Dail News Alerts
Joe Hornyak
Former editor of Benefits and Pensions Monitor and founder of Joe Hornyak Communications
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ESG Reporting Standard Faces Challenges
In recent years, rising frustration among investment managers and retail investors over the plethora of competing ESG (environmental, social, and governance) reporting standards and rating agencies has led to calls for standardizing the mandatory disclosures of ESG information. While in theory having a universal ESG reporting framework would bring consistency to ESG reporting, in practice, serious implementation and enforcement challenges would arise from mandating a uniform set of reporting standards that apply to all public companies, says ‘The Impracticality of Standardizing ESG Reporting (ESG: Myths and Realities),’ a Fraser Institute essay. Its authors ? Elmira Aliakbari, director of natural resource studies, and Steven Globerman, a senior fellow and Addington chair in measurement, at the institute ? say a significant challenge when mandating uniform ESG disclosure regulations and applying them to all public companies is related to implementation difficulties. In particular, identifying ESG materiality (defining what specific ESG issues are topics for reporting) will inevitably be arbitrary and unsatisfactory to many ‘stakeholders.’ “ESG encompasses a broad set of issues including waste and water management, supply chain management, hiring and compensation, and climate change. Stakeholders’ interests in ESG differ. Hence, so do their views of what is of material interest for corporate disclosure,” they say. Adding to the identification challenge is the fact that the materiality of specific ESG information will depend upon company-specific attributes including geographic location, industry, and business model. Verifying ESG information for internationally diversified companies with large and dispersed supply chains would be extremely costly, if not impossible, they say.
Double Valuations Add Cost To Quebec Plans
Retraite Québec should not require pension fund actuarial solvency valuations carried out in the past to be modified, considering the costs involved and the confusion that this could create, says the Association of Canadian Pension Management (ACPM). In a letter to the Quebec pension fund regulator, it says some of its members in Québec have received calls from Retraite Québec regarding the methods used in actuarial solvency valuations to value the liabilities of active members and members entitled to a deferred pension, located outside of the province. In Québec, the only option available in the event of an actual termination of the plan is the transfer value. Outside Québec, members can choose between the transfer value and the purchase of a deferred or immediate annuity. In such cases, actuaries establish appropriate assumptions to assume what percentage of the covered members outside Québec would choose one of the available options. For Retraite Québec, however, the solvency liabilities of all active and deferred members are valued using transfer value assumptions, regardless of whether they are in Québec or outside Québec. Its position is that the hypothetical wind-up valuation of the plan could not be used for the purposes of the solvency valuation. The consequence of this is that separate valuations would be made on a solvency basis and on a hypothetical wind-up basis of the plan. This will result in increased costs for pension plans to perform actuarial valuations on an additional basis, potential confusion among pension committee members and plan members to explain that the solvency valuation assumes plan termination, but that the results are different from the valuation on a hypothetical wind-up basis of the plan. ACPM also points out that the differences between the solvency valuation and the valuation on a hypothetical wind-up basis would, in most cases, be minimal. It wants Retraite Québec to reconsider its position or grant exemptions to allow only one valuation to be carried out.
For details on these stories, visit www.bpmmagazine.com