Public Accounts Committee on Feb. 15th, 2022

[Richard Bragdon, Conservative, Tobique—Mactaquac, NB]

I think they were looking for specific targets to measure whether the objective would be achieved, so I guess sharpening those is kind of where you're going. Are you putting in mechanisms to do that?

[Neil Cunningham]

That's correct.

[Richard Bragdon, Conservative, Tobique—Mactaquac, NB]

When will the new performance indicators be in place for the corporation's strategic objective of branding itself as a global pension and investment manager?

[Neil Cunningham]

That's an interesting question, because that was a comment directed specifically to an objective of our previous strategic plan, and last year we approved a new strategic plan, in which that specific branding objective is not one of our specific targets.

I will say that our plan has three pillars and 10 shifts, as we call them, for things we want to accomplish in order to be the organization that can manage not just the over $200 billion we have entrusted to us today but the $300 billion and more that we will go to over time. We do have measures in place and are adopting more as we get further into the plan for all the aspects of that strategic plan. Therefore, the specific comment related to one of those strategies in the previous plan is not relevant to our going forward, but the concept of having measurable objectives in every aspect of our strategic plan we have incorporated into it.

[Richard Bragdon, Conservative, Tobique—Mactaquac, NB]

Okay.

I have no further questions, Madam Chair.

Thank you.

[The Vice-Chair, Liberal, Jean Yip]

Thank you.

We will move to Ms. Shanahan for five minutes.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

I may get in a little extra time or I'll be happy to share it with my colleague from the Bloc.

That's wonderful, Chair. Thank you.

Again thank you to everyone who is here today.

I'm going to go on a bit of a philosophical bent. Bear with me, but it does have to do with Mr. Carney's book, Value(s), in which he raises some very interesting questions around what we as a society consider valuable and how we measure value and where we find value.

Mr. Cunningham, I would love to have your views on that direction of thought, because I think that we are having a moment—well, more than a moment—given the lessons we are learning from the pandemic and the climate change crisis we are facing, as to what is valuable to society.

[Neil Cunningham]

Thanks for that question.

If you got through Mark's book, I congratulate you, because it is truly a tome in very small print, and there's a lot in it.

When you get into values, that strays from the strict mandate that we, as a pension fund, are intended to have. It was mentioned earlier that we have a very specific mandate with respect to long-term returns, and we practise best practices as part of it because we believe those are an essential part of long-term returns.

A lot of public policy and public behaviour goes into the values, which I would say is beyond the scope of what one can expect a pension fund to do.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Would you talk to us, Mr. Cunningham, or perhaps another member of your team, about the idea of building long-term value and how we need to open up the scope of what that means? We addressed it earlier regarding stranded assets, regarding unknown risks.

I'll just share with you that I used to do the retirement workshop for the folks at McGill who were getting ready for retirement. Of course, the big concern was how much money they would have in their pension fund. If we knew it was a hybrid pension fund, oh, my gosh, it was just crazy how we had to do the calculations around defined benefit and the defined pension part. All that to say that in the retirement workshop, we would come to the conclusion that if you were to lose everything today, what would you have? It would be the place where you live and the fact that you could grow a garden and you could continue living.

I'm taking you to an existential place, Mr. Cunningham. I really would like to hear your views, because you are doing a terrific job on the nuts and bolts of looking after that pension, and it's a credit to what you're doing, but is it not time to think out of the box?

[Neil Cunningham]

Once again, you're bordering on our mandate. I'm saying the analogy you gave that someone would have their home, their garden and their pension is our objective in what we do.

We spent time on our mandate specifically to say how much does that line “for the long-term benefit of our beneficiaries,” or wording to that effect, actually mean?

There is no explicit social purpose in the mandate for how we manage the money. I don't think I can express my personal view here when I'm representing PSP.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Excellent.

Could you talk to us about the leadership role that PSP would play, then, internationally? I think you are a major player, certainly in Canada, North America. Talk to us about that leadership role.

[Neil Cunningham]

That's a good one, and that is completely appropriate.

I made reference earlier that a little over a year ago the Maple Eight pension funds made a joint statement for the first time ever. I'm proud to say we were the leaders to get it going, where we encouraged all public markets, issuers and participants to follow TCFD and SASB, the Sustainable Accounting Standards Board, requirements for reporting on their largely environmental but also social footprint, the objective being that there's a bit of what I'll call a “bully pulpit”, if you want. Once people are forced to disclose, they will want to improve their scores, and so we'll have greater adoption of the principles and then greater movement toward bettering one's score in whatever is good measure—

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

I'll thank you, Mr. Cunningham, because I do want to share some time with Madam Sinclair-Desgagné.

[The Vice-Chair, Liberal, Jean Yip]

Thank you. Your time is actually up, but we will give some time to Ms. Sinclair-Desgagné.

Go ahead for two and a half minutes, please.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

Thank you very much, Madam Chair.

I'd like to thank my colleague Mrs. Shanahan for wanting to share her time with me.

Mr. Cunningham, my question is very simple and very direct.

I understand that this can't be done overnight, but can you commit, as some of your peers have done, including the Caisse de dépôt et placement du Québec and the Canada Pension Plan Investment Board, to achieving net‑zero emissions by 2050, for example? Can you make that commitment here and now?

[Neil Cunningham]

Thank you for the question.

Not to steal thunder from an announcement that we will be making in the near term, we will be announcing that we are completely aligned with global net zero by 2050 in terms of the approach we're taking to investing in climate change. We will have some very specific shorter- term targets that are achievable with respect to green assets, green bonds, transition assets and others, so you will see specific targets in the near future.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

I understand that you can't give us too much information in advance, but can I ask you when this announcement will be made?

[Neil Cunningham]

The timing is not yet determined. It will be sooner rather than later. I know that's not what you're hoping to hear in terms of specifics, but it will be sooner rather than later. I also want to be careful that I don't get into disclosure issues, because as I said earlier, we just launched this week a green bond issuance, which has implications around this area. Especially with my CFO on the line, I certainly don't want to say something that he's going to say I shouldn't have disclosed when we're in a quiet period on selling the bonds.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

Thank you.

I'd like to ask you one last question, Mr. Cunningham.

Have you done a climate change risk analysis? You mentioned the physical risks, but I'm also thinking about risks of non‑compliance with regulations, systemic risks, all types of climate‑related risks.

Have you done a short‑, medium‑ and long‑term analysis of the risks associated with the investment funds?

[Neil Cunningham]

Mr. Bureau, could I ask you to answer that question about the risks?

[Jean-François Bureau]

I'm certainly willing to answer it.

Thank you for the question, Ms. Sinclair‑Desgagné.

It's important to understand that public investments are very liquid investments. That means they can be bought or sold very quickly. On the other hand, an analysis of all the risks is done for each private investment.

The risk review includes all environmental, social and governance risks, or ESG risks. Our management team, at the level of the vice‑president for responsible investment, makes a point of reporting their findings to us, which are listed in the risk register, which is submitted to the designated committee for approval, and the ESG risks associated with each investment are then taken into account.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

Can you commit to following the best practice methods and standards recommended by the Task Force on Climate‑related Financial Disclosures?

[The Vice-Chair, Liberal, Jean Yip]

We need a very short answer, please.

[Jean-François Bureau]

As Mr. Cunningham said earlier, we're going to make some commitments.

Mr. Cunningham didn't want to give a specific date, but I can assure you that it will be before he retires.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

I'd like to thank the witnesses very much for taking part in our work.