Caisse, others sign on for G7 plan
From women in finance to climate risks
Some of Canada’s largest pension funds have joined forces with the federal government and other investors in a bid to advance the G7’s objectives of developing global infrastructure expertise, promoting women in finance in emerging economies, and increasing the disclosure of climate risks by corporations.
“As long-term investors, we know that our returns are affected by the health and strength of countries where we invest,” said Michael Sabia, chief executive of the Caisse de dépôt et placement du Quebec, one of the two Canadian institutional investors leading the partnership.
“In many ways, our performance is tied to their growth and development.”
The partnership, which is expected to inject $10 to $15 million into global and domestic initiatives including internships and fellowship programs, also includes insurers and asset managers Allianz Group and Aviva, and CalPERS, the largest defined-benefit public pension in the United States.
At a news conference to unveil the partnership with federal finance minister Bill Morneau on Wednesday, the Canadian pension managers were asked to weigh in on the impact of trade uncertainty on G7 nations including Canada, the United States and the United Kingdom.
Sabia said he supports the Canadian government’s strong response to the U.S. plan to impose new tariffs on a variety of goods, including aluminum and steel from Canada.
Ottawa pushed back on the duties, announcing tariffs on dozens of U.S. products in retaliation.
“I think the government of Canada has done exactly what the government of Canada needed to do in the face of the positions taken by the U.S. government, and that is to say: ‘We don’t like it, it’s not our view of the world, but if that’s your approach then we will react to that’,” Sabia said.
“I honestly think the government of Canada has done the right thing and sent a very clear and very loud message to the government in Washington about how their greatest and most historic ally is going to react when the United States reacts in the way that it has.”
He and Ron Mock, chief executive of the Ontario Teachers’ Pension Plan, both said they expect “cooler heads” will prevail in the trade disputes.
Sabia said he is confident the countries will be able to avoid an all-out trade war, “which would of course have negative consequences for everybody, probably at the top of the list the United States.”
Mock said he doesn’t expect a “substantially negative impact” in the short term, but he added that he isn’t pleased with the “trajectory” of the tariff fight, which already reaches beyond North America and into Europe.
“It’s effectively a tax, it’s a tax between countries and (has) an impact on growth,” Mock said.
“Notwithstanding what happened recently … ultimately I’m still in the camp of cooler heads will prevail, and frankly that self-interest will prevail, which means that we will start to back away from the trajectory that we appear to be on at this point in time.”
Neither Mock nor Sabia would weigh in on whether their respective pension funds have an interest in investing in the Trans Mountain pipeline, which Ottawa stepped in to salvage through a $4.5-billion purchase announced late last month.
Mock said it was “early days” to ponder such an investment, which, he added, would be looked at through the same lens Teachers uses to assess potential investments around the globe.
The institutional investors were more willing to discuss the funding and expertise they can bring to global infrastructure development expertise, diversity and climate-related disclosure.
“Institutional investors have the resources and the platform to make meaningful contributions in all these areas,” said Mock.
“Climate change, gender inequality and the infrastructure gap are all significant global problems that need collective action and robust practical solutions.”
The infrastructure “gap” refers to a lack of financial and operating expertise in “investable” projects in emerging markets despite projections that $3.3 trillion must be invested in infrastructure globally by 2030 to keep pace with growth.
An infrastructure fellowship the partners plan to launch will include a threemonth intensive business school program as well as an internship on the infrastructure teams of leading investors participating in the initiative. The program will begin next summer with about a dozen candidates and a partnership with York University’s Schulich School of Business in Toronto.
The Canadian government and institutional investors also pledged to work together to speed up implementation of uniform and comparable corporate disclosure of climate-changerelated risks and opportunities.
Such metrics and data have become increasingly important to institutional investors to measure the value of their portfolios and make investment decisions.
An advisory committee will be set up to push disclosure a step beyond the recommendations presented a year ago by a Financial Stability Board task force.
“While there is broad agreement among global investors about the need to disclose climate-related risks and opportunities, no single methodology or approach has emerged to make disclosure easily comparable across institutions and companies,” the partners said. Canadian pension funds involved in the partnership include the Canada Pension Plan Investment Board, AIMCo, OMERS, and OpTrust.
IT’S A TAX BETWEEN COUNTRIES AND (HAS) AN IMPACT.