Public Accounts Committee on Feb. 15th, 2022

[Mélanie Cabana]

Yes, there are some subsidiaries that we do not audit, that we waived our rights on PSP.... What I could say about the wholly owned subsidiaries is that while we didn't audit the subsidiaries themselves, we did include a portion in the special examination where we looked at the governance practices of PSP related to the wholly owned subsidiaries.

[Mélanie Cabana]

It was mostly a decision in scope. The special examination was large enough as it was, so we decided to go the route with the governance practices instead of of going into the wholly owned subsidiaries.

[Peter Fragiskatos, Liberal, London North Centre, ON]

I did see that there was an audit done and, as you point out here in the answer—the report also underlines this—there was an audit done of the systems and practices used by the board to audit the wholly owned subsidiaries themselves.

This is for Mr. Cunningham.

First of all, sir—and I suppose I could have begun with this question—what are the six wholly owned subsidiaries of the board? This is for the record and my understanding as well.

[Neil Cunningham]

Can you name them all, J.-F.?

[Jean-François Bureau]

Neil, I was trying to go from memory.

We have PSP Capital, for one, which is wholly owned, the subsidiary that is used to issue our debt, be it commercial paper or bonds.

There are other various subsidiaries that are held for jurisdictional and legal purposes, but in terms of investment, Neil, short of certain assets—I'm going from memory, but to be honest with you—I can't recall the names and the roles of each one.

Mélanie, would you have them in your notes?

[Peter Fragiskatos, Liberal, London North Centre, ON]

It's fine, but perhaps the board could follow up with a list of those six. Perhaps it's a bit unfair. There are 147, but I figured that, since there are six that are wholly owned by the board, maybe that list would be readily available. It's not a judgment or anything. Someone from your side can follow up.

I ask because I'm curious to understand what systems and practices the board uses to exercise oversight of these subsidiaries or even subsidiaries in general terms.

What are some key...? Are general standard best practices used or are there specific things that you use as an organization to ensure best practices? I ask that also because there are lessons here. I think—

[The Vice-Chair, Liberal, Jean Yip]

Thank you, Mr. Fragiskatos.

We now move to Ms. Sinclair-Desgagné for two and a half minutes.

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

Thank you very much, Madam Chair.

I have the numbers with me with respect to the PSP Investments carbon footprint issue over the six years it was measured. It went from 99 tonnes in 2016 to 101 tonnes in 2021. So there hasn't been a decrease. Obviously, this is the carbon footprint. If investments increased, it's important to consider the carbon intensity, which has basically decreased since 2016. However, there was quite a significant increase between 2020 and 2021.

Is this just another news story, or is there a genuine desire to reduce the carbon intensity of PSP Investments?

I would ask you to be very brief, Mr. Cunningham.

[Neil Cunningham]

The short answer is yes, we are working to reduce, and when we release our climate investment strategy in the next little while, you'll see very specific targets towards investing in green assets, etc.

Sometimes the measure of a carbon footprint can be a bit tricky in that our numbers can move with our AUM, moving up and down as it tends to do over time. The short-term movement, in my view of anything in our portfolio, carbon footprint included, is less meaningful than what you see over a longer period of time. I would stress that the longer period is indicative of what efforts are being made.

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

Thank you.

I would like to use the little time I have left to mention, on behalf of the taxpayers we represent, that the investment advice of our dear Conservative friends is sometimes a little out of date.

Mr. Cunningham, setting tangible and measurable net‑zero targets can have a beneficial impact. In addition, it is essential to disclose the climate change risks, as requested by the Task Force on Climate‑related Financial Disclosures. This is one of the best practices internationally right now. We would love to see PSP Investments embrace this.

How much time do I have left, Madam Chair?

[The Vice-Chair, Liberal, Jean Yip]

Give a short answer, please.

[Neil Cunningham]

I'm not sure I heard the question in there. I definitely heard the commentary.

We are committed to TCFD best practices. As I said earlier, the risks are apparent. It's a very nebulous area, though, in that the taxonomies are in flux and being negotiated or discussed, as we speak, for what's green and what's not green.

Probably the most important aspect of this is that moving to net zero is not something that pension funds can do alone in moving everything in that direction. It takes the entire market and all of the participants to be moving in that direction. We're very much aligned with that direction.

[The Vice-Chair, Liberal, Jean Yip]

Thank you.

We move to Mr. Desjarlais for two and a half minutes.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you, Madam Chair.

According to the OAG's report, PSP investments had not systematically integrated the objectives of the United Nations 2030 agenda for sustainable development in its investment activities. There is a quote from the OAG that says, “There is an opportunity for the corporation to enhance its reporting on the sustainability impacts of its investment activities.”

Do you plan to give greater consideration to the goals of the United Nations 2030 agenda for sustainable development? If so, could you elaborate on how PSP is tracking and monitoring its progress to ensure that PSP's investment activities contribute to each of the 18 goals?

[Neil Cunningham]

We certainly appreciate the importance of UN SDGs, but we've not implemented them specifically into our investment strategies. Incorporating those SDGs into an investment strategy poses several challenges, including measurement of the alignment of investments and the mandate of the UN SDGs and their specific considerations.

To meet these challenges, we should not just look at how ESG risks and opportunities affect the risk return profile of the investments, but also how a responsible investment portfolio affects the broader objectives of society or the SDGs. Our long-standing responsible investing approach overlaps with many of the UN SDGs, such as climate action, responsible consumption and production, and gender equality. Our disclosure is focused on how we incorporate ESG considerations in our investment activities to meet our mandate and drive long-term value for contributors and beneficiaries.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you for that.

This question is for Deputy Auditor General Hayes.

Do you think it would be beneficial to have a more systematic approach to tracking how PSP investment activities contribute to each of the SDGs? If so, what kind of oversight and performance measures could this achieve on behalf of Canadians?

[Andrew Hayes]

As an office, we've taken the position that we will look at the SDGs and how they're implemented across the board, whether it's the government or in Crown corporations. We are actively encouraging all of the entities that we audit to consider the SDGs in a manner that will contribute to the commitments made by the government.

How these can be incorporated into the investment decisions is a question for management. I believe, though, that in order to advance progress on many of the SDGs, there needs to be a whole-of-society approach to committing to action.

[The Vice-Chair, Liberal, Jean Yip]

Thank you, Mr. Hayes.

We now go to Mr. Cooper for five minutes.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

I don't have any further questions, Madam Chair.

I don't know if Mr. Bragdon has any.

[The Vice-Chair, Liberal, Jean Yip]

Okay.

Mr. Bragdon, you have five minutes.

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

According to the Office of the Auditor General, for the strategic objective related to branding itself as a global pension investment manager, the corporation had performance indicators but no specific targets to measure whether the objective would be achieved. Whether or not there were performance indicators in the first place, I guess would be the first question.

[Martin Glynn]

Neil, do you want to take that?

[Neil Cunningham]

I want to make sure I understand your question, Mr. Bragdon.

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

Sure.

[Neil Cunningham]

The lack of performance indicators was....

Let me say this; I'll approach it a different way.

I would say the organization as a whole has sharpened its game in terms of KPIs in general, and the report of the OAG, as I said earlier, highlighted to us that in certain areas we needed to sharpen our game, and we have. We took the recommendations very seriously.