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
Sandra Cobena Conservative Newmarket—Aurora, ON
Mr. Leduc, I'd love to get some specific recommendations from you as to what specific federal policies are currently discouraging domestic investment. I ask this in the context of our needing legislation and wanting to put in effective legislation to encourage domestic investment.
I'd love to hear your thoughts on that.
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
If I had to pick one single thing that would enable greater deployment of global capital, it's bankable, at-scale projects.
I don't know if I'll get into trouble for saying this, but we might be an enthusiastic acquirer of a large airport in Canada. We look at the opportunities we've seen around the world and ask, “Why airports?” They're like big shopping malls. People have a lot of disposable income. They will park there. They will spend their money there. All of the global airlines pay fees to land there. They're long term. They're like a high-paying bond.
Conservative
Sandra Cobena Conservative Newmarket—Aurora, ON
I used to work at an airport. I agree with the longevity of it, but if I could follow up—
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
I would say, make these projects available. That would be the single biggest thing.
Conservative
Sandra Cobena Conservative Newmarket—Aurora, ON
Be as concrete as possible because, as you can see, we have only minutes.
What would be the top three changes that the government could implement to unlock that capital to come back into Canada?
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
It would be to bring a greater level of efficiency in terms of approvals. I'll say bankable projects again.
It would also be to have efficient regulation. That means, if there are multiple regulators, there could be an overarching clearing house that would work to coordinate all of the different regulatory milestones.
Conservative
Sandra Cobena Conservative Newmarket—Aurora, ON
All of us—every Canadian—are eager to see our country grow and see that wealth and job creation here.
If those changes were made tomorrow—hypothetically—how quickly could you redeploy capital here in Canada?
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
We're already in the system. We're looking at several opportunities today. It would be a continuation of what we're trying to do.
Conservative
Sandra Cobena Conservative Newmarket—Aurora, ON
In that train of thought, what is the realistic or short-term ceiling for Canadian allocation, given the current market conditions?
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
We don't put specific targets around countries. We don't have a specific target for the U.S. We don't have a specific target for the United Kingdom, Germany or France. We need to leave a certain level of flexibility. We have a number of investments in Australia, and we feel that we're comfortable with that exposure today. It doesn't mean that if a great opportunity came along we wouldn't look at it.
We don't have specific targets, but from a portfolio construction perspective, there would be a ceiling at some point—not an arbitrary one—where we would feel we'd be too concentrated in Canada. Because of what I've said about the other factors that affect the CPP, we would have to prudently ensure that we are always dealing with that concentration risk.
Conservative
Sandra Cobena Conservative Newmarket—Aurora, ON
I suppose there's a trade-off between the greatest rate of return and diversification. It's which of the two is trump, at that point.
If all of us here could focus on one change, what would be the one change you would like to see to make Canada more investable?
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
I will reiterate what I've said. Make these at-scale investments available to us.
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
Yes.
Conservative
Sandra Cobena Conservative Newmarket—Aurora, ON
I have 30 seconds.
We heard recently from the Enbridge CEO. You may have heard his comments around how market conditions do not exist. In fact, he briefly talked about how they had invested funds—I think it was $600 million—and then felt like the rug was pulled out from under their feet. Obviously, they are scarred and other investors are scarred from that condition.
As an independent investment fund, do you find, through your own discussions with project developers, that federal permitting remains a persistent obstacle in preventing projects from becoming investment-ready?
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
It's a global phenomenon. It's not particular to Canada.
Liberal
The Chair Liberal Karina Gould
Thank you. That concludes the time for this round.
We'll continue now with Mr. Leitão for five minutes.
Liberal
Carlos Leitão Liberal Marc-Aurèle-Fortin, QC
Thank you very much, Madam Chair.
Let's continue where we left off.
This is not so much a question for you as it is a comment in the context of the question the chair raised about the importance of the CPP staying a united entity.
Quebec has its own separate system. It's totally harmonized with the CPP in order for pension benefits to be portable. Quebeckers can retire elsewhere in Canada and get their pension payments. Canadians can retire in Quebec and get their pension payments. That principle is absolutely necessary and will be maintained. That's what was done with CPP2. This puts pressure on the premiums Quebeckers pay to ensure that they have the same benefits, given the lack of economies of scale. Then there is pressure on the premium. That's a hugely important issue. The CPPIB does a good job of maintaining premiums so they can be as affordable as they can be.
You mentioned earlier that one of the things the CPPIB does is the Northleaf investment fund, but you didn't have time to expand on that. Could you elaborate a bit on that?
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
I mentioned, as well, that one of the challenges we have is around scale. Some of the opportunities in Canada are related to venture funds—smaller technology-related funds. In trying to manage our costs, we don't have teams large enough to go and spend enough time to conduct due diligence across hundreds of technology clusters—to do that efficiently.
What we can do is partner. We do this around the world, frankly. In the Canadian venture capital space, we work closely with Northleaf. We've partnered with them so far. We did a recent enhancement in terms of allocated capital going to them. It's roughly around $3 billion. Their team and expertise can efficiently work in that space. It's been very successful. We hope this partnership will continue to grow. It gives us the opportunity to efficiently access that Canadian innovation space as well.
Liberal
Carlos Leitão Liberal Marc-Aurèle-Fortin, QC
At some point, it might even justify an increase in contributions, but I'm not telling you to do that. I'm just saying that it might happen. It would be fine if it does indeed happen.
Something you also mentioned that I find interesting—perhaps it's not fully understood, or people haven't paid attention to it—is your issuing of green bonds. With that, you fund green investment.
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
Yes, that's correct.
Senior Managing Director and Chief Public Affairs Officer, Canada Pension Plan Investment Board
We issue a broad range of bonds, but the green bond is one segment of our larger...and that is to fund our ability to achieve the level of risk we've set for the fund and to do so prudently.
We could certainly provide the clerk with more specificity on the current value and issuance, on the cadence of when we made those investments over the last five years and on the investments we made using those bonds. We issued, in our annual report, some specificity, but we could give you a one-pager that describes this in a very coherent way. We'll do that.