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Jennifer Reynolds, le rôle du Canada dans la finance internationale

Tous les 15 jours, Nicolas Mackel, CEO de Luxembourg for Finance, invite des leaders de haut niveau des secteurs européen et mondial des services financiers à partager leur point de vue dans le podcast «Shaping Finance». L’invitée du troisième épisode est Jennifer Reynolds, CEO de Toronto Finance International.

Nicolas Mackel . – “Welcome to Shaping Finance, a podcast which offers a platform to high level decision makers and shapers in international finance. My name is Nicolas Mackel, I’m the CEO of Luxembourg for Finance and the host of this podcast.

It’s a great pleasure to welcome today Jennifer Reynolds, the president and CEO of Toronto Finance International. Jennifer has been at the helm of this public private partnership between Canada’s three levels of government, the financial sector and academia since 2017. She will certainly tell us a little bit more about the mission of TFI. Jennifer’s 20-year career in the financial services industry has included senior roles in investment banking, venture capital, and global risks. She holds an MBA from McGill University and will tell us today more about what is going on in, not only Canada in general, but more specifically in Toronto’s financial industry. Welcome, Jennifer, how are you?

Jennifer Reynolds. –  “Good, thank you. It’s a pleasure to be here, Nicolas.

Good, now Toronto is one of the leading financial centres on the American continent. Second actually only to New York. Tell us a little bit, what are the activities of financial institutions in Toronto and what geographic markets do they serve? What explains Toronto’s prominence in financial services?

JR: “Yeah, so as you mentioned, we’re the second largest financial centre in North America and we’re the fourth largest city. So, it’s a very large city. All the headquarters of the major banks and pension funds and insurers are in Toronto and it’s about 13% actually of total GDP. So, it’s a very significant part of our economy here. It’s one of the top 10 ranked global financial centres as well. So, a very leading global financial centre.

If you think about sort of what we have there, our banks are ranked sixth globally, just to give you some idea of the size of the banking sector, the bank and pension assets would be about 10 trillion. And also, our pension funds are very much global investors, which we can talk about as well. Another key interesting factor though about the financial centre is actually our tech sector is enormous in the Toronto Financial Centre. It’s actually the second largest tech cluster in North America.

So that’s a pretty unique dynamic having a very significant financial sector and tech sector together. As you know, innovation is so critical right now for the industry with COVID-19, that’s only increased digitalisation obviously. So that’s been a big benefit for the sector. If you think about concentration of employment here, about 8.5% of the people are employed in financial services and about the same are in the tech sector. So that’s been really fundamental to the growth I think of the Toronto Financial Centre and the growth of our international institutions. Certainly, the large financial institutions are very much focused on not only in North America, but on growth internationally as well, which we can certainly chat about.

The other thing I’d mentioned about Canada broadly and certainly Toronto is when we think about talent pool, it’s very highly educated. One of the most educated in the OECD in terms of post-secondary education. And it’s very, very diverse. Diversity is really critical. Immigration is critical to our economic growth in Canada. It’s very much part of the strategy. And so, we really are out there trying to recruit the best and bring it to our country. And the financial sector is very much a part of trying to attract that talent.

Absolutely. I agree with you that Toronto is obviously one of the leading tech centres, not only in the Americas, but globally, and this has become more important over the last couple of years. Do you, what is the main factor? Is it really immigration, Canada’s policies developed since 2015? What is the main success factor that Canada and Toronto in particular have seen there?

JR: “I think it’s a few different things. Certainly, our post-secondary educations are very strong in STEM, science, technology, engineering, and math. They have a strong focus there. So, we’re graduating a lot of young people from those disciplines, which helps, but immigration is critical. There’s no doubt about it. We have a what we call a fast track system for immigration. So, you can get in as quickly as two weeks, if you’re in certain areas of sort of high demand employment. And certainly, the tech sector qualifies for that type of the immigration system. So that has really helped to attract talent.

And there’s no doubt what’s happening south of the border, it has had a huge impact in Canada too. People who probably would have gone to New York or Silicon Valley are thinking of Canada instead. And thinking, just in terms of number one, getting in and getting a visa is easier. But number two, just the general environment here. It’s very politically stable. It’s very welcoming in terms of immigration. And I think that really is growing. That story we’re hearing that anecdotally over and over again, and companies are choosing here over the U.S. as a result of the environment and the ability to get in and bring others in too later on.

So, you don’t have in Canada movements that would be going against this immigration trend? You don’t have prime ministers who say that citizens of the world are citizens of nowhere and thus have no clue what citizenship means?

JR: “No, we really don’t. You know, I think it’s something you always have to watch and make sure that you’re not, if you think about just populism generally and extremes in society. But we don’t have the anti-immigration feeling here. I think we just understand that fundamentally we’re a large country and we need many people. If you think about our own population growth, it’s not enough. And if we’re going to have economic growth, we understand that we need to be welcoming to people. And I think we also understand that diversity is good. Diversity brings different types of people and talent and ideas. And I think there’s a strong belief that innovation will actually prosper if we’re bringing in different people here. So, it’s something I am proud to say as a Canadian that thus far we haven’t seen that type of rhetoric in this country.

Wonderful. I mean, we Luxembourgers certainly couldn’t agree more with you about diversity being important. That certainly has been key to the success of Luxembourg. Now, how do Canadian investors view the European market, given the image we project with the turmoil around Brexit, around immigration, populism, and now the mess that’s COVID has thrown us into?

JR: “Yeah, I mean, it’s certainly it’s extraordinary times. But if you think just generally about Europe for Canadians, we have a comprehensive trade agreement with Europe, which has been very important. We’re a trading nation and Europe has strong roots there. So that will continue to be an area of focus in terms of investment. There’s no doubt about it. If you think about financial services specifically, about 20% of our financial services exports are in the EU and it will continue to be important. Financial services sector invested about 150 billion in 2018 in the EU. So, all of our financial institutions have offices in Europe, certainly with Brexit what we’ve seen is, and you’re certainly aware of this, there’s those who were only in London or had the most of their employees in London are now looking at other financial centres in Europe, Luxembourg, of course, being one of them.

And we’ve seen many Canadian institutions increase their footprint in Luxembourg and in other financial services centres in the EU. So, I think we’ll see that as certainly just as a bit of a hedge and a bit of in the face of Brexit. But I don’t, certainly I don’t see people exiting London altogether either. I think there’ll just be a more balanced approach when they’re thinking about where do they want their footprint and their people. So certainly, we’ll continue, even with in the face of COVID and the turmoil, that’s what stopped everybody from an economic growth perspective to a certain degree. But once we’re through this, I would expect investments continue to thrive there.

Excellent news, because I mean, obviously Europe needs investments. Everybody will need investments with whatever is left after the crisis. Now, one of the big investors, and you mentioned them already in your introductions are Canadian pension funds. They’re actually among the largest and the most advanced globally. In light of the sustained low interest rate environments that we have seen over the last couple of years and which will certainly not be changed given the current circumstances. How do you see their roles and their strategies evolving over the next month, if not years?

JR: “Yeah, it’s a great question. Because our pension funds are critical components of the financial services sector and the overall economy. And if you think about our global ranking, just to give people an idea of the size. We ranked third in terms of OECD countries, in terms of total assets. So, the pension funds in Canada have gone through an interesting evolution over the last call it 15 years or so. They really were more passive investors I would call it. Now they really have moved too, they have huge investment teams. They’re doing direct investing in many cases, they’re in all asset classes and around the world. So, if you think about where are they investing, if you went back to 2000, there’d only be about 24% of their assets would be outside of Canada. And now that’s 57%. So very international.

And as I said, a lot of direct investments, whether that’s in real estate or infrastructure, different types of private equity too. So, they’ve recognised that they know that if they can have all their investments in Canada or even in North America, that’s just not going to work as an investment strategy if they want to get the returns that they need so that Canadians have their pensions years and years ahead. So, they certainly recognise the importance of having a very diversified portfolio, both geographically and in terms of asset classes. So that will continue I would say. If you talk to the CEOs of the major pension funds today, I don’t think their strategies are changing as a result of COVID.

I think that they will stay the course. I think they feel that they’ve built resilient, long-term focused portfolios, and that that will just continue. Certainly, returns will be hit. There’s no doubt about it in the short term, but I think over the long term they’re feeling confident that the asset mix, the asset strategy that they’ve been pursuing is one which will be the winning strategy for them. And for obviously Canadian pensioners in the future.

Yes, and one of the emerging long-term trends, obviously not only for pension funds, but larger investors and, even more, retail investors is sustainable finance. Now Canada is a major producer of fossil fuels obviously. At the same time, it is striving to build a sustainable economy. So, which side do you see financial services in Toronto taking in this dichotomy and which actions are you promoting also in Toronto with the financial industry to tackle climate change?

JR: “Yeah, I mean this whole debate is a difficult one in Canada. There’s no doubt about it. When we have a part of our country that is a huge oil and gas producer. But if you think about the approach of the financial services sector and the Canadian government, it absolutely is one which recognises the importance of the transition, recognises the importance of driving capital towards the transition and to meeting our goals with regard to climate change. So, we’ve seen a lot of activity. We saw the federal government appoint an expert panel, and they’ve made some recommendations on sort of the roadmap forward for the country. And so now work is actually being executed on those recommendations at this point. Just to give you some idea of the commitments from our five largest banks in Canada that have invested about 850 billion in sustainable finance. We’ve seen these announcements over the last couple of years.

So, there’s definitely a recognition that this is something that needs to happen throughout the world and in Canada. Transition will happen in Canada, just like it’s going to happen in other countries. So, if you think about just the size of the investment, it’s we have some interesting work that just came out this week in terms of what would it cost for us to meet our 2030 goals. So, that goal being to have GHG emissions 30% below what they were in 2005. So, what is the dollar cost? Because we haven’t seen a lot of studies like that throughout the world. What do we actually need to spend to get there in a very granular way? And so, it’s about 130 billion is sort of the estimate of what that would take.

So, it’s actually a very achievable goal. That sounds like a huge number of course, right? But if you break it down, that’s about 0.62% of our GDP in Canada, and it’s about 10% of the total CapEx spend of our publicly listed companies, only 10% of the total CapEx spend. And so, when you put it in those terms, that’s an amount of money that it’s achievable. We can put that power behind the transition, we can afford that. And so, we’re trying to really come at it in a very practical way here because sometimes people think it’s so big, it’s so many dollars. It’s just so hard. How are we ever going to get there? But I think that work proves that we can. So, we really are taking those steps to quantify, to figure out where we invest and how we transition, but it absolutely will be a just transition.

We can’t just forget about the fact that a large part of our economy and therefore our population is working in the oil and gas sector. So, we have to figure out a way to transition that part of our economy in a way which brings those people into different parts of the economy, different industries, clean energy, and that’s difficult work. But I certainly think financial services sector, no doubt about it is a 100% behind this. We’ve seen very bold statements by CEOs of the banks and pension funds that this is direction that Canada must go. So, I think sometimes we had a bit of a bad rap just being an oil and gas producer. But certainly, if you’re here in Canada, the tone, the discussion, the dialogue is very advanced when it comes to meeting our climate goals. There’s no doubt about it.

And on the regulatory sphere, do you have any initiatives, either at the national level, the Canadian level, or at the provincial level to create frameworks like we have in Europe with disclosure regulations or with the taxonomy that will certainly also provide a framework for the financial industry to go about these investments?

JR: “Yeah, I think there’s work being done on two fronts specifically that I would mention. Number one, TCFD, I think we’ve seen growing adoption there. We’ve actually got a capital markets review going on right now of a regulatory review and there’s recommendations around TCFD in there and disclosure. So, I think we will see that come through shortly, but we’re already seeing companies step up without having to and provide that type of disclosure, which is great. Certainly, the larger companies are very active on that front. The other important piece of work that’s being done in Canada is around taxonomy as you were mentioning. I think, obviously globally, people want, we’re hoping we can get to some standards we can all agree on, right? And the EU hopefully put out one which people can fall behind from a green perspective.

But from Canada’s perspective, we actually need some type of transition funding. We need dollars to go towards transition. And therefore, there was a period that we need to transition taxonomy. And so, there’s work with the Canadian Standards Association creating that taxonomy right now, which would outline what are those accredited projects in terms of transition and how do we make sure that we all understand what those are and investors can get behind that. Because there’s actually a huge amount of demand in Canada from investors to put their dollars behind transition. So, we want to make that happen. We want to allow that capital to flow. So that’s going to be an important piece of work too that’s coming up. But I will say that that is more, contrary to what we’ve seen in Europe, those initiatives tend to be more industry-driven as opposed to government-driven at this point. So, it’s an interesting dynamic here in Canada.

Okay, and you mentioned before in the context of discussing immigration and technology, the what is happening south of your border. Is that also something that you are looking at, obviously, how does it impact sustainable finance and all the action in the sustainable area in Canada what is happening south of your border in the United States?

JR: “Yeah, it’s obviously a very different tone in the U.S. when it comes to this topic, particularly from the top of the house. And so, I think it’s an opportunity for Canada to move forward and to hopefully show some leadership here.

Even in the U.S. investors start to be very interested in this.

JR: “Yeah, exactly. That’s the interesting thing, is investors are global investors. You know, they don’t just invest in the U.S., so companies are looking for global investors as well. So, it’s not like companies in the U.S. can completely ignore what’s happening from a climate perspective, from a disclosure perspective. So, they’re not immune to where the world is going on this, but I think certainly it slowed things down, the general tone there. You’re still seeing certain states being very proactive, but you’re not seeing a country level action. You’re seeing banks like Citibank make huge investments into sustainability and many others, but you’re not getting that coordinated action. So I really, I do think that that’s an opportunity for Canada. Hopefully show some leadership and can gain some investment they might not have seen otherwise.

Good. Well, Jennifer, there was something before in the introduction, when I explained what you have been doing that I omitted, that is all the activities you have been very, very much involved as regards to the role of women in finance. You have been a very strong advocate. And the reason why you omitted talking about it is because I want to discuss this with you, because I think it needs and deserves to be a separate question. And that is, what do you think needs to happen to achieve a better gender balance in our industry and especially in higher management levels?

JR: “Yeah, this is an important topic for me. I spent quite a bit of time throughout my career working on this issue and trying to attract women to the industry and trying to work on some of the barriers from women advancing into leadership roles. So, I would say we’ve done a much better job of attracting women at the more junior levels in the industry in recent years, which is a good thing. But we haven’t really been able to break the proverbial glass ceiling, right. To get women into leadership roles. And so, it’s interesting, when I was with Women in Capital Markets, which is an industry association for the financial sector for women, we did some work around exactly this problem is, why aren’t women in their careers making that transition to senior roles?

And it’s interesting because often people will say, ‘Oh, it’s children. Well, they all leave the industry and that’s why they never make it to senior roles.’ And I just don’t buy into that. And so, the work that we did, the data that we got actually showed that the disengagement of women and women falling behind happened long before the childbearing years, it started two, three years into their career. Women and men came into the industry, equally engaged, equally positive about their prospects and women very quickly started to become less engaged and feel that their prospects were not as good. Whereas men’s engagement went up and the curve was actually increasing over time in their career.

So, I think that indicates to me that something is happening in the environment where women are saying, assuming that they’re not going to make it to senior roles, or they’re not feeling encouraged that they can actually go there. And so, I think we need to be very disciplined as an industry about tracking the numbers at every level and really holding our feet to the fire around promotions at every level. Because if we only look at the senior level, we’ll never figure out what the problem is, because the problem is starting much further down the pipeline.

So, I think what we need to do is track every promotion level and really say, ‘We want positive results at every promotion level, If we’re going to have that outcome at the top, and finally have female CEOs of financial institutions, we’re going to see where we’re going wrong.’ And really question ourselves when it’s coming down to say two candidates. The men get the job nine times out of 10 at that particular level. So really, it’s been disciplined. It’s being data-driven and questioning your culture too. I think there is a lot of unconscious bias out there. I don’t believe that men fundamentally don’t want women to advance in their careers.

I actually, I think it’s unconscious. I think there’s just some cultural barriers there that often we make assumptions about abilities. We assess that the value of people perhaps differently based on our biases, but we’ve really got to question those and do the hard work around that if we want a different outcome. Because let’s face it, women have been over 50% of the university graduates now for 30 years. So, we’re there, we’re educated. We’re in the workforce. We’re almost 50% of the workforce in most countries. So, this is one that I think it’s time we finally, we’ve got to face this challenge and beat it hopefully.

Yes. That certainly gives us something to think about. Well, before we conclude, Jennifer, let me ask you a question. Obviously, you have a very high-powered career, on top of it as I know you are a mother of twins. I know something about that myself. Does that leave any time for you to read books? And if so, do you have any that you would like to recommend to our listeners?

JR: “I do actually. I enjoy reading. So even, COVID, one good thing about it is it’s given me a little more time to read, but I used to do a lot of reading on planes flying around. So yeah. So, I’ve been reading all kinds of different ones lately. The two probably most recently that I really enjoyed were one called The New Geography of Jobs, and it looks at, it’s a U.S. example of how do innovation clusters begin. What fosters innovation clusters in particular regions or cities? So that was a very interesting one. And it also talked about how, when you have one of those innovation clusters of economic activity, it sort of rises the tides for all boats effectively. So even if you’re in the service sector, like you’re a hairdresser or you’re working in a restaurant, it actually raises your income relative to a city which isn’t as much of an innovation cluster and doesn’t have that type of economic activity.

So that was an interesting one. And then from a historical perspective, I think one that many people have read, The Splendid and the Vile, the story of the first year of the war and Winston Churchill was a really interesting read as well. I’d recommend that one.

NM: “So thank you very much, Jennifer for sharing your insights and your knowledge with us. It was as always, a great pleasure to chat with you and to have you on this podcast episode of Shaping Finance. Thank you also to our listeners who have tuned in again to this podcast. In our next episode, we will be welcoming Bertrand Badré, the CEO and founder of Blue like an Orange Sustainable Capital. And that tells you also what the subject will be. If you would like to be up to date, then don’t miss out on one of our latest episodes. Please feel free to subscribe to our podcast on iTunes, Spotify and Google. You can also find more information on our website,”