Thank you, and good evening, Mr. Chair and members of the committee.
My name is Kathleen Wrye, and I'm the director of the pensions policy team in the financial sector policy branch of the Department of Finance.
I would like to thank the committee for this invitation to appear.
I am here today to answer your questions about federally regulated registered pension plans, so I would like to take this opportunity to provide you with a bit of context on the federal pension standards legislation—the Pension Benefits Standards Act, 1985, or PBSA.
Under the PBSA, the federal government regulates the workplace pension plans of Crown corporations and private-sector employers in areas under federal jurisdiction, such as telecommunications, banking and interprovincial transportation, as well as private pension plans in the territories.
The Office of the Superintendent of Financial Institutions is responsible for supervising federally regulated plans, with the mandate to protect the rights and interests of plan beneficiaries.
Most workplace pension plans in Canada are provincially regulated, with approximately 7% of registered pensions in Canada being regulated at the federal level. At this time, there are over 1,200 federally regulated pension plans.
Federal pension legislation imposes a fiduciary duty on plan administrators with respect to the administration of the plan and the investment of the assets. Ultimately, plan administrators must act in the best interests of all plan members and beneficiaries.
As fiduciaries, plan administrators are required to act prudently and account for any factor that could materially affect the financial performance of the pension fund. This includes, for example, considerations such as geopolitical issues, human rights, governance and climate risks, to the extent that they could materially affect the financial performance of plan investments.
There is growing acceptance that environmental, social and governance, or ESG, considerations may be relevant to the risk-adjusted returns of pension plans and should be taken into account when making investment decisions.
The Canadian Association of Pension Supervisory Authorities, which is a national association of pension regulators, has been consulting on draft guidelines to support pension plan administrators in fulfilling their fiduciary duties and giving appropriate consideration to ESG factors. These draft guidelines note that pension administrators should consider whether any particular ESG factors are relevant to investment performance and take appropriate action based on that determination.
They also suggest that plan administrators may determine that it is consistent with their fiduciary duty to use ESG information, including ethical or impact investing considerations, as a deciding factor between otherwise equivalent investment options.
With respect to federally regulated pension plans, in budget 2022 the government announced that it would move forward with requirements for disclosure of ESG considerations for federally regulated pension plans.
Legislative amendments were made through Budget Implementation Act, 2022, No. 1, and the department is currently working on regulatory amendments that will contain these detailed disclosure requirements.
To close, I would like to thank the committee for allowing me to provide some additional context. I look forward to answering any questions you may have.