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January 12, 2021

ACCELERATION OF COMPARABLE ESG DATA NEEDED

Despite the abundance of sustainability reporting frameworks in existence, there is a need to accelerate the emergence of comparable, material ESG (environment, social, and governance) data across jurisdictions, especially considering the urgency of climate change, says the Alberta Investment Management Corporation (AIMCo) in its comments on the ‘International Financial Reporting Standards (IFRS) Consultation Paper on Sustainability Reporting.’ It believes there is a role for the IFRS to play in working with standard setting institutions such as the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD) to arrive at a comprehensive, inclusive and global sustainable financial framework that leverages existing standards. For any set of sustainability standards to be meaningful the standards body will require global buy-in. IFRS accounting standards are already present in 140 jurisdictions, yet not all jurisdictions approach sustainability with the same lens. AIMCo says it will be important to ensure that the standards created are principles-based and consider both jurisdictional differences and different user needs such as governments, central banks, regulators, investors, and civil institutions. In countries where there is no established ESG framework, IFRS principles and precepts could act as the default standard and assist in driving global convergence on disclosure of material ESG information, such as carbon emissions and emissions intensity.

January 12, 2021

OSFI LAUNCHES CLIMATE CHANGE CONSULTATION

The Office of the Superintendent of Financial Institutions (OSFI) has launched a three-month consultation on risks arising from climate change that can affect the safety and soundness of federally regulated financial institutions (FRFIs) and federally regulated pension plans (FRPPs). It categorizes climate-related risks that affect FRFIs and FRPPs as physical risk, which arises from a changing climate increasing the frequency and severity of wildfires, floods, wind events and rising sea levels, among other things; transition risk, which stems from efforts to reduce greenhouse gas (GHG) emissions as the economy shifts towards a lower-GHG footprint; and liability risk, which relates to potential exposure to the risks associated with climate-related litigation. Through a discussion paper, ‘Navigating Uncertainty in Climate Change: Promoting Preparedness and Resilience to Climate-Related Risks,’ it is seeking to engage FRFIs, FRPPs, and other interested stakeholders in a dialogue on climate-related risks. It wants to know how FRFIs and FRPPs define, identify, measure, and build resilience to climate‑related risks. It is also seeking feedback on how it can facilitate FRFIs’ and FRPPs’ preparedness for, and resilience to, these risks. This input will guide the development of regulatory and supervisory approaches that meet OSFI’s mandate of protecting depositors, policyholders, and private pension plan beneficiaries while allowing institutions to compete and take risks. It says climate-related risks can affect a FRFI’s or FRPP’s safety and soundness by driving financial, strategic, and operational risks and by affecting a FRFI’s reputation. Comments and submissions on the discussion paper can be sent to Climate-climat@osfi-bsif.gc.ca by April 12.

January 12, 2021

PATIENCE REQUIRED ON SALARY INCREASES

Despite an optimistic economic outlook throughout Canada, it will take patience for salary increases to return to the pre-pandemic levels of three per cent, says Normandin Beaudry. Its supplemental ‘Salary Increase Survey’ cites statistics published by Canada’s big banks which show that the economy has rebounded despite uncertainty in certain sectors. Still, approximately seven per cent of organizations expect to freeze salaries in 2021, an improvement from the 20 per cent of organizations reported in its original survey conducted during the summer of 2020. Ontario employers seem to be more cautious as 10 per cent expect salary freezes this year. In light of the supplemental survey results, the salary increase forecast across Canada is expected to be 2.6 per cent (excluding freezes), which is very close to the percentage forecast from last summer, 2.7 per cent. This decrease is partly due to the fact that approximately 35 per cent of organizations expect to allocate a budget that is less than what was initially planned.

January 12, 2021

IMC OPENS CLOSED-END FUND

The Institutional Mortgage Capital (IMC) has launched an open-ended active mortgage fund (AMF). The AMF was originally launched as a closed-end fund in December 2016 and was converted from a closed-end fund to an open-ended fund as of January 1. “The Canadian commercial mortgage market continues to be a source of strong risk-adjusted returns,” says John Ho, CEO and CIO of IMC. “Commercial mortgages that are supported by strong loan fundamentals offer a compelling investment opportunity for investors seeking to enhance portfolio yield. We continue to experience a strong appetite from institutional investors for commercial mortgages to enhance portfolios in a low interest rate environment.”

January 12, 2021

CANADIAN ETF FLOWS SET RECORD

Flows into Canadian ETFs set a record last year, reaching $41 billion ‒ a 49 per cent increase over 2019 which held the previous record, says a report from National Bank Financial Inc. “ETF volume skyrocketed in the first half of the year amid the pandemic-induced sell-off and subsequent market recovery, driving inflows into all asset classes,” the report says. Canadian ETFs have now outsold mutual funds for the third straight year, with sales outpacing mutual funds by $13 billion as of November 30, 2020. Last year was a record year for inflows into equity, commodity, and multi-asset ETFs, while fixed income ETFs had their second-highest year of inflows. There were a record 1,010 ETFs in Canada at the end of the year offered by 39 providers. Five new providers entered the market in 2020 and one exited.