Sus­tain­able global growth will re­quire a whole new mind­set

The Globe and Mail (Ottawa/Quebec Edition) - - OPINION - MICHAEL SABIA

Pres­i­dent and CEO of the Caisse de dépôt et place­ment du Québec

At the G20 sum­mit here in Ar­gentina, lead­ers made no progress in ad­vanc­ing a global agenda for eco­nomic growth.

The fi­nal com­mu­niqué was a sad laun­dry list with lit­tle con­vic­tion on any point. The week­end’s so-called high­light was an ill-de­fined truce be­tween the United States and China on tar­iffs, mo­ti­vated not by the pur­suit of the ra­tio­nal trade pol­icy we need, but by the U.S. Pres­i­dent’s im­me­di­ate po­lit­i­cal need to keep his coun­try’s econ­omy buoy­ant in the face of grow­ing head­winds.

The lack of ac­com­plish­ment in Ar­gentina re­flects a broader trend: Gov­ern­ments – in­di­vid­u­ally and col­lec­tively – are in­creas­ingly un­able to re­spond ef­fec­tively to many of to­day’s ur­gent is­sues. The world needs durable, sus­tain­able, in­clu­sive growth. It needs solutions on cli- mate change. It needs in­fra­struc­ture. But gov­ern­ments alone aren’t get­ting it done. It’s time for oth­ers to step up – not out of no­ble im­pulse, but be­cause it’s in our in­ter­ests.

To be clear, gov­ern­ments will al­ways have a crit­i­cal role to play in ad­vanc­ing pros­per­ity and sus­tain­abil­ity. But the com­plex­ity of our chal­lenges and the con­straints on our gov­ern­ments – in­clud­ing fis­cal con­straints – de­mand a new way of think­ing. To find real solutions, there’s a role for a much broader group of play­ers: busi­nesses, not-for-prof­its, phi­lan­thropists, civic lead­ers. And, cru­cially, there is a role for in­vestors.

Long-term in­vestors such as the Caisse de dépôt et place­ment du Québec have a nat­u­ral in­cen­tive to em­brace this new op­por­tu­nity. We un­der­stand that over the course of years and decades, our re­turns will be only as strong as the so­ci­eties in which we in­vest.

To­gether, the world’s longterm in­sti­tu­tional in­vestors have more than $50-tril­lion un­der man­age­ment. That’s enough cap­i­tal to move the nee­dle on the chal­lenges that gov­ern­ments are just not go­ing to solve on their own.

Take cli­mate change: Con­sumers all over the world are al­ter­ing how they think and act. Con­cern about cli­mate is in­flu­enc­ing their choices. As a re­sult, com­pa­nies are more fo­cused on en­sur­ing their brands are on the right side of the cli­mate chal­lenge.

We’re see­ing in­no­va­tion to re­duce car­bon emis­sions. We’re see­ing new ideas and new tech­nolo­gies. And, among some of us, at least, we’re see­ing a new way of think­ing – an aware­ness that in­vest­ing in the fight against cli­mate change is an op­por­tu­nity to do two things at the same time: serve as good stew­ards of peo­ple’s sav­ings while also con­tribut­ing to the tran­si­tion to a lower-car­bon econ­omy.

Many per­sist in view­ing cli­mate change as a con­straint – a drag on re­turns. They’re wrong. At the Caisse, we’re one of North Amer­ica’s largest in­vestors in wind power. We’re in­vest­ing in so­lar power in In­dia, and we’re earn­ing E dou­ble-digit re­turns do­ing it. In Toronto, Chicago, Hous­ton and Paris, we’re build­ing a new gen­er­a­tion of en­ergy- ef­fi­cient build­ings – with sub­stan­tial re­turns.

An­other ex­am­ple is in­fra­struc­ture. In­vest­ing in ports, tran­sit sys­tems, tele­com net­works – real stuff that con­nects peo­ple to jobs, and prod­ucts to mar­kets. Put sim­ply: In­vest­ing in in­fra­struc­ture may be the most pow­er­ful lever we have for the kind of growth that the world needs. But ac­cord­ing to the World Bank, around the world, we are not spend­ing enough to keep up with need, let alone op­por­tu­nity. Each and ev­ery year, we come up short by $1-tril­lion.

Gov­ern­ments alone are not go­ing to solve this prob­lem. They are too heav­ily in­debted. Global debt to­day is even higher than at the time of the 2008 fi­nan­cial cri­sis.

So, if gov­ern­ments alone aren’t go­ing to build the in­fra­struc­ture we need to bol­ster pro­duc­tiv­ity and growth, who will? Long-term in­vestors can and should. Let’s be clear: In the mar­ket en­vi­ron­ment that is likely to un­fold over the com­ing years, long-term in­vestors will need the steady, pre­dictable, low-risk re­turns that in­fra­struc­ture pays.

The chal­lenge is to demon­strate that our com­mer­cial in­ter­ests are not at odds with the pub­lic in­ter­est. The rapid tran­sit pro­ject that the Caisse is build­ing in Mon­treal serves as a proof point of what’s pos­si­ble. Gov­ern­ments at all lev­els – Mon­treal, Que­bec, Canada – de­fined the pub­lic in­ter­est, as they should. We de­signed a tran­sit so­lu­tion to serve that in­ter­est. The re­sult­ing sys­tem will serve 30 mil­lion peo­ple a year – car­bon-neu­tral, from begin­ning to end.

There is no short­age of ideas ca­pa­ble of align­ing the com­mer­cial and pub­lic in­ter­ests. The Cana­dian In­fra­struc­ture Bank is one such idea. The in­fra­struc­ture risk-shar­ing tools re­cently de­vel­oped by the World Bank are an­other. We’re lim­ited only by our ca­pac­ity to think dif­fer­ently and cre­atively.

Build­ing a global agenda for durable, sus­tain­able, in­clu­sive growth is a huge task. If we’re go­ing to get it done, it won’t be by stand­ing on the side­lines and urg­ing gov­ern­ments to de­liver. They can’t do it alone. More of us are go­ing to have to get into the game. It’s in our in­ter­ests. It’s vi­tal that we do.

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