Evidence of meeting #33 for Finance in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was investments.
A video is available from Parliament.
Conservative
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
Permitting would be one of them.
Conservative
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
Typically, it's the uncertainty and the time.
Conservative
Jasraj Singh Hallan Conservative Calgary East, AB
Do bills like Bill C‑69 play a part in that? Do anti-development laws play a part?
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
I would have to be more familiar with that particular piece of legislation.
Conservative
Jasraj Singh Hallan Conservative Calgary East, AB
Okay.
With regard to permitting itself, do you have more specifics on that? There is a report that says that Canada is second-last in the OECD.
Liberal
The Chair Liberal Karina Gould
You will have to answer that in another round because that is your time.
We are going to continue now with Mr. Turnbull for five minutes.
Liberal
Ryan Turnbull Liberal Whitby, ON
Wonderful.
I'm going to pick up on some of these themes anyway, so maybe we'll get a chance to answer some of your other questions.
I know that there are things governments can do when it comes to helping manage climate risk and perhaps deploy capital. I know that OSFI put out their B-15 guideline for federally regulated financial institutions. That sort of mandated across our financial institutions a level of having to manage climate risk.
You mentioned climate change as the single biggest risk for long-term investment—I think that's a direct quote—and I was glad to hear you say that. We've done such things as clean economy investment tax credits, the Canada Infrastructure Bank, the strategic innovation fund and the Canada Growth Fund. The government is doing a lot in terms of hopefully increasing the risk-return profile, perhaps, by de-risking some of those investments.
We also have had green bonds, which I'm sure you've participated in. We've also committed to $10 billion per year of green and transition bonds in 2027 and beyond. Can you speak to CPPIB's interest in the Canada green bond and transition bonds program?
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
We're actually an issuer of green bonds. Canadians may not be familiar with the fact that we issue more than $100 billion in CPPIB capital bonds around the world. Our green bonds then allow us to fund our green investments. The wide range of the tool kit, say, and some of the things you've described are critically important. Obviously, it's a global phenomenon to help investors navigate through climate change risk.
If I may, to discuss a little bit our approach around what I indicated, we see the path to a low-carbon world to be a whole economy transition, but when we look at high-emitting sectors, including conventional energy, faced against growing demand for energy from all over the world, the world will not get to a low-carbon world without the patient capital that is necessary to transition. When we're faced with calls for divestment, the world can't get there without the type of capital we bring—the constructive, productive, patient capital. It just won't happen. Those companies will not be able to go from grey to green.
That is how we see managing the risk.
Liberal
Ryan Turnbull Liberal Whitby, ON
I agree completely, although I will say that I think there are things the Government of Canada can do to help with the transition. I think our planning to pilot the first transition bonds, for example, might perhaps be one of the things.
The other thing I'm particularly passionate about is the two pieces of financial infrastructure that have been missing—that is, to have a green and transition taxonomy for Canada and to have climate-related financial disclosures. I'm wondering if you could speak to how those create more transparency in the market, allowing you better and more useful information for investment decisions and allowing you to manage climate risk more effectively, etc.
Would you speak to whether CPPIB is supportive of those two initiatives that the federal government has recommitted to and is moving forward on?
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
Mr. Turnbull, you've hit a very important point, which is the level of uncertainty around measurement for global investors. There's an expectation, a genuine and legitimate one, from the public and from our shareholders, the contributors and beneficiaries, to better understand how we're managing risk around climate change. We want to be as transparent as we possibly can. In terms of the taxonomy, having a standard that is broadly available is fundamentally critical for us to be able to demonstrate, from year to year to year, the progress we are making and also, very importantly, the progress of the portfolio companies, and the assets we're investing in, to be able to give us transparency.
Our portfolio is made up of assets. The carbon exposure we have is determined by having a clear line of sight into that data. The taxonomy is so critical to that.
Liberal
The Chair Liberal Karina Gould
Thank you, Mr. Leduc.
Thank you, Mr. Turnbull.
Mr. Garon, you have the floor for two and a half minutes.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
Thank you, Madam Chair.
Mr. Leduc, I would just like to clarify a few things. You are told that 60% of your investments are in the United States, for example, and you are criticized for that. In my mind, I always had the sense that the U.S.'s share of global market capitalization was larger than its economy. The reason is that many companies listed on the exchange in the United States do business all over the world, including Canada, while companies listed on the exchange in Canada tend to operate mostly in Canada.
When you speak about the percentage invested in the U.S., is that percentage based on the market capitalization you have, or is it a measure of the business operations that take place in the U.S.? How is that calculated? Do those companies do business in Canada?
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
That is a very good question and a good observation.
For us, it is the value of the investments. I will use a simple example. I mentioned that we are investing in ports in the United States. Let's say that the value of those investments is $10 billion. We also have investments in the five big tech companies, including Google or Alphabet, which are actually the same company. Let's say that those investments total $15 billion. To obtain the value of all our investments in the U.S., we add all of that up. The percentage is the value of our investments in the U.S. out of $800 billion.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
That means Canadian business operations represented on the U.S. stock market are counted as an American investment.
When a company is listed on both the Toronto Stock Exchange and the NASDAQ, for example, how is that calculated in your portfolio in terms of geographic allocation?
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
If the companies are headquartered in the U.S. and listed on the NASDAQ, for example—I believe they are only American companies, but I am not certain—that would be included in the percentage of our U.S. investments.
Liberal
The Chair Liberal Karina Gould
Thank you, Mr. Garon.
Thank you, Mr. Leduc.
We'll continue now with Mr. Kelly for five minutes.
Conservative
Pat Kelly Conservative Calgary Crowfoot, AB
Thank you.
Earlier, you spoke of the diversity of your investments spread out across 154 countries. I think you said that.
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
It's 55.
Conservative
Pat Kelly Conservative Calgary Crowfoot, AB
I'm sorry. It's 55 countries. Okay. The United States is at 47%. Canada is at 12%.
What's China at, right now?
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
It's at about 5%.
Conservative
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
It's been reduced, I think, from just under 12% to just over 5%.