Finance Committee on Nov. 1st, 2016

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

Do I get just one question?

[The Chair, Liberal, Wayne Easter]

Go ahead. You have five minutes.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

Okay.

Thank you very much for coming here today. I very much appreciate it.

I was thinking about the infrastructure bank. I wonder if you could describe some of the advantages and the disadvantages from your perspective of having an infrastructure bank, not only for yourselves, perhaps, but for Canadians. I was also thinking about competition from other large investment funds that will also be coming in and perhaps competing with you in Canada, which you know really well.

[Mark Machin]

Thank you for the question.

We've noted the advice of the council on the recommendation on the infrastructure bank, and we'll watch carefully how that unfolds and what comes from that.

As an infrastructure investor principally on the equity side, I'd say that anything that increases that pipeline of scale opportunities, whether in Canada or elsewhere.... As I said previously, we tend to look at opportunities of over $500 million in size, and that's been one of the biggest challenges in Canada and around the world. There have just not been enough of those scale opportunities, either in size or that are prepared for our type of investment, which generally doesn't invest in greenfield opportunities but more in operating infrastructure over time, where we find that the risk-and-return characteristics are ones that we can understand and that we can be compensated for adequately. We hope there will be more of those opportunities here and elsewhere that we can evaluate and that will be good investments for our pensioners.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

Could you describe any disadvantages?

[Mark Machin]

On the disadvantages of having an infrastructure bank, I think things that improve the pipeline of opportunity are good. More opportunity for investment are good. We welcome competition, and we deal with competition around the world against other people. I think the devil will be in the details of how everything is implemented, if it's so decided to implement.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

I think some of the disadvantages when you do infrastructure projects is that governments can change course. They can change policies. You could be left holding a bag of goods that might not be to your advantage or, I guess, to the pensioners' advantage in the long term.

[Mark Machin]

We'd agree with that statement. That is one of the major risks when we're making infrastructure investments. Infrastructure investments by nature are very long-term investments, and therefore the stability of regulatory regimes around those investments is very important. That includes regulatory regimes, tax regimes, and other factors that may influence the returns on those investments.

In order for governments to get the lowest cost of capital to invest, it will help governments if they can provide that long-term stability of a regulatory framework. That's important, and it's something that we focus on anywhere in the world where we're looking at making infrastructure investments.

[Robert-Falcon Ouellette, Liberal, Winnipeg Centre, MB]

I also heard that you have something like a postal bank. You're part of a group in China where you're earning dividends for CPPIB through a postal bank in China. Could you describe the success of that operation and how it's working for you in China and whether you see more opportunity elsewhere doing something like that?

[Mark Machin]

Yes. With regard to the Postal Savings Bank of China, we made an investment in it about a year ago. It was a private investment at the time. That bank has gone public since then. It's one of the larger banks in China. It has some 400 million customers and 40,000 branches. It's an extremely big bank.

We think it's one that is very exposed to the rise of consumption, particularly the rise of people being pulled out of lower incomes into the middle incomes in the more agricultural and rural areas of China. We think that trend will continue for quite a long time. We're hopeful that we'll benefit from that trend over the years to come.

[The Chair, Liberal, Wayne Easter]

We'll have to end it there. We have to deal with a motion.

There's a motion that is in order, if Mr. MacKinnon wants to move it.

[Steven MacKinnon, Liberal, Gatineau, QC]

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

We'll be back in a minute, gentlemen.

[Steven MacKinnon, Liberal, Gatineau, QC]

I want to thank the board's representatives for meeting with us today. I hope it wasn't too difficult for them.

Mr. Machin, on behalf of my colleagues, thank you for taking the time to meet with us.

In relation to the first question I asked, I move the following motion:

That the Standing Committee on Finance invite the CEO of the Canada Pension Plan Investment Board to appear before the committee to review the board’s results on an annual basis.

[The Chair, Liberal, Wayne Easter]

The motion is in order. Is there any discussion? All those in favour?

(Motion agreed to)

Mr. Machin, Mr. Cass, and Mr. Leduc, I think you've heard some comments of appreciation from members on all sides on the performance of the Canada Pension Plan Investment Board, and that's to your credit.

Mr. Machin, on my behalf and that of the committee as well, congratulations on the role of president and CEO. As you heard around the table, there's certainly a lot of responsibility in terms of taking on that position. You recognize that, and we do as well.

With that, thanks to all of you for your presentation and your forthrightness in terms of your remarks.

We will adjourn. Thank you very much.