The Canadian market is buoyed by its strength, stability and transparency. In addition, Canada still holds on to its fundamental character for which it is recognised globally, outlines CIBC Mellon’s Richard Anton
Canada’s banking and regulatory environment retains a strong position among institutional investors, marked by its status as a robust and mature market, with high rankings for its stability and transparency, attractive risk profile and status as one of the few remaining countries with a AAA sovereign debt rating. Central to this confidence is the continuing focus of Canadian market participants on a culture of prudent risk management, due diligence and technological innovation. Long known as a global safe harbour in turbulent markets, Canada’s market continues to uphold its fundamental ‘Canadian character’.
Technological innovation and data complexity
The hunger for new and greater sources of data comes from an array of opportunities. For many institutional investors, the demand is loudest from front office teams looking to keep pace with competition for investment opportunities. The COVID-19 pandemic has increased pressure to digitise operations, and highlighted the inefficiencies most firms have in the data supply chain to support their front office teams. The pandemic also brought to light the challenges for middle- and back-office operations facing an increasing gap in data infrastructure and operations.
Clients want a clear view and greater transparency around account activities in order to support governance and risk management reporting — something they are now being asked to provide to their stakeholders. To keep clients well-informed, market participants are turning to their providers to distill complex settlement and account information, in order to receive the confidence they need in the protection of their holdings. Simultaneously, institutional investors also expect their asset servicing providers to leverage new technology. In this environment, providers must take the time to thoughtfully explore new solutions and look at how these new solutions can be securely deployed.
The usage of technology to further automate capabilities has been an ongoing development in the marketplace. In particular, we believe the remote pandemic-driven environment has further accelerated long-term trends related to digitisation and the streamlining of operating models, particularly as organisations continue to focus on the areas where they can deliver core value to clients.
The former is being carried out while organisations continue to outsource non-core activities to providers that can offer the necessary scale, technology and expertise to deliver success. Participants are looking for greater transparency, as well as flexible and timely access to data, all while respecting and navigating a rapid rise in regulatory and market complexity.
We also see that clients are requesting an evolving hybrid model as institutional investors evolve their operations over a long-term plan. They want to be able to integrate a wider range of data sets and focus resources on complex analysis, but also be prepared to allocate operational functions to their asset servicing provider.
This has provided many clients with the best of both worlds — minimising in-house operational activities, but continuing to leverage technology to better meet their strategic information delivery objectives. We are also seeing clients leverage a co-sourced relationship for intake and interfacing with multiple data vendors, data validations and mastering, leaving the asset managers to focus on data governance and client enablement.
The impact of greater automation and technological innovation is consistent with the broader themes: more efficient, effective and transparent investment operations, and ultimately, greater optimisation outcomes for clients.
One of the attributes that makes Canada attractive is how our business and market environment blend high innovation with high governance. This integration of innovation and governance also extends to the way the regulators and government entities have approached new asset classes, new instruments, and new markets.
Embracing the ESG imperative
As organisations consider their investment allocations, investment management, compliance monitoring and operational efforts in the years ahead, the opportunity to align their purpose with what they do, and how they do it, will likely continue to rise — as will pressure from data that increasingly correlates value and values around the incorporation of ESG factors. Investors’ rapidly evolving attitudes and explorations of ESG have set their influence to a macro level. The ESG imperative is driving change, not only in the way organisations go about their business, but also in the way they define themselves and think about their own role in the world. Canada is increasingly a locus for global ESG momentum: the North American office of the International Sustainability Standards Board is located in Montreal, further cementing the regional hub as an ESG centre of excellence.
This year, the Canadian federal government issued its first green bond, raising CAD$5 billion in an oversubscribed offering. In its 2022 Federal Budget, the Government of Canada states that Canada’s Office of the Superintendent of Financial Institutions will “consult federally-regulated financial institutions on climate disclosure guidelines in 2022, and will require financial institutions to publish climate disclosures starting in 2024”. Furthermore, the Government of Canada will move forward with requirements for disclosure of considerations, for federally-regulated pension plans.
Canada’s talent pool
In global estimation, Canada shines brightly as a business destination. Canada is recognised for its highly-skilled, well-educated and diverse workforce. The country also holds status as a hub for technological innovation and advanced infrastructure.
According to The Economist Intelligence Unit, Canada retains first place in its regional rank of G7 countries for the best business environment.
Toronto is even home to MaRS, North America’s largest urban innovation hub — a launchpad for start-ups, a platform for researchers and a home to innovators.
Institutional investors look to their asset servicing providers for local insights, a consultative service experience and to proactively explore new solutions to help clients achieve their goals. The ‘S’ in ESG increasingly focuses on how an organisation treats its own employees.
The outlook for 2023 is one where employees, workforce and talent are rapidly coming into sharper focus. Headlines point to the ‘Year of the Employee’, ‘The Great Reset’, or ‘The Race for Talent’.
Many organisations are confronting both challenges and opportunities related to retaining or capturing top talent that can help drive organisational outperformance.
Firms are looking to build and reinforce an engaged employee culture that is collaborative, insightful, and puts clients at the centre.
A local presence
Overall, in the Canadian market, we are experiencing rapid technological change, and CIBC Mellon is embracing opportunities for innovation. By using automation to drive efficiencies, certain repetitive tasks can be automated, allowing employees to focus on more value-added opportunities.
While up-to-date technology and products, a solid risk culture, and a great client service model are key foundations of our business, our people are central to CIBC Mellon.
Our employees’ ability to listen to clients, champion client initiatives, and understand client priorities, in the framework of market and industry trends, is critical.
One of the attributes that makes Canada a great market is how our business and market environment blend high innovation with high governance. From a global perspective, Canada is mostly seen as a stable, well-regulated market with a concentrated banking sector and a wealth of resources.
The Canadian market still retains its fundamental character that it is globally known for, strength, stability and a prudent regulatory environment.
