Daily News Alerts

To register for Benefits and Pensions Monitor's Daily News Alerts, click here

Allocations To ESG Bonds To Increase

Institutional fixed income investors around the world plan to increase allocations to ESG (environmental, social, and governance) bonds in the next two years, says a study from Coalition Greenwich. It found more than 90 per cent of the global fixed income investors plan to expand allocations to ESG-labeled bonds. That result points to strong demand from the buy side for sustainability-linked and use-of-proceeds bonds like green bonds and social bonds. “The fact that institutional investors are almost unanimous in their embrace of ESG-labeled bonds should provide a boost of confidence to the organizations and firms working to build out the infrastructure for sustainable investments,” says Stephen Bruel, senior analyst at Coalition Greenwich market structure and technology and author of ‘The Continued Maturation of Fixed-Income ESG Investing.’ However, even institutions planning to expand allocations to ESG-labeled bonds are not entirely convinced that the market today is fully ready to support the demand. More than 60 per cent of institutions believe liquidity in ESG-labeled bonds sometimes falls short of what’s needed, including a quarter of the investors who describe liquidity in these products as “insufficient.” Institutions are increasing allocations to ESG-labeled bonds to align with their own corporate values and in response to pressure from stakeholders. However, almost half of respondents in the study say they are investing in these products for the performance.

IT Risk Guidance Needs Reconsideration

The Financial Services Regulatory Authority of Ontario (FSRA) needs to consider whether the prescriptive elements in its ‘Proposed IT Risk Management Guidance’ are consistent with a principles-based approach that provides flexibility, consistent with the varied size and nature of Ontario pension plans, says the Association of Canadian Pension Management (ACPM). While the guidance acknowledges the need for sector-specific considerations, including those of Ontario pension plan administrators, ACPM says administrators are subject to a fiduciary standard that distinguishes pension administration from the consumer model in brokerages and other regulated Ontario sectors which FSRA alludes to in its reasons for the guidance. As a result, it wants FSRA to consider whether cross-sectoral guidance will, in practice, consistently support the intended outcomes of improved oversight and risk mitigation in the pension sector. In particular, it is concerned that the proposed real-time reporting framework for material IT risk incidents may, in some respects and situations, result in a diversion of resources away from incident management and the creation of additional risk through the sharing of sensitive information. The resourcing and co-ordination associated with such reporting may be particularly burdensome for smaller, single employer plans. Best practices guidance would be preferable for the pension sector, given the nature of the sector and FSRA’s supervisory powers, it says.

For details on these stories, visit www.bpmmagazine.com

• Greenwashing Fines Get Widespread Support
• CETFA Adds Member
• Climate Change Impact Discussed