The Pension Investment Association of Canada is calling on the B.C. Financial Services Authority to reconsider implementing new standards for climate-related risks analysis guidelines, noting it would be extremely challenging for most pension plans to meet a potential new climate and transition risk review system.
In an open letter, the PIAC recommended a principles-based approach to climate risk requirements. While the association said it supports a reasonable method to identify risks related to climate change and broader environmental, social and governance factors, it cautioned that a commitment of resources to complete reviews from the BCFSA could place undue burden on smaller plans.
“While PIAC agrees with the utility of conducting climate scenario analysis and stress testing, the capacity for pension plan administrators to do so must be considered by the BCFSA and should not be overestimated,” said Peter Waite, the organization’s executive director, in the letter. “Most pension plans have minimal in-house investment resources and rely on multiple external investment managers and consultants to invest their assets in a variety of asset classes.”
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The letter also raised concerns about the effort required by smaller plans and their dependence on external managers when it comes to their portfolios, noting if this system were put in place, it could lead to data transparency issues.
“While the largest pension plans in Canada have been able to meet the requirements of the Task Force on Climate-related Financial Disclosures, this has proven to be lengthy and expensive,” said Waite, recommending that plan administrators discuss their approach to climate risk management directly with their beneficiaries, along with sharing what they expect from their asset managers.
Since the Office of the Superintendent of Financial Institutions isn’t currently imposing guidelines on climate risk management for federally regulated pension plans, the letter noted the potential imposition by the BCFSA wouldn’t fit with current regulatory demands. “Therefore, BCFSA’s proposal would be an additional burden unique to plan administrators in B.C.”
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