Caisse hails Northvolt as exemplary, discloses $200M investment
Northvolt AB is an outstanding corporate citizen that's committed to an open dialogue with all stakeholders, Caisse de dépôt et placement du Québec executives say.
Quebec's public pension plan manager disclosed Thursday that it recently invested about $200 million in Northvolt convertible debt to help the Swedish company build its controversial battery plant on Montreal's South Shore. The revelation came as the Caisse reported a 7.2 per cent overall return on investments for calendar 2023.
Opposition to the Northvolt factory has snowballed since the project was officially unveiled in September, despite the company's assurances that electric batteries will play a role in cutting carbon emissions globally. Area residents have expressed concern about increased truck traffic, pollution, housing shortages and the potential destruction of wetlands.
On Wednesday, Radio-canada reported that the scientific rationale that had been used months earlier in an environmental assessment to block a proposed real estate project from the site now occupied by Northvolt had disappeared from a subsequent examination of the battery plant's feasibility.
Northvolt “is an exemplary player in terms of its practices,” Caisse chief executive Charles Emond said during a news conference in Montreal to discuss the annual results. Caisse officials analyzed the Northvolt investment with “rigour” before proceeding, he stressed.
“Our due diligence, both with our internal experts and outside advisers, shows us that Northvolt is demonstrating great transparency,” added Kim Thomassin, a Caisse executive vice-president who looks after the pension fund manager's Quebec investments. “There's a corporate desire and corporate values to answer the challenge of climate change, to be transparent in everything they do.”
Northvolt's environmental management policies comply with the international standards known as ISO 14001, Thomassin said. This demonstrates that the company is environmentally responsible, she told reporters.
Asked whether the Northvolt holding meets the Caisse's environmental, social and governance investment criteria, Thomassin said: “What's important for us is the dialogue with stakeholders. In each file, it's very important that we see this dialogue. This is what we have witnessed.”
Global investors such as Blackrock, OMERS and the Canada Pension Plan Investment Board have made the same analysis and become investors in Northvolt, she said.
Electric batteries are “a promising sector,” Emond said, citing the industry's 30 per cent average annual growth rate. Buying Northvolt's convertible debt protects the Caisse while giving it access to potential upside, he added. Emond declined to say whether the Caisse would be open to investing more in the company, saying it's too early to discuss such a scenario.
Double-digit gains in publicly traded stocks helped the Caisse generate net investment income of $28 billion last year, the pension fund manager said Thursday. The performance, which pushed net assets to $434 billion by Dec. 31, contrasts with the negative 5.6 per cent return the Caisse reported in 2022 as equity and bond markets corrected simultaneously.
Some of the Caisse's peers fared even better in 2023. The Caisse said its own benchmark index gained 7.3 per cent, while Canada's defined-benefit pension plans returned 9.1 per cent on average, according to a January calculation by RBC Investor and Treasury Services.
Over five years, the Caisse's annualized return stands at 6.4 per cent, outpacing the benchmark portfolio's 5.9 per cent advance. Its annualized return over 10 years is 7.4 per cent, which also tops the benchmark portfolio's 6.5 per cent increase.
Publicly traded equities provided the biggest boost to the Caisse's portfolio in 2023, climbing 17.7 per cent amid gains by growth stocks and several Quebec companies. The performance of the Caisse's stock-market portfolio was the best in 10 years, according to Vincent Delisle, executive vice-president and head of liquid markets at the fund manager.
Seven U.S. technology stocks propelled major stock indexes last year, accounting for about 60 per cent of the S&P500 Index's increase, said Delisle. Dubbed the Magnificent Seven, the stocks are Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla.
Private equity returned one per cent, while fixed income added 8.1 per cent as government debt rebounded. Real assets advanced 2.2 per cent, paced by a 9.6 per cent return in infrastructure. Real estate, meanwhile, posted a 6.2 per cent loss.