Evidence of meeting #20 for Canada-China Relations in the 44th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was investment.
A video is available from Parliament.
Conservative
Randy Hoback Conservative Prince Albert, SK
You talked before about how legislation would be a blunt instrument with regard to creating some sort of enforcement similar to what they do in the U.S. What would be a good instrument that wouldn't be so blunt, that could achieve the results that we want?
Senior Managing Director and Global Head, Public and Corporate Affairs, Canada Pension Plan Investment Board
It would be strong, transparent disclosure by all companies in a standardized way.
Liberal
The Chair Liberal Ken Hardie
Thank you very much, Mr. Hoback.
We'll now go to Ms. Yip for five minutes or less.
Liberal
Jean Yip Liberal Scarborough—Agincourt, ON
Thank you very much for coming to this evening session.
My question is for Monsieur Leduc.
First of all, it is impressive that CPP Investments has nearly 2,000 companies in its portfolio, among a potential universe of 10,000. How does your organization manage to incorporate and monitor the number of companies for ESG criteria effectively? It seems like a lot.
Senior Managing Director and Global Head, Public and Corporate Affairs, Canada Pension Plan Investment Board
It is a lot. We're risk-focused, so it wouldn't be a process of combing through, say, 2,000 particular constituents. When it's a particular sector that may be involved in an area that would have a higher controversy score or is known to have issues around governance, then we're also able to acquire a wide variety of reports that are available to investors around the world. They're a little bit like report cards. If there are any red flags, it's a lot more efficient to then do a deep dive to understand how they treat human rights. We're risk-focused in understanding where we could best place, efficiently, our attention.
Liberal
Jean Yip Liberal Scarborough—Agincourt, ON
Okay.
You mentioned in your opening statement the “exclusions and exits” section of your policy on sustainable investing. Could you elaborate on that? Are there timelines to provide a quick exit should an investment be contentious or very unfavourable?
Senior Managing Director and Global Head, Public and Corporate Affairs, Canada Pension Plan Investment Board
Yes. As an example for the first part of your question, if there are things that are against policy, such as mines and munitions, we would obviously not invest in that area. That would be one.
In terms of exits, it's not a satisfactory answer to say “it depends”. If it's a real asset, such as a toll road, for example, that's not easily disposed of. If it's a publicly traded security, we could do it very quickly. It all depends on what the nature of the asset might be.
Liberal
Senior Managing Director and Global Head, Public and Corporate Affairs, Canada Pension Plan Investment Board
No.
Liberal
Jean Yip Liberal Scarborough—Agincourt, ON
Okay. Well, that's a good answer.
Does CPP Investments continue to have any investments with Tencent?
Senior Managing Director and Global Head, Public and Corporate Affairs, Canada Pension Plan Investment Board
Yes, we do.
Senior Managing Director and Global Head, Public and Corporate Affairs, Canada Pension Plan Investment Board
It's an investment that we made almost a decade ago. We recognize that the organization has evolved and changed along with the issues associated with their operations. One example might be dual-use technologies. They were built for a particular intention, and then over time they may be used for intentions that were not contemplated at the time. It is something that we are seized with and are monitoring very, very closely.
Liberal
Jean Yip Liberal Scarborough—Agincourt, ON
You're aware that certain parts of the business may be engaged in surveillance. How do you come to the decision that this is not acceptable and move on?
Senior Managing Director and Global Head, Public and Corporate Affairs, Canada Pension Plan Investment Board
We haven't made any conclusion. It is an exposure we have that we're monitoring very, very closely to continue to understand the risks, including some broader human rights-related dimensions of that investment.
Liberal
Jean Yip Liberal Scarborough—Agincourt, ON
Okay.
Aside from Tencent, what about the seven equities linked to forced labour and the six equities linked to the construction of other infrastructure, of less-than-desirable infrastructure?
Senior Managing Director and Global Head, Public and Corporate Affairs, Canada Pension Plan Investment Board
I'm sorry; are those specific companies or entities?
Senior Managing Director and Global Head, Public and Corporate Affairs, Canada Pension Plan Investment Board
Generally, we've improved our processes. It used to be that we had a very rigorous process, and we continue to have a very rigorous process, associated with direct investments where we would have a large exposure. When it comes to, say, an index with maybe hundreds of companies with tiny exposures, even there we've established the rigorous process we have for direct investment onto those broader index-based investments.
As I mentioned earlier, we did a very deep dive combing through all of the exposures, trying to understand what their business is and trying to understand where they may be exposed through supply chains that would be unacceptable to us. We're confident in that process and we're confident in the number of holdings that we were careful not to invest in, but the capital markets are dynamic. Bad guys are often ahead of the good guys. It's always a changing set of circumstances, but we continue to be very focused on monitoring the risks.
Liberal
The Chair Liberal Ken Hardie
Thank you.
We're now going into the third round. The order I have is Mr. Viersen, Mr. Cormier, Mr. Trudel and Ms. McPherson. If everybody sticks to the time, we'll get that done.
Mr. Viersen, it's over to you for five minutes or less.
Conservative
Arnold Viersen Conservative Peace River—Westlock, AB
Thank you, Mr. Chair.
Thank you to our guests for being here.
This question is for the Canada Pension Plan Investment Board.
The Canadian pension fund is invested in the Postal Savings Bank of China. Does that investment continue?
Senior Managing Director and Global Head, Public and Corporate Affairs, Canada Pension Plan Investment Board
I will have to get back to you on that. I'm sorry. I don't have that information with me right now.
Conservative
Arnold Viersen Conservative Peace River—Westlock, AB
Okay.
It's interesting; China and Africa are similar in population. In terms of the percentage of your portfolio, why such a focus on China when it seems to be excluding...? Africa just gets lumped in with a number of other continents, and China is one country. What's the difference?
Senior Managing Director and Global Head, Public and Corporate Affairs, Canada Pension Plan Investment Board
One difference is that China is one market. It's a complex market, but it's one market. Africa has dozens of very different markets with very different risks associated with each market.
Once we're in a market, we're in for the long run. As I mentioned earlier, it's about developing relationships and understanding the business culture, and it is much more efficient to do that in one market than to try to open up, say, 17 offices.