While Canada’s public and private pension plans are a vital player in the transition to a lower carbon economy, they’re only one component, with other financial market participants, such as banks, insurers and asset managers, must also play a role, according to the Pension Investment Association of Canada.
In a letter commenting on a report by an expert panel on sustainable finance, the association agreed financial market participants should pay attention to the potential impact of government policy. As far as carbon emissions, the PIAC also noted it generally agrees with the measures put in place by governments to mitigate and reduce the negative impacts of climate change, which includes efforts to reduce greenhouse gas emissions. These actions can include regulatory action, as well as more general guidance and incentives to influence capital allocation that would bolster innovation around climate change.
In terms of fiduciary duty, the PIAC noted its members are required to act in good faith on behalf of their plan members. It also highlighted that evaluating the potential impact of environmental, social and governance issues on investments falls within the scope of responsibility.
There’s a growing consensus around the inclusion of these factors, noted the letter, which included examples such as the United Nation’s Principles for Responsible Investment’s 2015 report on fiduciary duty and the significant support for the task force on climate-related disclosures.
In building markets that are friendly to sustainable financing, of particular importance is improving reporting and disclosure on climate change-related risks and opportunities, according to the letter. “We have previously stressed, as long-term investors, our members require reliable, consistent and comparable information in climate risks to make informed investment decisions,” it said. “In Canada, disclosure on climate risks and opportunities is often insufficient or completely absent with even basic information around GHG emissions not disclosed.”
The PIAC’s letter encouraged the expert panel to continue discussions of the role it has to play in encouraging and regulating these types of disclosures.