Public Accounts Committee on Feb. 15th, 2022

[Andrew Hayes]

Yes, we found that they did implement our recommendations. There were two areas in the report where we identified there were improvements made but maybe a little more space for improvement.

I might ask Mélanie Cabana or Victoria Loutsiv if they want to add to that.

[Mélanie Cabana, Principal, Office of the Auditor General]

I can take it on.

One of the areas was related to, in the past, when PSP was more focused on reporting on accomplishment of tasks and not as much on progress on the objectives. We did see an improvement there. Now I guess some fine tuning is necessary to actually specify measurable targets for the non-investment risks, but before, it was more prevalent.

The other area where we've seen some improvement was—

[The Vice-Chair, Liberal, Jean Yip]

Thank you.

[Han Dong, Liberal, Don Valley North, ON]

Thank you.

[The Vice-Chair, Liberal, Jean Yip]

We will now move to Ms. Sinclair-Desgagné, please, for six minutes.

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

Thank you, Madam Chair.

I'd like to thank the witnesses very much for being with us today. It's a pleasure to welcome representatives from the Public Sector Pension Investment Board, or PSP Investments, which has offices here, in Montreal.

To follow up on my colleagues' comments, I would like to commend the very strong performance that has been achieved in the past year, which offsets a perhaps lesser performance in previous years. However, the mandate of PSP Investments is also combined with the financial and economic stability of the Canadian economy.

PSP Investments is a Crown corporation and has a duty to lead and apply international best practices in all areas. The audit report confirmed that this was the case both in terms of governance—I congratulate it—and in terms of financial risks. However, with respect to environmental risks, the report mentions, among other things, that there is room for improvement.

Let me explain. The Bank of Canada, another major, neutral crown corporation, just released a report a month ago pointing out that the Canadian economy is being compromised by investments in the oil sector. In the report entitled “Assessing climate change risks to our financial system”, the authors do not mince words. It states that if we don't do more to pull our investments out of the oil sector, the Canadian economy is in jeopardy.

Therefore, beyond this report from the Bank of Canada, we note that PSP Investments is not a signatory to the commitment made by the Net Zero Asset Owner Alliance, unlike its peers, such as the Mouvement Desjardins and the Caisse de dépôt et placement du Québec, or CDPQ. PSP Investments' invested and reported assets in sustainability sectors are found to be 6% compared to its peers, 9% at CDPQ, and 11% with respect to the Canada pension plan.

My question is for one of the officials from PSP Investments.

I was a little surprised to see that the long‑term goals Mr. Glynn mentioned are only for the next 10 years, given that a retirement now lasts 30 years.

Why isn't PSP Investments doing more to be a leader and to have the best environmental practices?

[Neil Cunningham]

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

It's an interesting question, because what we've discovered over the last year, and we spent a great deal of time on exactly this point over the last year, is that we at PSP were doing a great deal with respect to climate awareness, investing in positive climate change investments, but we weren't keeping score as well as we could have. We've undertaken in the last short period of time to do exactly that.

I can describe our approach. At the first level it's ensuring the safety of our assets from physical climate change. That was something we'd been doing for years. We have a responsible investment team that sits on every one of our investment committees for private investments.

It's twofold with respect to engagement. We work primarily with public companies working with other similar investors to have them improve their practices, improve their transparency, improve their disclosure. We've had some pretty significant improvements in that regard.

On the physical assets, we are on the verge of releasing our climate investment strategy. I wish I could do it today. It's not public yet, but it will be released in the next few weeks. What you'll see is that we have a commitment to multi-faceted approaches. We call it the pathway to net zero. We're committed to global net zero in general. You may have noticed just yesterday that we issued our framework for our first green bond issue, which will hopefully happen this week. We have a commitment to grow our green assets and our transition assets, all with the intention of removing carbon from the world.

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

Thank you very much, Mr. Cunningham.

Does that mean that you'll be publishing the targeted quota very soon and that you've made a commitment to net‑zero emissions?

[Neil Cunningham]

We have targets, yes, but not a disinvestment program. The reason for not having a disinvestment program—it's very similar to what John Graham at CPPIB said yesterday—is that our commitment is to remove carbon. We can divest and make our own portfolio look greener, but it doesn't do anything to remove carbon from the environment. Whoever buys it continues on.

Our commitment is, through either advocacy or cash dollar investment, to assist companies to migrate to a cleaner activity. That's not just oil and gas. There are a number of other industries, many of which are important in Canada, where capital is required in order to allow them to shift from what they're doing and invest money to get greener. That, to us, is a better way, or a complementary way, to simply divesting.

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

You're right, it's necessary. But have you—

[The Vice-Chair, Liberal, Jean Yip]

Thank you.

We will now move to Mr. Desjarlais for six minutes.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you very much, Madam Chair.

I want to begin by thanking the witnesses who are present today for their service.

I was pleased to see, in the Auditor General's report, a very good audit. Congratulations to all of those who participated in ensuring our public corporations are accountable and transparent and have good governance.

I also want to mention—it was one of the earlier witnesses, but I don't recall who.... Mr. Cunningham, I believe it's you who's retiring in 13 months. Congratulations. Thank you for your service as well.

I want to turn to one aspect of the report that the Auditor General pointed to. Maybe this is best suited for Mr. Cunningham.

According to the Auditor General's report, there was a strategic direction related to the prioritization of diversity inclusion. Part of that was implemented within the strategic direction of the corporation and had particular performance indicators, but there were no specific targets to measure whether that objective would be achieved.

I am wondering if you could speak to how those performance indicators were intended to guide the work of the corporation. The second part of my question is, when will the new performance indicators be in place for this strategic objective?

[Neil Cunningham]

I'll say the equity, inclusion and diversity, EI and D, has been a hugely important aspect of what we do at the organization over the last several years. I co-chair our EI and D committee along with our head of HR. The focus on equity, inclusion and diversity is immense. The intention is to have it ingrained in the fabric of the organization and not as something that's done on the side. We're making great strides in getting there.

With respect to your question, specifically, we used to report to the board on an annual basis on the gaps that we had compared to the market in the four areas where we are specifically required to report under the Employment Equity Act. Those four groups are women, aboriginal peoples, persons with disabilities and members of visible minorities. Since November 2021, we've expanded that fairly significantly. We now present a full EI and D report to our board of directors that contains our ambition level, benchmark and progress. It also tracks several other metrics, such as senior leadership diversity, succession diversity, promotion diversity, external hires diversity, etc.

We took that comment very seriously. We have a number of other measures I didn't mention there.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you very much for that, Mr. Cunningham.

To further elaborate on that and to confirm, you're saying that just recently your work included a renewed version in 2021 of some of these indicators. Is that correct?

[Neil Cunningham]

That's correct.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

As part of those indicators you mentioned, there's likely some kind of inheritance from the former structure related to it. You probably kept women, aboriginal people or indigenous people and other minority groups, visible minorities, in particular. Was there any mention, particularly in the equity piece, related to the 2SLGBTQ community?

[Neil Cunningham]

Most definitely we have LGBTQ. We have veterans. We distinguish by multi-generational background and by educational background, as well as ethnicity. It truly is multi-faceted, to capture as much as we can.

Our EI and D council, which is made up of roughly a hundred employees, all on a volunteer basis, have split themselves into eight diversity groups, and each has different activities that they do to promote understanding and information. We do a lot of work with Black Lives Matter. Last year, we had a panel that was entitled.... I can't remember the name of it, but it was several of our Black employees speaking on a panel, largely about education and breaking down the unconscious biases, which we all acknowledge we have, in order to move forward in all of our inclusion and diversity targets.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you, Mr. Cunningham.

As it relates to that last portion, when will this current framework be renewed for diversity and inclusion, and what does the review process look like? Will it be reporting to the board?

[Neil Cunningham]

It reports to the board on a constant basis. It's a new structure, if you like. We talk about it in our responsible investing report. I think you'll see a renewed focus on it in our annual report or our responsible investing report when we next publish them.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Chair, what's the time remaining?

[The Vice-Chair, Liberal, Jean Yip]

You have 30 seconds left.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Perfect.

The most recent indicators were put in place in 2021. When will the next cycle be, and when can the board expect a review of the existing successes, or maybe not successes, of the existing framework?

[Neil Cunningham]

We report at least annually, but we talk about EI and D on a quarterly basis, when the board meets.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Are you saying there won't be a need for performance indicators on diversity and inclusion for now?

[Neil Cunningham]

Well, achievement of target will occur over time, so until we achieve the targets we have, we're not updating them. We look at them every year, of course, to make sure they're still relevant and how we're doing against them.