Transport Committee on May 9th, 2023

[The Chair, Liberal, Peter Schiefke]

I call this meeting to order.

Welcome to meeting no. 67 of the House of Commons Standing Committee on Transport, Infrastructure and Communities.

Pursuant to Standing Order 108(2) and the motions adopted by the committee on Tuesday, February 14, 2023, and on Thursday, May 4, 2023, the committee is meeting to discuss its study on the role of McKinsey & Company in the creation and the beginnings of the Canada Infrastructure Bank.

Today's meeting is taking place in a hybrid format, pursuant to the House Order of Thursday, June 23, 2022. Members are attending in person in the room and remotely using the Zoom application.

I would like to begin by first informing all members and witnesses that the sound test has been done for everyone appearing in person and online, for the benefit of our interpreters.

Colleagues, before us today we have as witnesses, from the Canada Infrastructure Bank, Tamara Vrooman, chairperson, joining by video conference; and Ehren Cory, chief executive officer. We also have Aneil Jaswal, director, strategies sector, joining by video conference; Frédéric Duguay, general counsel and corporate secretary, joining us here in person; and Steven Robins, group head, strategy, joining by video conference.

I will now turn to Ms. Vrooman for the first of our opening remarks.

Oh, we'll switch to Mr. Cory to give time for Ms. Vrooman to join in.

Mr. Cory, I'll turn it over to you to begin. You have five minutes for your opening remarks.

[Ehren Cory, Chief Executive Officer, Canada Infrastructure Bank]

Mr. Chair, members of the committee, good morning.

My name is Ehren Cory and I am president and CEO of the Canada Infrastructure Bank, or CIB. Joining me are Mr. Duguay and my colleagues Mr. Robins, Mr. Jaswal and Ms. Vrooman, who will be with us in a few moments. We are pleased to be with you today and to have accepted the invitation to appear for the purposes of your study.

Today, my opening remarks will focus on three areas I feel are helpful.

First, I'd like to talk about the significant progress that the CIB has made since its launch in November, 2017.

Building an organization from the ground up, especially one with a unique role like ours, takes time. It requires appropriate governance capacity, resources and expertise, investment guardrails and management policies and practices.

Early on, at least from the outside, progress appeared slow as the team built relationships, developed a pipeline of investments and grew the organization, but we have now hit our stride. Two years ago, I appeared before this committee to talk about our progress, and at that time we had made investment commitments. That is, we had signed a detailed term sheet with a borrower outlining the terms of a loan on four projects, which represented about $2 billion of investment by the CIB.

Today those same numbers are 46 investment commitments and $9.7 billion in CIB capital, and these projects have a total investment value of over $27 billion.

Each of these are real investments in real projects. They represent new homes connected to broadband in southern Manitoba and northern Alberta; new district energy solutions in Richmond, B.C., and Toronto and Markham, Ontario; new electric buses on the road in Edmonton and on order for Ottawa, Brampton, Calgary, Durham, York and school bus operators across Quebec. They include the largest renewable power project in Saskatchewan, the largest battery storage project in our country and one of the largest green hydrogen facilities in the world.

Each of these projects also represents innovative partnerships between public and private sectors, partners who can now speak to how the CIB has helped them to move their projects forward.

Second, I'd like to speak to the contracts between the CIB and McKinsey. In total, as we previously reported to Parliament in response to Order Paper questions and as I testified at OGGO, the value of contracts awarded by the CIB to McKinsey and Company was $1.43 million across three projects. To put that in context, it represents about 5% of our cumulative expense on professional service fees. It represents about 1% of our total cumulative operating expenses, and it represents 0.01% of our committed capital. As previously outlined in my testimony, all three of these contracts pre-date my joining the CIB in November of 2020.

Mr. Duguay will speak more to how the contracts were procured, the scope and total value of each contract and the quality of the work. I will just say that, from my review of the output, the work provided by McKinsey in these three projects was specialized analysis that the CIB was not in a position to prepare on its own in those very early days of the bank's existence.

Third, I'd like to speak to the matter of personnel. As I testified at OGGO, I worked at McKinsey and Company more than a decade ago. However, since 2012 I've been a public servant, first for eight years at Infrastructure Ontario, and then beginning in late 2020, in my current role with the CIB.

There are three other CIB employees who also previously worked at McKinsey. Steve Robins was hired by me at the end of 2020. I worked with Steve at McKinsey before I left in 2012, and he subsequently worked with me at Infrastructure Ontario as well. A year later, in December of 2021, Aneil Jaswal was hired, having applied to a public online job posting through our HR department. There is also my executive assistant at the CIB, Lisa Burkitt, who previously worked with me at both McKinsey and IO.

The four of us are just a small portion of the CIB team, which now stands at 125 people. Our team at the CIB is highly diverse with nearly every person coming with some private sector experience, from the infrastructure development, banking, pension fund and advisory worlds. This experience is highly valuable as we work to leverage the private sector to get more infrastructure built in our country. All our employees share the desire to build the infrastructure we need to make Canada competitive in a rapidly changing world. None of us were hired for who we know or where we come from but rather for the skills, experience and expertise that we bring.

I appreciate your attention to the CIB, and I'm looking forward to our discussion.

[The Chair, Liberal, Peter Schiefke]

Thank you very much for your opening remarks, Mr. Cory.

Next we'll go with Monsieur Duguay.

Monsieur Duguay, the floor is yours. You have five minutes.

[Frédéric Duguay, General Counsel and Corporate Secretary, Canada Infrastructure Bank]

Mr. Chair, ladies and gentlemen members of the committee, good morning.

As Mr. Cory said, my name is Frédéric Duguay, and I am the general counsel and secretary of the Canada Infrastructure Bank, and I have been in this position since November 2018. I am pleased to be here as a witness in your study of the role of McKinsey & Company in the creation and beginnings of the CIB. To contribute to the committee's study, my remarks will focus on the procurement process and policies in place during CIB's startup activities and the contracts awarded to McKinsey & Company.

As a Crown corporation, the CIB is not subject to Treasury Board policies and regulations governing procurement activities. Consistent with the approach taken by Crown corporations, the CIB establishes its own policies and procedures to make its procurement activities more efficient and responsive to its needs to ensure that the CIB obtains the goods and services required for its operations.

The CIB also aims to be transparent to Canadians about its operations and decision-making processes, while respecting confidential information. To this end, our procurement policy incorporates best practices in the public sector and is available on the CIB's website. Amounts spent on professional fees are disclosed in the audited financial statements and our executive compensation policies are disclosed in the CIB's annual report to Parliament.

As mentioned by Mr. Cory, and as disclosed to the Standing Committee on Government Operations and Estimates, the CIB has awarded three contracts to McKinsey since its creation in June 2017. The first two contracts were awarded in winter of 2018 under the interim procurement policy put in place for the CIB's startup activities. The principles of this policy took into account the timeline for hiring staff and receiving investment proposals, and the processes needed to make quick procurement decisions.

The first contract awarded in January 2018 was for investment consulting services to support the development of investment criteria. The value of this contract was $390,000. In keeping with the flexibility provided by the interim policy, the CIB leadership also identified other consultants to provide their qualifications. McKinsey was selected based on its expertise in infrastructure and investment projects in Canada and abroad.

The second contract was awarded in March 2018 to develop the enterprise risk management function, and practices to ensure appropriate management of investments and other risks. The total professional fee for this contract was $550,000. CIB executives also discussed the mandate with other consultants.

The final contract was awarded to McKinsey in May 2020 to provide consulting services to identify new strategic opportunities given the impact of the COVID‑19 pandemic. Deliverables included research on the Canadian infrastructure market, case studies on infrastructure and economic impacts and interviews with industry experts. This work was used to develop the $10 billion growth plan that was announced in October 2020 to invest in major infrastructure initiatives. The value of this contract was $490,000 and the contract was awarded in accordance with the exceptions allowed under CIB policies in force and applicable free trade agreements.

Finally, the CIB's procurement policies follow best practices in public-sector corporate governance to ensure that purchases are made in a fair and transparent manner and the CIB receives the best value for goods and services.

I would be happy to answer any questions.

Thank you very much for inviting me today.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Duguay.

Next we will have Mr. Aneil Jaswal.

The floor is yours. You have five minutes for your opening remarks.

[Aneil Jaswal, Director, Strategies Sector, Canada Infrastructure Bank]

Thank you, Mr. Chair and committee members.

My name is Aneil Jaswal.

I am a director on the strategy team at the CIB, where I lead work on measuring the impact of our projects and developing strategies across our priority sectors.

I'm happy to be here today as a witness for this committee's study. It is important to note that I am a recent employee of the CIB, having joined the organization in December 2021.

I was not involved with, and do not have knowledge of, the beginnings of the CIB or any of the contracts awarded by the CIB to McKinsey. For those reasons, which were previously communicated to the committee, I was not initially put forward as a CIB witness to help inform the committee's study. Other CIB staff, who may have more relevant knowledge, including our CEO, Ehren Cory, are also here today to best support the study.

That being said, in light of the committee's interest in my appearing, I have joined today to support the committee to the best of my abilities. To assist the committee in identifying where I might be most helpful, I would like to share a bit about my career and areas of expertise.

I did my Ph.D. with a focus on health policy and economics. To further my interest in economics and grow my skills outside academia, I joined McKinsey & Company in August 2016, as an associate consultant in its Montreal office. I worked there for just under two years, until February 2018. While at McKinsey, I worked on a variety of projects ranging from due diligence of large corporate investments to projects in the natural resources sector. I was not staffed on any federal government or CIB projects.

I left McKinsey over five years ago, seeking to work in the public service and get back to my policy interests. In March 2018, I joined the federal public service, working as a policy adviser at PCO, focused on mentoring and supporting the achievement of government results. In January 2020, I took on a new role as a policy adviser to the Minister of Finance, where I worked primarily on economic and health responses to COVID-19. While in government, I never worked with McKinsey or on the CIB.

I'd also like to share a bit about joining the CIB. I joined in December 2021, with an interest in using both my public policy and private sector experiences to support the CIB's goals of advancing infrastructure in the public interest. Having grown up in northern B.C., I've seen first-hand the challenges of a lack of infrastructure as well as the transformative, positive impact of getting critical infrastructure built, such as the port development in my north coast hometown.

Wanting to support this area of public policy, I applied to a CIB job posting I saw on LinkedIn. The hiring process was competitive, and I understand there were multiple applicants. I had never met Steve Robins or Ehren Cory before applying to the CIB. Before leaving government, as recommended for all exempt staff, I confirmed compliance of post-employment obligations, including receiving confirmation from the office of the Ethics Commissioner.

Since joining the CIB, I have worked on a variety of topics, including having rolled out a rigorous new standard for how we estimate the greenhouse gas emissions reduction of our projects as well as supporting CIB's advancement into new sectors. This includes zero-emission vehicle charging infrastructure, for which I'm excited to say we recently announced our first project to almost double the number of public fast chargers in Canada. I'm also currently helping to develop our strategy to support the enabling infrastructure needed for critical minerals development across the country.

In closing, since I joined the CIB, it has not awarded any contracts to McKinsey. As I mentioned, others may be better placed to answer your questions in that respect. However, I'm happy to assist however I may.

Thank you.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Jaswal.

Next we have Mr. Steven Robins.

Mr. Robins, the floor is yours. You have five minutes for your opening remarks.

[Steven Robins, Group Head, Strategy, Canada Infrastructure Bank]

Thank you for having me, Mr. Chair and committee. My name is Steven Robins. I'm happy to be here today.

I'm the head of strategy at the Canada Infrastructure Bank, and I've held this role since December 2020.

I would like to start by speaking briefly about my career history. I began as a business analyst at McKinsey in 2011. My clients ranged from infrastructure to retail, banking and metals. In 2013, I joined Infrastructure Ontario as a manager in their transactions structuring group, where I worked in a variety of roles, including engaging with industry partners, organizational change initiatives and on PPP procurement.

In 2014, I left Infrastructure Ontario to pursue graduate studies at Harvard, obtaining a master's in business administration and a master's in public policy. The program was three years. While at graduate school, I accepted a role in the New Zealand Treasury department's PPP unit based in Wellington. On graduation, I returned to McKinsey, first as an associate and then as an engagement manager. I worked exclusively in the utilities sector in both Canada and the United States. I did not work on any projects with the CIB or with the federal government.

In 2019, I then rejoined Infrastructure Ontario as commercial lead for the GTA subway expansion. There I lead the significant, successful effort to bring four major subway projects to market simultaneously across the region.

I would now like to discuss my hiring at the CIB.

In late 2020, Mr. Cory and I discussed my joining the CIB as head of strategy. I had initially worked with Mr. Cory in 2011 when I was —

[The Chair, Liberal, Peter Schiefke]

Excuse me.

I'm sorry to interrupt you, Mr. Robins. There is a point of order.

[Xavier Barsalou-Duval, Bloc, Pierre-Boucher—Les Patriotes—Verchères, QC]

We no longer have interpretation, Mr. Chair.

[The Chair, Liberal, Peter Schiefke]

Okay.

We're going to have to hold on for one second, Mr. Robins, to ensure that translation continues. It looks like we're having an issue with translation.

Can we check to see if it's working?

Is everything okay? Great.

I'm sorry about that, Mr. Robins. Please continue. I'll make sure that your time is not affected by that interruption.

[Steven Robins]

I appreciate that.

In late 2020, Mr. Cory and I discussed my joining the CIB as head of strategy. I had initially worked with Mr. Cory in 2011, when I was a business analyst. I then worked with him at Infrastructure Ontario in 2013 and 2014, where I reported to several managers and delivered results on important projects for the organization. When I returned in 2019 as the commercial lead for subway expansion, I took on a significant leadership role and delivered results. All four Toronto subway projects are now under construction.

In this role, I worked closely with Ehren. When Mr. Cory and I discussed the role at CIB, it was clear how my skills and experiences could contribute to the success of the CIB. Since joining the CIB, I have led the development of our corporate plans, which outline our process for making investment decisions, and the development of our inaugural sustainability and impact report.

I work closely with our investment leads to develop approaches for new areas of investment. For example, there's our initiative in clean fuels, through which we have invested in the Varennes carbon recycling project, one of the world's first at-scale biorefineries that's producing biofuels with green hydrogen, creating jobs and reducing emissions. There's also our investment in the Darlington small modular reactor project.

I also lead our research partnerships, like our recent green retrofit economy study with the Canada Green Building Council.

Finally, I also led the hiring of Aneil Jaswal as he was hired directly into my department. My department has nine employees. Mr. Jaswal is the only employee with experience working at McKinsey. The remaining team came to the CIB from a mix of public and private sector backgrounds.

The hiring process was open and competitive. It arose through a public job posting. Several candidates applied and were considered, and candidates from many backgrounds, including those with consulting experience from a variety of firms, were interviewed.

I first met Mr. Jaswal through this interview process. He was the most qualified candidate. He has a doctorate from Oxford and past work experience in both the public and private sectors. He was hired based on his extensive skill set, his commitment to public service and his diverse prior work experience.

One of his core responsibilities is the development of the results framework in our corporate plan. His work at the Privy Council Office is particularly relevant to the role.

His experience as a consultant was not the driving force behind his hiring. His academic credentials, paired with his public and private work experience, were key. In this role, Mr. Jaswal needed to equally understand government and investment structuring. He has been a great hire.

Finally, I'd like to speak to the contracts awarded by the CIB to McKinsey. To be clear, since I joined the CIB, the corporation has not awarded any contracts to McKinsey. When I was at McKinsey, I was not involved in the CIB contracts or any other contracts with the federal government in any way. Since I had no involvement in any of the contracts awarded to McKinsey and was not here at the beginning, others may be better placed to answer specific questions about these topics.

I was not initially invited to appear before this committee and, accordingly, I was not put forward as a witness on behalf of the CIB. I am happy to participate in the study and answer any questions that the committee may have to the best of my ability.

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Mr. Robins.

Next, and finally, we have Chairperson Vrooman.

The floor is yours. You have five minutes for your opening remarks.

[Tamara Vrooman, Chairperson, Canada Infrastructure Bank]

Thank you very much, Mr. Chair. I apologize for my delay in joining.

I'm Tamara Vrooman, chair of the Canada Infrastructure Bank, or CIB. I'm also president and CEO of the Vancouver Airport Authority. I'm joining you from my office in Vancouver on the traditional territory of the Musqueam people.

I also served for 13 years as president and CEO of Vancity, Canada's largest commercial credit union. Prior to that, I served as the deputy minister of finance for the Province of British Columbia, secretary to the Treasury Board, and CEO of the public sector employers' council.

I'm here today along with Ehren Cory, CEO of the CIB, and members of his team.

I appear today on behalf of the Canada Infrastructure Bank board, a board that brings a wealth of experience and diversity of perspectives. We have deep experience in such key areas of oversight as human resources, compensation and governance, and have industry-specific expertise in infrastructure, major project financing and public policy. Our responsibilities include approving the corporation's investments, investment portfolio and the corporate plans that set out the bank's strategic direction, as well as its compensation policies, which includes a review of the CEO's performance rating, salary and incentive program. We ensure that the highest standards of corporate governance and board effectiveness are respected.

Canada has an estimated infrastructure deficit of well over $100 billion. In fact, the last period of significant infrastructure investment in our country dates to around World War II. Canadians need infrastructure now, whether it's investing in Canada's electrical grid to support cleaner energy or building better transit in our communities, but our tax dollars are finite. The government cannot pay for all of the infrastructure itself, which is where the help of the private sector comes in. The CIB makes investing in infrastructure in the public interest more attractive to the private sector by using innovative financial tools to de-risk the investment and incentivize the private sector to spend on infrastructure. With impact as its bottom line, the CIB prioritizes consideration of sustainable outcomes that drive investment decisions.

The CIB has made very significant progress with an increase in both the pace and volume of its investments over the last two years. As at the end of this past fiscal year, the CIB has made a total of 46 investment commitments, 42 of which have reached financial close. From coast to coast to coast, the CIB is delivering public good outcomes for Canadians across five priority sectors—clean power, green infrastructure, broadband connectivity, trade and transportation, and public transit. The CIB's investments translate into such public interest outcomes as 5.1 million tonnes in reduced greenhouse gas emissions, 174,000 new daily transit riders, 340,000 more households connected to broadband and benefits to 27 indigenous communities.

The bank has built relationships in its key sectors and is being sought out earlier on potential partnerships. The market now has a better understanding of what CIB does and how to work with us. The Organisation for Economic Co-operation and Development, the OECD, has highlighted the CIB as a leading model for catalyzing private investment and aligning stakeholders to get projects built, particularly to support the post-pandemic recovery and facilitate energy transition.

Budget 2023 provided the CIB with greater focus and clarity on its role in supporting transition to a net zero economy with at least $20 billion for clean energy and green infrastructure investments. The CIB has already been engaging with key project proponents to accelerate action in these areas. The CIB has set an ambitious objective to invest in projects that will achieve 10 million tonnes of annual greenhouse gas reductions by 2025-26.

Since I've been the chair of the Canada Infrastructure Bank, as of January 2021, we have not entered into any contracts with McKinsey consulting. All three contracts that the bank previously entered into predate my arrival. I believe Mr. Cory and Mr. Duguay will speak on the procurement processes in more detail.

Thank you very much to the committee for inviting us. I look forward to participating in these proceedings.

Thank you.

[The Chair, Liberal, Peter Schiefke]

Thank you very much, Chairperson Vrooman.

We'll begin our line of questioning today with Dr. Lewis.

Dr. Lewis, the floor is yours. You have six minutes.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

Thank you, Chair.

I would like to thank the witnesses for coming today.

My first set of questions is for the CEO of McKinsey, Mr. Cory.

Mr. Cory, I just want to start by stating that it's been quite disappointing, the manner in which the Canada Infrastructure Bank employees have responded to our request for them to appear before committee. I'm actually very glad to see you here today. It's a pleasure to meet you in person. However, with all due respect, you were not around at the beginning, when the bank was created and the contracts were awarded. As a former McKinsey partner for 10 years, your answers will largely be limited to your time at the Infrastructure Bank, which was from November 2020.

Is that correct?

[Ehren Cory]

That's correct.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

With all due respect, by virtue of the fact that you've been at the bank for only 2.5 years, you are really not the most informed person to speak to the earlier relationships between McKinsey and the bank. Is that correct?

[Ehren Cory]

Thank you for the question, Chair.

In my capacity as CEO, I can certainly speak to the outcomes of the work that was done, which I have reviewed. I can speak to the materials that have been submitted in previous committees, such as OGGO.

The member's comment is accurate. I was not here at the outset of the bank. That's part of why Mr. Duguay has joined me, Chair. He has been the general counsel at the organization for just over four years, so brings a bit more corporate history.

The reality is that we are a young organization. The first full-time employee was hired only five years ago. We've been ramping up since then.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

Thank you.

In your annual reports, you list professional fees in your financial statement.

May I ask why the CIB's annual reports do not provide information on the contracts it has with external consultants?

[Ehren Cory]

I'm sorry. Could you repeat the question? I'm not sure I understood, Chair.

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

Your financial statements do not list your.... There's nowhere that we can see which contracts you have with external consultants and who those external consultants are. Is that correct?

[Ehren Cory]

I understand.

Our financial statements do outline our expenditure on advisory services from external firms. It does not break them down by individual firm, if that's the member's question. It certainly does outline our expenditure, which I could, in general, break down into two categories, if it's helpful.

First, we spend money on third parties for deal-related stuff. This would be transaction advisers, power market advisers, legal advice and that sort of thing. We call that “investment-related external advice”.

Then, separately, we have corporate external advice, like our auditors, for instance. We hired a firm last year to help us with our HR practices. It's that sort of corporate consulting—

[Leslyn Lewis, Conservative, Haldimand—Norfolk, ON]

Is that what the $14 million includes. Is it those two categories?

[Ehren Cory]

Each year we break down our external expenditures. Yes, it is for those two categories.