Canada Pension Plan sets record for country’s largest green bond in $1.5-billion debut

Canada Pension Plan Investment Board went green with a bang.

The pension fund, which boasts the highest credit score at the three largest rating firms, priced $1.5 billion (US$1.15 billion) of green bonds Wednesday in what it called the first green bond sold by a pension fund globally. It was also a record size for a single green bond transaction in Canada, according to Bloomberg data.

The 10-year bonds, sold via its unit CPPIB Capital Inc., were sold at a spread of 71 basis points over similar-maturity federal government bonds and offer a 3 percent coupon. They attracted 79 buyers with demand at $2.7 billion, according to a CPPIB statement. The sale was led by CIBC World Markets Inc. and RBC Dominion Securities Inc.

“I like the AAA and the spread is attractive given the credit support,” said Mark Carpani, who helps manage $1.2 billion as head of fixed income at Toronto-based Ridgewood Capital Asset Management and bought the CPPIB green bonds. “CPPIB will put proceeds to good use so I’m fine supporting this.”

CPPIB’s new debt dethrones Ontario’s securities due 2025 as the country’s largest green bond in Canadian dollars. The province’s outstanding securities due 2023 stand at $1.55 billion, yet that total was split between two offerings; an initial $750 million was sold in January 2016, followed by a $800 million add-on of the same notes a year later.

Canada’s green bond issuance has recently been dominated by provincial governments, but an increasing number of other issuers such as insurers and municipalities have been making forays into the market lately too.

In November, Manulife Financial Corp. became the world’s first life insurer to sell green bonds when it priced securities in Singapore dollars. The company followed that transaction in May with the first corporate green bond in Canadian dollars since 2015. The city of Ottawa sold green bonds in November, while Toronto seeks to follow suit in the second half of this year.

CPPIB’s green-bond framework allows for investments in wind and solar energy, sustainable water and wastewater management, as well as green buildings. It plans to invest more than $3 billion in renewable energy as it prepares for an expected global transition to a lower-carbon economy.

CPPIB invests on behalf of the $356.1 billion Canada Pension Plan. It started issuing debt in 2015, selling bonds in both Canadian and U.S. dollars and the euro since.

CPP Investment Board approached about Trans Mountain, but no decision yet: CEO

OTTAWA — The head of the Canada Pension Plan Investment Board says the federal government’s financial adviser has raised the possibility of getting involved in the Trans Mountain pipeline project but there’s been no political pressure applied.

CPPIB chief executive Mark Machin says that the Toronto-based fund manager and its peers will likely take a look at the stalled Trans Mountain project because there are a limited number of investment opportunities of its magnitude.

Machin’s comments to the House of Commons finance committee come less than two weeks after the government announced it would buy the project for $4.5 billion from Kinder Morgan to ensure the pipeline will be completed.

Finance Minister Bill Morneau has predicted the Trudeau government will have no difficulty selling the Trans Mountain pipeline expansion project after uncertainty about its future is resolved.

The federal government’s hand was forced by B.C. Premier John Horgan, who is waging a court battle over the federally regulated pipeline, which would carry diluted bitumen from Alberta’s oilsands to a sea port near Vancouver.

Machin told the finance committee that the Canada Pension Plan Investment Board has had both good and bad experiences with pipelines and will use its usual approach when deciding whether to put money into Trans Mountain.

Inside the CPP Investment Board: Why CPPIB is working with China to help it tackle it’s aging population problem

The Financial Post’s Barbara Shecter speaks with Mark Machin, CEO of Canada Pension Plan Investment Board, on their bond program and lessons from China’s aging population.

Inside the CPP Investment Board: The reasons behind CPPIB’s decision to invest substantially in renewable energy

The Financial Post’s Barbara Shecter speaks with Mark Machin, CEO of Canada Pension Plan Investment Board, on how the CPPIB selects long-term investments and their decision to substantially invest in renewable energy.

Inside the CPP Investment Board: Many Canadians think CPP won’t be there for them at retirement — they couldn’t be more wrong

The Financial Post’s Barbara Shecter speaks with Mark Machin, CEO of Canada Pension Plan Investment Board, about the key misconceptions Canadians have of the CPP, as well as the major changes that have been made to strengthen the pension plan.

Canada Pension Plan Makes $1.75-Billion Investment Into Renewable Energy

Solar panels stand in this aerial photograph taken above the Enbridge Inc. Sarnia Solar Farm in Sarnia, Ont., Fri. July 21, 2017. Enbridge Inc. has signed a deal for the Canada Pension Plan Investment Board to buy 49 per cent of the pipeline company's interests in a group of renewable power assets for $1.75 billion.

CALGARY — Enbridge Inc. has signed a deal for the Canada Pension Plan Investment Board to buy 49 per cent of the pipeline company’s interests in a group of renewable power assets for $1.75 billion.

Enbridge says the agreement will see the creation of a joint venture that includes all its Canadian renewable power assets, as well as the Cedar Point Wind Farm in Colorado and the Silver State North Solar Project in Nevada.

The deal also includes Enbridge’s interests in two German offshore wind projects.

Earlier on HuffPost Canada:

Enbridge says it will keep its interests in certain other U.S. renewable power assets.

Under agreement, CPPIB has agreed to fund its share of the remaining costs to complete the German offshore wind projects, estimated at about $500 million, bringing the pension fund’s total commitment to about $2.25 billion.

Enbridge and CPPIB have also signed a deal to form a 50-50 joint venture to pursue future European offshore wind projects.

Also on HuffPost:

CPPIB looking for bargains amid market selloff, Machin says

The head of the Canada Pension Plan Investment Board sounded optimistic Friday about opportunities that may arise out of the recent return of volatility to markets.

“I think there was a lot of euphoria coming into the new year, so I think some of that’s blowing off here,” said Mark Machin, president and chief executive officer of the CPPIB, in an interview with the Financial Post. “Hopefully, there’s opportunity thrown up by some of this volatility. Certainly, our public market teams are looking at better entry positions into stocks that wouldn’t otherwise be there because there’s volatility.”

The CPPIB reported Friday net assets of $337.1 billion for its fiscal third quarter ended Dec. 31 2017, up from $328.2 billion for the previous quarter. Canada’s largest pension fund said its net return was 4 per cent for the quarter, 12.1 per cent on a five-year annualized basis, and 7.4 per cent on a 10-year basis.

For the nine months to date in its fiscal year, CPPIB reported that the fund had increased by $20.3 billion, delivering a net return of 6.7 per cent. 

CPPIB, which manages investments for the Canadian Pension Plan, chalked up some of the gains to the scorching pace of international stock markets last year (as of the end of the quarter, 30.5 per cent of its assets were foreign public equity, totalling $102.7 billion). That pace finally slackened this past week, helping trigger the first correction in the Dow Jones industrial average in two years.

The recent downturn also marked the first time that the market has entered correction territory since Machin was appointed to lead the fund in 2016.

Machin said the “fundamental reason” driving the volatility has been the longstanding anticipation of rising interest rates. He also said the shake-up did not change anything about the CPPIB’s approach, which includes long-term infrastructure and real estate investments.

“This type of short-term volatility doesn’t affect us at all,” he added. “It’s part of what we’re set up to be protected against, because we broadly diversify the portfolio across different geographies, across different strategies, across different asset classes.”

However, as something to watch, Machin highlighted the CPPIB’s recent creation of a group focused on power and renewable energy. CPPIB came to terms with a Brazilian energy company during the quarter on forming a new joint venture that purchased two working wind farms in the northeastern part of the South American country. The fund made an initial investment of $272 million in equity as part of the transaction.

CPPIB also sold an 18-per-cent ownership stake in a European heat and water sub-metering during the quarter for net proceeds of approximately $1 billion. Following the quarter, CPPIB announced it would pay US$144 million for a 6.3 per cent ownership stake in an Indian renewable energy developer.

The quarter also preceded some of CPPIB’s more recent transactions, such as a US$20-billion deal involving Thomson Reuters’ financial and risk business. A consortium led by U.S.-based private equity firm Blackstone, and including CPPIB, aims to own 55 per cent of the financial data business through a new company. 

The CPPIB also announced several coming changes to its C-suite this week, with senior managing director and chief operations officer Nick Zelenczuk, as well as senior managing director Graeme Eadie, to retire at the end of May and March, respectively. Eric Wetlaufer, senior managing director and global head of public market investments at the fund, is also departing the CPPIB effective May 31.

Machin said the moves were part of “planned renewals.” 

“We’re going through processes to make sure we have strong successors in place, and doing that sort of transparently,” he said.

Financial Post

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Canada Pension Plan’s 4.75% return on investments pushes assets over $300 billion

The Canada Pension Plan Fund surpassed $300 billion in net assets in the second quarter, boosted by net investment income of $13.6 billion.

The climb to $300.5 billion from $287.3 billion reflected net CPP outflows of $400 million in the quarter. Benefit payments tend to exceed contributions in the final months of the calendar year.

The portfolio produced an investment return of 4.75 per cent in the second quarter, net of costs.

For the six months to September 30, the fund increased by $21.6 billion, which included $17.7 billion in net investment income and $3.9 billion in net CPP contributions. The portfolio delivered a return of 6.3 per cent net of all costs.

“All investment departments contributed to the fund’s overall performance this quarter with solid gains across public and private markets,” said Mark Machin, chief executive of the Canada Pension Plan Investment Board.

CPPIB is a professional investment management organization that invests the funds not needed by the Canada Pension to pay current benefits.