Canadian Investment Review

Geopolitics ranked top risk for pension funds: survey

Written by Yaelle Gang on Friday, February 28th, 2020 at 9:38 am

close up of businessman hand showing texture the world with digital social media network diagram concept © everythingpossible / 123RF Stock PhotosPension funds view geopolitical risk as the top risk to the financial system, followed by economic risk and climate risk, according to the Global Risk Institute in Financial Services’ annual risk outlook survey for 2019-2020.

While the survey wasn’t technically broken down by pension plans versus other institutional investors, Sonia Baxendale, chief executive officer of the Global Risk Institute, shared the specific results with the Canadian Investment Review.

Taking the views of all respondents in the financial industry, including banks, insurance companies, pension funds, asset managers and crown corporations, cyber security was identified as the most significant systemic risk for the fourth year in a row, followed by geopolitical and economic risks.

In general, the survey’s most notable finding in aggregate was the movement of climate risk up the ranks, says Baxendale. Among pension funds, this risk was ranked third, while total responses ranked it sixth on the list. “I think the pension funds are ahead of everyone else, but it’s continuing to move up the risk scale.”

Among pension fund respondents, another notable result was the lack of change in confidence in global economies, notes Baxendale. “But I would say pensions probably just, in general, have consistently had a higher confidence level in the overall ability of the global system to withstand shocks. And again, I think the differences we see in the pension funds is reflective of their longer-term planning and longer-term thinking.”

The Global Risk Institute uses the annual survey of its members as a guidepost to determine its activities and areas of focus.

Current Global Risk Institute members include the Alberta Investment Management Corp., the Canada Pension Plan Investment Board, La Caisse de Dépôt et Placement du Québec, the Ontario Municipal Employees Retirement System, the Ontario Pension Board, the Ontario Teachers’ Pension Plan and the Public Sector Pension Investment Board.

Pension funds comprised 16 per cent of the survey respondents.

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