CAPSA Releases New Guidelines

On June 9, 2022, the Canadian Association of Pension Supervisory Authorities (CAPSA) released draft guidelines on Cyber Risk for Pension Plans, Environmental, Social and Governance Considerations in Pension Plan Management and Leverage and the Effective Management of Associated Risks for consultation and stakeholder feedback.

The Cyber Risk for Pension Plans Guideline focuses on:

• Identifying cyber-related-risk areas for pension plans

• Discussing how cyber risks should be incorporated in the plan’s governance and risk management frameworks

• Describing how plan administrators should prepare and plan for a cyber “incident” and an appropriate response

The Environmental, Social and Governance Considerations in Pension Plan Management Guideline establishes a set of principles with respect to environmental, social and governance (ESG) factors in pension plan management and activities, including in relation to:

• The plan administrator’s fiduciary obligations to the plan in the context of ESG issues

• The implementation of ESG considerations in the plan’s governance and risk management structures and its decision-making processes

• The disclosure of the pension fund’s investment policies in relation to ESG factors

The Leverage and the Effective Management of Associated Risks Guideline focuses on:

• Identifying the types of leverage used by pension plans and the risks associated with such use

• Outlining principles to ensure sound practices for managing leverage and the associated risks when leverage is incorporated into the pension plan’s investments

• Offering metrics and tools that measure leverage and its impact on the plan’s investment and funding risks

Also on June 9, 2022, CAPSA announced that it is considering developing an “inclusive” Risk Management Guideline covering foundational risk management concepts associated with the good administration of pension plans, regulatory expectations and risk-specific sections. This guideline would include the Guidelines on Cyber Risk, ESG and Leverage rather than establishing a stand-alone and separate risk management guideline. CAPSA is seeking stakeholder feedback on whether there is support for such an inclusive guideline.

Comments on the Cyber Risk, ESG and Leverage Guidelines and the concept of the inclusive Risk Management Guideline are open until September 15, 2022.

We welcome comments from all our clients on the draft Guidelines and the inclusive Risk Management Guideline proposal, which we would reflect in the development of our submissions to CAPSA.

For further information, please contact any member of our Pensions, Benefits & Executive Compensation group.