Companies That Offer Pension Plans – Without a strong message from shareholders, big banks will continue to finance fossil fuel expansion and lend money to companies that violate indigenous rights.
But big banks have to listen to their shareholders — and your pension fund is an important shareholder.
Companies That Offer Pension Plans
Tell your pension fund to vote to end fossil fuel expansion and respect indigenous rights at the RBC and TD Annual General Meetings this April.
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On April 5, the Royal Bank of Canada (RBC) holds its Annual General Meeting (AGM) — where RBC’s shareholders and executives gather to make key decisions about the year ahead. Canada’s public pension funds hold more than $2.8 billion in shares in RBC. And on April 20, TD Bank is holding its AGM. Canadian pension funds hold more than $2.4 billion in shares in TD.
This year’s AGMs of big banks are a clear opportunity for our pension funds to fulfill their promises to engage companies to protect our climate and respect indigenous rights. Investors, indigenous groups, community banks and allies submitted shareholder resolutions asking RBC to:
RBC and TD are Canada’s two largest banks and talk a lot about their commitments to climate action and aboriginal rights. But the big banks’ track record of financing oil, gas, coal and pipelines, including projects and companies that ignore indigenous rights, tells a very different story. That’s why RBC and TD shareholders are pushing back against the bank’s fossil fuel financing, greenwashing and aboriginal rights violations at this year’s AGMs.
We need Canadian pension funds to join them. Pension funds must ensure that companies they own work to solve the climate crisis, not make it worse. RBC and TD’s continued fossil fuel funding and lack of credible climate plans undermine the urgent action needed to avoid catastrophic climate change, putting our collective future and our pension savings at risk.
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Our pension funds claim to be concerned about investing our retirement savings in a secure climate future. They claim that their ownership of shares in companies such as RBC and TD enables them to manage climate risks, reduce carbon emissions and improve corporate behavior. And they claim to use voting at AGMs as a way to encourage companies to act on the climate crisis.
The RBC AGM on April 7 and TD Bank AGM on April 20 is the ideal opportunity for our pension funds to prove it.
Tell your pension fund managers to vote for climate action and indigenous rights at this spring’s big bank AGM. The Pension Health Pulse (MPHP), which tracks the average solvency ratio of the defined benefit (DB) pension plans within the pension database of ‘, was 101% on September 30, 2021, and is a slight improvement on the ratio of 100 % on June 30, 2021.
Investment returns for pension plans were largely flat during the third quarter. Equity returns were largely positive, however, bond returns increased in the quarter. The increase in bond yields led to negative returns on fixed income investments, but also resulted in lower solvency liabilities. As a result, there was a slight improvement in the financial position of most pension plans during the quarter. Of the plans in ‘s pension database, just over half (53%) are estimated to be in surplus on a solvency basis, 31% have solvency ratios between 90% and 100%, 11% have solvency ratios between 80% and 90. %, and 5% have solution ratios less than 80%.
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“The financial positions of pension plans continue to improve in 2021, and unless an unexpected event occurs, are on track to end 2021 in a much better position than they started,” said Ben Ukonga, Principal in the Financial Strategy Group of .
As vaccination rates continue to rise, economies continue to reopen, global supply chains re-established, there is cause for optimism in the continued strength in equity markets and pension plan funding positions. However, potential headwinds still exist, including stagnant increases in vaccination rates, risk of new vaccine-resistant strains of the COVID-19 virus, inflation, future levels of interest rates and reactions from markets to central banks to monetary policies like ours. to get out of the pandemic.
When these risks are considered along with geo-political tensions, political gridlock (especially in the US) and political interference in capital markets and with private companies, pension plan funding positions could still be a bumpy ride.
“As the funded position of their pension plans improves, plan sponsors should reassess the risk of their plans, and decide whether because of the improved positions, it is time to lock in some of these gains. As we all saw in March of 2020, markets can change quickly . Having the right plan and strategy in place is essential to ensure that a plan can take advantage of market gains and be protected against market declines,” said Ukonga.
Defined Contribution Pension Plan
With the asymmetry of pension plan funding for single employer pension plans, well-funded closed and frozen plans have little reward for taking market risk. They should think about taking risk off the table by increasing their allocations to defensive assets, and better matching plan investments to plan liabilities.
For open-end plans and plans with longer time horizons, with returns on fixed income investments at historic lows, these plans must continue to remain invested in growth assets to remain affordable, and will need to manage the volatility that comes with investing in growth assets. However, the volatility can be managed through broader diversification in their public market investments (asset classes and across geographies), increased allocations to private markets, strategic use of margins, and including risk-sharing features in their plan design.
A typical balanced pension portfolio would have posted a return of -0.1 percent during the third quarter of 2021. There was more evidence that the global increase in the delta variant was beginning to impact economic growth. While highly vaccinated countries like the US and the UK are doing well by staying open, countries in the Asia-Pacific, where vaccination rates are lower, continue to struggle.
Global equities had positive returns, with the US outperforming all developed market peers. Canadian value stocks reversed course and outperformed growth stocks during the third quarter. Canadian equities underperformed global markets with the exception of emerging markets, driven by the cyclical makeup of the market and the underperformance of the materials sector. Emerging markets were a notable underperformer as regulatory pressures on China’s technology sector continued to mount on the investment landscape. Reversing the trend observed in the first half of 2021, returns for Canadian investors were strong as the Canadian dollar depreciated against most major currencies. The US dollar on the other hand strengthened against almost all major developed and emerging market currencies.
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Both Canadian universe and long-term bond yields were negative during the quarter, as yields rose 11 bps and 14 bps, respectively. Corporate bonds outperformed their government counterparts as the risk environment persisted throughout the third quarter.
Investor preferences within the Canadian real estate market remain highly segmented as it relates to sector choice. Investors continue to seek exposure to the industrial and multifamily sectors as they continue to show favorable characteristics. While the broader sector remains bearish, we are also seeing interest in select key retail assets. Canadian vaccination numbers have now surpassed levels seen across the United States, however there remain ongoing concerns about a possible variant resurgence and accompanying restrictions. As a result, uncertainty remains within the broader office, retail and hospitality sectors.
“Stocks within emerging markets continue to be dominated by China. Since the beginning of the year we have seen a number of regulatory actions in the areas of antitrust, data security, private education and cryptocurrencies. We have also witnessed the financial problems of high-profile companies such as China Huarong and Evergrande. These events emphasize the importance of choosing an active mandate through an investment manager with specialist knowledge in China,” said Venelina Arduini, Chief at nada. “While the decline in equity markets has reduced valuations, presenting a cheaper entry point, investors should allow more time for the current regulatory dust to settle before increasing their allocation to this region.”
Both the U.S. Federal Reserve and Bank of Canada kept their target rates at 0.25 percent for the third quarter of 2021. The Federal Reserve has indicated that moderation in the pace of asset purchases may soon be warranted if progress toward its dual targets is made. continues wide because expected.
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The Pension Health Pulse tracks the average ratio of liquid assets to liquid liabilities of the pension plans in the pension database, a database of the financial, demographic and other information of the pension plans of customers in Canada. The database contains information on more than 500 pension plans across Canada, in every industry, including public, private and not-for-profit sectors. The information for each pension plan in the database is updated each time a new actuarial financial valuation is performed for the plan. The financial position of each plan is projected from its most recent valuation date, reflecting the estimated accrual of benefits of active members, estimated payments of benefits to retirees and beneficiaries, allowance for interest, estimate of the impact of interest rate changes, estimates. of employer and employee contributions (where applicable), and expected investment returns based on the target investment mix of the individual plan, where the target mix for each
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