corporate Governance Network (ICGN) as part of its commitment to promote and support high standards of corporate governance and sustainability. Established in 1995 as an investor-led organization, the ICGN mission is to promote effective standards of corporate governance and investor stewardship to advance efficient markets and sustainable economies worldwide. ICGN members are from over 50 markets with assets under management in excess of $54 trillion and include pension funds, insurance companies, and asset managers such as TDAM. As part of joining ICGN, it is also endorsing the ICGN Global Stewardship principles, which set out ICGN’s best practices in relation to investor stewardship obligations, policies, and processes. These include influencing policy by providing a reliable source of investor opinion on governance and stewardship; connecting peers at global events to enhance dialogue between companies and investors around long-term value creation; and informing dialogue through education to enhance the professionalism of governance and stewardship practices.

April 7, 2021

SUSTAINABLE ENERGY GROUP CREATED

The Canada Pension Plan Investment Board (CPP Investment) is creating the Sustainable Energy Group (SEG), an investment group that combines the organization’s expertise in renewables, conventional energy and new technology, and service solutions. It will generate investment opportunities for the fund, positioning CPP Investments as a global energy investor. Through the combination of the energy and resources and power and renewables groups, SEG will have approximately $18 billion in assets. According to the ‘Bloomberg New Energy Outlook 2020’ report, around US$15.1 trillion is expected to be invested in new power capacity alone by 2050. SEG is well-positioned to pursue a variety of opportunities in this and the broader sustainable energy market, having combined expertise in conventional energy, renewable energy, and carbon capture as well as emerging and disruptive opportunities through its innovation and technology and services team.

April 7, 2021

EQUITY MARKETS GAIN

Despite renewed volatility in March, most equity markets gained in the first quarter, while government bonds fell, says FTSE Russell’s ‘Monthly Performance Report for March 2021.’ Vaccine and stimulus fueled optimism in the recovery of the global economy and corporate profits. This carried risk assets higher for most of the period, but worries about a potential destabilizing rise in bond yields reversed some of those gains. Despite higher volatility in March, most equity markets gained in the quarter, although fixed income returns were broadly negative, with 10-year U.S. and UK inflation-linked bonds being the worst performers. Investment grade underperformed high-yield credit. Oil and copper rallied strongly, while gold ended lower.

April 7, 2021

CI ACQUIRES FULL OWNERSHIP

CI Financial Corp. will acquire full ownership of alternative fixed income investment firm Lawrence Park Asset Management. CI currently holds a minority interest in Lawrence Park which manages approximately C$600 million of assets specializing in credit-focused strategies, including a hedge fund, a liquid alternatives fund, and an ETF. Lawrence Park employs a relative value approach to identify and profit from inefficiencies in global corporate bond markets (Canada, U.S., and Europe) and utilizes an active portfolio management process.

April 7, 2021

SOLAR PROJECT ACQUISITION CLOSES

Leeward Renewable Energy, LLC, a growth-oriented renewable energy company and portfolio company of OMERS Infrastructure, has closed the previously announced acquisition of a utility-scale solar project platform of approximately 10-gigawatts (GW)AC from First Solar, Inc. The project development platform includes 773 megawatts (MW) of projects that are expected to commence construction in the next two years, as well as the 30-MW Barilla Solar Project, which is operational.

April 7, 2021

IACOUCCI HAS NEW DUTIES

Christina Iacoucci is Canadian chief investment officer at BentallGreenOak, a subsidiary of Toronto-based Sun Life Financial. She retains her portfolio manager duties at BentallGreenOak and will continue to manage the Canadian real estate portion of Sun Life’s general account.

April 7, 2021

VACCINATION PROGRAM OUTLINED

‘Inoculating against misinformation – A case study on a successful work place Vaccination program’ is the focus of a CPBI Pacific session on April 28. Ajit Johal, founder and clinical director of Immunize.io, will look at the Richmond School District (RSD38) comprehensive workplace immunization services for staff. The program has resulted in an increased uptake in immunizations and significantly higher vaccination completions than the national average. Information is at https://www.cpbi-icra.ca/Events/Details/Pacific/2021/04-28-Inoculating-against-misinformation-A-case

April 6, 2021

CANADIANS RELUCTANT TO SEEK CARE

Canadians living with chronic diseases ‒ like arthritis, cancer, diabetes, heart disease, or obesity ‒ are reluctant to seek proactive care during COVID-19. A national survey by Novo Nordisk Canada Inc. reveals while Canadians may think they’re reducing potential health risks, delaying care can increase negative health outcomes and impact demand on healthcare professionals and the medical system. Almost four in 10 (38 per cent) Canadians surveyed ‒ who have been clinically diagnosed with a chronic disease ‒ say they are avoiding the healthcare system altogether during the pandemic. Of those clinically diagnosed with a chronic condition, 13 per cent have neither visited their physician nor had a virtual/telephone visit since the start of the pandemic. It encourages Canadians to engage healthcare professionals safely and efficiently during COVID-19 as every province and territory offers telemedicine and virtual care offerings. For those who need in-person care, Canadians should feel comfortable accessing their healthcare providers who offer safe, sanitized, environments for treatment, it says.

April 6, 2021

HOOPP WINDS DOWN STRATEGY

The Healthcare of Ontario Pension Plan (HOOPP) has wound down its long-term options strategy. Its 2020 annual report says the strategy, which offered equity index exposure with equity index options, recorded losses in 2020 and 2019. HOOPP’s broader portfolio posted strong performance in 2020, returning 11.42 percent for the year and beating its benchmark return of 9.8 percent. The pension fund surpassed C$100 billion (USD $79.5 billion) in assets under management for the first time in 2020. As the overall portfolio outperformed, the long-term options strategy lost C$31 million in 2020. In 2019, when the total fund gained 17.14 percent, the options strategy lost $C629 million. The strategy had, in some years, returned billions of dollars and is one of the major contributors to the return-seeking portfolio when it was first implemented in 2011.

April 6, 2021

INSTITUTIONAL INVESTORS WORRY ABOUT EMPLOYEES

Over a year into the pandemic, institutional investors are worried about the mental health of their employees, says a Nuveen global survey of institutional investors. It found managing stress and curbing burnout among employees who are working remotely were cited as top concerns. When the COVID-19 pandemic changed the nature of work and shifted the investing world to the home office, institutional investors took the change in stride as 79 per cent of respondents did not make significant asset allocation changes as a result of the pandemic and 67 per cent reported an increase in productivity while working from home. While the functions of the office space translated relatively seamlessly to a remote world, institutional investors reported concerns about employee mental health, including stress levels and the potential for burnout.

April 6, 2021

MARKETPLACE LENDING SET FOR EXPLOSIVE GROWTH