CPPIB has roughly 12 to 13 per cent of its portfolio invested in Canada and is looking for more domestic investments, but they must be the right opportunities to serve the publicChris Young/The Canadian Press
Some politicians are nothing if not predictable.
As the federal government seeks capital to fund its first round of nation-building projects, there is mounting pressure to push large Canadian pension funds to invest more at home.
Although all members of the so-called Maple Eight are feeling the heat, the Canada Pension Plan Investment Board, or CPPIB, appears particularly vulnerable to political interference because of its size and status as a federal Crown corporation.
Political expediency may be the name of the game in Ottawa, but the Carney government must resist the urge to meddle with pension fund independence to attract investment.
The Canada Pension Plan is the largest source of retirement income for many Canadians. It was never intended to serve as a piggy bank to fund the government’s pet projects.
CPPIB chief executive officer John Graham, of course, used more diplomatic language this week when he spoke of the sanctity of the pension fund’s independence to make investment decisions.
“Now is not the time to borrow from future benefits to pay today’s bills,” Mr. Graham said during a keynote address on Monday at the Canadian Club Toronto.
CPPIB has roughly 12 to 13 per cent of its portfolio invested in Canada and is looking for more domestic investments, but they must be the right opportunities to serve the public.
As Mr. Graham rightly points out, what’s getting lost in the current discourse is that pension plans have both assets and liabilities on their balance sheets.
“The money is already spent,” Mr. Graham explained during an interview after his speech. “This isn’t just money in some bank account. It’s actually earmarked for a pension.”
CPPIB, he added, wants to invest more in Canada, but there has been a lack of suitable possibilities.
“We just haven’t seen the opportunities, which is why I am super encouraged by the major projects initiatives,” Mr. Graham said. “But if we’re going to have this debate, we have to have it in the context of a pension plan and not a savings account.”
Canadians have reason to be nervous that federal legislators will try to finagle a funding shortcut by tapping the $731.7-billion CPP fund. Both the current and previous Liberal governments have mused about the utility of pension funds to achieve political goals.
This past summer, for instance, Dominic LeBlanc, whose cabinet responsibilities include Canada-U.S. trade, dangled the prospect of domestic pension funds increasing their U.S. investments as he sought a new trade deal with the Trump administration.
“Our pension funds alone have over $1-trillion of investment in the United States. That can potentially grow by $100-billion or more a year, and that’s just the big nine Canadian pension funds,” Mr. LeBlanc said, according to a story by Bloomberg News.
Although Mr. LeBlanc did not make any firm promises or single out CPPIB, his comments are the thin edge of the wedge of political interference. They are also reminiscent of a tactic employed by former finance minister Chrystia Freeland.
“The federal government believes that continued domestic investments by Canada’s pension funds have the potential to boost Canada’s economy and create good careers for people across the country,” she wrote in the 2023 fall economic statement.
Federal legislators are not alone in their penchant for prodding pension funds to invest more in their home markets – even though doing so could prove risky.
Indeed, this unsettling political trend is playing out at the provincial level, too.
Earlier this week, Quebec Premier François Legault announced that his government will ask the Caisse de dépôt et placement du Québec – which he characterized as “an extraordinary tool” – to increase its share of investments in the province’s economy because of the new global economic context.
To be sure, the Caisse has a dual mandate of generating returns and promoting Quebec’s economic development. But the optics of the provincial government issuing the Caisse investment directives are nonetheless poor.
But no politician has been more intrusive than Alberta Premier Danielle Smith.
Not only has she floated the idea of Alberta pulling out of the CPP, but her government also took the drastic move of sacking Alberta Investment Management Corp.’s top executives and its entire board in 2024 (ostensibly over rising costs and humdrum returns).
Political interference, even under the guise of nation-building, risks eroding trust in the Maple Eight.
As the World Bank aptly stated in a 2017 report: “Strong, independent governance is perhaps the most important element of the Canadian model.”
That brings us back to CPPIB, which runs a world-class pension fund. Mortgage it, and retirees will revolt.