Finance Committee on April 27th, 2023

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Chambers.

We'll still have to find out about that Hunger Games comment, Mr. Countryman, for those who don't watch Hunger Games.

MP Chatel, you have five minutes.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much.

As you will note, Ms. Wong, this committee is very interested in what we can do to strengthen our legislation on proceeds of crime and terrorist financing, among other things. And it has recommended twice that the registry be brought into force. I know you said that you've worked very hard to move this forward. I would appreciate it if you could put in writing what we are missing to meet our standards and what barriers are making it difficult. This would help us better understand your role and help you better.

I want to go back to the Canada growth fund. There are a lot of projects related to that fund and I would like to understand the nature of the projects we will try to fund with the private sector. I'd also like you to give me some concrete examples of the sectors in which we will be investing. What is your plan?

[Anne David]

Thank you for the question.

The Canada growth fund will have the flexibility to invest in many types of projects, companies or technologies. For example, it could be decarbonization projects for industrial companies in the cement, concrete or steel sector. It could also be companies that develop green technologies, such as manufacturers of zero-emission buses. We could also invest in low-carbon supply chains, such as in the sector of critical minerals that are used to make batteries.

[Sophie Chatel, Liberal, Pontiac, QC]

In another context, we've talked a lot about green finance or sustainable finance.

In terms of taxonomy, a lot of work is being done by the International Sustainability Standards Board. I know it's not directly related, but how do you choose the best projects that lead to net-zero emissions and help achieve sustainability goals?

The taxonomy is missing from the budget, unfortunately, while the European Commission and other countries, for example, are moving quickly on this. Yet Canada seems to be waiting. However, it would be important to adopt certain standards in order to properly select projects. Will taxonomy play a role in selecting the best projects?

[Anne David]

Thank you for the question, Mrs. Chatel.

I will pass along the question on taxonomy to my departmental colleagues who are responsible for that sector.

The Canada Growth Fund looks at high-level international standards relating to selection of investments. It reports to the public on certain investment criteria. It will also report on its results, how it reached them, and the criteria it considered.

[Sophie Chatel, Liberal, Pontiac, QC]

I want to make sure I understood correctly. We are going to rely on international standards, but the people at the Department of Finance are working to develop standards for Canada to ensure that projects lead to net zero.

[Anne David]

Yes, some of our colleagues are working specifically on taxonomy. We can send you a written response on that topic.

[Sophie Chatel, Liberal, Pontiac, QC]

We are very interested in seeing the department's progress on taxonomy, since it is related to the motion on green finance that we are studying.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mrs. Chatel.

Those were great questions and answers.

Members and witnesses, we're moving into round four. This will be our last round of questions.

MP Fast, we will start with you. You have five minutes.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you.

I believe most of us around this table, if not all, would acknowledge that government doesn't always get investment decisions right. Medicago and CanSino come to mind. The federal government often fails in its investment decisions, so you'll understand why we on this side of the table are concerned that growth funds that are established by the government be properly managed by the individuals who can actually make the right decisions. I note that the mandate of the Canada growth fund is to actually absorb risks. That is your own testimony.

This is a little different from investing for conventional pension purposes, and yet the PSPIB is the organization you are drawing on to help make the investments for the CGF. I'm just wondering, why did you not cast your net more broadly as you were searching for a fund manager?

[Anne David]

Thank you very much for the question.

With regard to selecting a fund manager, as was previously indicated, the government's intent was to stand up the growth fund quickly so that it could start making the investments to achieve net zero at the speed and scale required. In selecting PSP Investments, the government considered an experienced and independent fund manager that is currently owned by the government—those were some of the criteria—and in addition, an investment fund manager that has already experienced investment teams so that we could quickly stand up a team in order to invest the growth fund.

Just in terms of the distinction between the pension management mandate and the growth fund management mandate, those will be two very separate mandates. Obviously, the PSP will be able to provide some economies of scale by already having investments teams, such as being able to quickly staff up an investment team for the growth fund, but the assets of the growth fund will be managed separately. It will be a separate portfolio with a separate financial mandate to achieve the growth fund's financial objectives and recover its capital, whereas PSP will continue to invest the pension funds with the mandate to maximize returns without undue risk or loss.

[Ed Fast, Conservative, Abbotsford, BC]

Did I hear correctly that you it was the ability to set up the CGF quickly that drove your decision to go with the PSPIB?

[Anne David]

That's correct. It was the desire to quickly have an expert investment team ready to make investments in the near term.

[Ed Fast, Conservative, Abbotsford, BC]

But these are much higher-risk investments. In fact, by definition, this is about the absorption of risk by government to enable and catalyze green innovation in Canada.

Is that correct?

[Anne David]

That's correct.

[Ed Fast, Conservative, Abbotsford, BC]

Did you also say that the fund manager had to be owned by the government?

[Anne David]

I'm saying that one of the benefits of selecting PSP is that it was an existing investment fund that is owned by the government.

[Ed Fast, Conservative, Abbotsford, BC]

If those are the two criteria—setting it up quickly and it has to be owned by the government—that severely limits your ability to bring in expertise to get these investment decisions right.

[Anne David]

As previously indicated, PSP is one of the largest pension investment managers in Canada and has expert investment teams. That was a significant driver to the decision to select PSP to manage the growth fund.

[Ed Fast, Conservative, Abbotsford, BC]

The CGF is not a pension fund. Is that correct?

[Anne David]

That's correct. The CGF is an investment fund.

[Ed Fast, Conservative, Abbotsford, BC]

It's a higher risk investment fund.

[Anne David]

That's correct.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you.

Listen, I also just want to ask a question about the recent high-profile bank failures in the United States and in Europe. The budget does try to address that, including giving the minister extended power to address the coverage under the deposit insurance regime.

Can you tell me examples of circumstances where the Minister of Finance would use her authority to increase the deposit insurance limit?

[Rachel Grasham]

As I noted, it is a temporary measure. Our system is very strong and very resilient. It's well capitalized. It's very well regulated. However, given the circumstances in the U.S., there's always that concern around contagion in the financial sector. Our financial institutions are global in scope—