Environmental, social and governance (ESG) Factors
Taking into consideration the environmental, social and governance (ESG) factors in supplemental pension plans is a subject of current interest for stakeholders involved in such plans. Integrating the factors into the decision-making process could make it possible to better manage certain risks, and could improve the performance of the plans' pension funds.
The factors mainly concern investments, but also other aspects such as the administration, conception and governance of a pension plan.
Examples of ESG factors
Environmental
- Climate change
- Pollution
- Biodiversity
- Deforestation
- Energy efficiency
- Waste management
- Water scarcity
Social
- Diversity
- Inclusion
- Work conditions
- Compliance with legislation
- Human rights
- Relations with communities
- Contribution to society
Governance
- Composition of the Board of Directors
- Executive management remuneration
- Corruption
- Lobbying
- Political contribution
- Whistleblower program
- Transparency
Certain plans already have a policy that deals with sustainable investments and that takes ESG factors into account.
Survey with administrators
For several years now, Retraite Québec has been implementing best practices focused on sustainable development. ESG factors are an integral part of sustainable development.
As mentioned in its Plan stratégique 2024-2027 (2024-2027 Strategic plan; French only), Retraite Québec wishes to make a significant contribution to the development of sustainable finance by raising awareness among pension plan administrators of the need to take ESG factors into account in their decisions.
Retraite Québec wanted to provide a portrait of the consideration of ESG factors in supplemental pension plans. To do so, and in accordance with its Plan d'action 2023 (Action plan for 2023; French only) and its sustainable development strategy, Retraite Québec conducted a survey with plan administrators in May and June 2023. The main objectives of the survey were:
- to measure the extent to which ESG factors are currently taken into account in plans;
- to establish indicators that will make it possible to set targets for the integration of ESG factors into plans, and to monitor their implementation over time;
- to guide Retraite Québec's actions in this regard.
Summary of the methodology
The survey covered 785 of the supplemental pension plans monitored by Retraite Québec. Data collection was carried out between 25 May and 23 June 2023 using an online questionnaire. The administrators from 390 affected plans responded to the survey, giving a response rate of 49.7%. Due to this low response rate, the results cannot be generalized to all plans surveyed. The results therefore relate exclusively to the plans whose administrators responded to the survey.
Summary of the results
Pension plan administrators' level of knowledge regarding sustainable investments
of responding administrators consider themselves to be "beginners" (meaning they know the basic concepts of sustainable investments) or have "no knowledge at all."
mentioned having an "advanced" level of knowledge (meaning they can distinguish between the different approaches to sustainable investments and are able to weigh them).
Interest in and training on sustainable investments
63%
of responding administrators claim that there have been discussions about sustainable investments between the administrator and portfolio manager of their pension plan over the past 12 months.
64%
of responding administrators would like to see Retraite Québec offer training on sustainable investments.
Initial measure of the consideration of ESG factors
30%
of responding administrators claim to have developed a sustainable investment policy that takes ESG factors into account, or to have added a section on this subject in their investment policy.
The main motives for administrators to consider ESG factors in their investment strategy are the following:
69%
Improve financial risk management
66%
Respect their missions and values
60%
Fulfill their fiduciary obligations
52%
Generate a social or environmental benefit
- Among the 70% of responding administrators who have not developed a sustainable investment policy that takes ESG factors into account, and who have not added a section on this subject to their investment policy:
- Nearly 26% of them plan to develop a sustainable investment policy that takes ESG factors into account by the summer of 2025 or add a section on this subject to their investment policy;
- the lack of knowledge of nearly 31% of them is the main reason why they do not take ESG factors into account in their investment strategy.
Retraite Québec's actions
Retraite Québec aims to increase the rate of adoption of sustainable investment approaches by plan administrators from
30% (the initial measure taken from the survey)
to 50% by 2027 (see the
Plan d'action de développement durable 2023‑2027 (2023-2027 Sustainable development action plan; French only).
To do so:
- a question is included on the 2023 and subsequent Annual Information Returns (AIRs) to track the progress of the consideration of ESG factors. It is the question of line 401.5, which reads as follows: At the time this return is being completed, has the plan administrator developed a sustainable investment policy or added a section to its investment policy dedicated to sustainable investing that includes the environmental, social and governance (ESG) factors?;
- ESG factors have been covered since 2024 during training on the role and responsibilities of the pension committee;
- other actions related to ESG factors could be considered if necessary.
CAPSA's actions
On 9 September 2024, the Canadian Association of Pension Supervisory Authorities (CAPSA), of which Retraite Québec is a member, published the Guideline for Risk Management for Plan Administrators (Guideline number 10) 
. The guideline takes into account ESG factors, among other things. Retraite Québec participated in its development in collaboration with other governments in Canada.