ABCs of the CPP – A

Canada Pension Plan Investment Board (CPPIB) now holds more than $350 billion in assets which makes it the largest pension fund in Canada and a major international investor. It’s assets include: tobacco, real estate, mining, utilities, insurance, oil and gas, coal, railways, banks and other financial institutions. A listing of the CPPIB’s investments can be found on its website, at:

http://www.cppib.com/en/what-we-do/our-investments

The only influence the federal government has is through the appointment of Board members. Making any changes to the CPPIB requires the consent of the federal government and seven of the provinces, a standard similar to amending the constitution.

In 2017 nearly 23.5 million Canadians between the ages of 18 and 65 contributed to the CPP. In the year 2016-2017, 5.6 million Canadians were receiving benefits from the Plan. This number continues to rise each year as the largest segment of the population, to so-called ‘Baby Boomers’, enter their senior years. Accordingly, CPP benefit expenditures increase each year and will continue to do so for the foreseeable future.   

Individual Canadians who pay into the CPP and receive pensions from it have no say about the assets the CPPIB invests nor the ability to ask questions. The CPPIB is explicitly exempt from the Access to Information Act.

Although the CPPIB provides a list of its assets it is not governed by the same laws and regulations as other pension plans in Canada. According to Moin Yahya, law professor at the University of Alberta and co-author of Understanding the Regulatory Framework Governing Private and Public Pensions the CPPIB is not subject to regulations that lead to increased transparency.  Further, there are almost no laws allowing for the CPPIB to be sued for bad governance.

Until the late 1990s the CPPIB was limited to loaning excess contributions to the Canada Pension Plan to the federal and provincial governments to be repaided a at commercial interest rates. This was accomplished with a modest staff of ten people. A decision was taken to take the fund global and allow it to invest Canada Pension Plan deductions like a private pension fund. Since then the staff has grown to 1200 with an operating budget of more than a billion dollars.

The asset portfolio has grown a slightly greater rate than the stock market in the last 20 years. Even so, the federal and provincial governments were required to substantially increase CPP payroll deductions for both workers and employers in 2016 to ensure adequate pensions in the future.

Fossil fuel producers or pipeline companies make up about 22% of the CPP’s Canadian investments, and about 6% of its foreign investments.

The CPPIB has extensive real estate assets; some of these are in danger of sustaining damage or losing their value due to climate change and the increase of severe weather.

Faculty of Environment professor Blair Feltmate, head of the Intact Centre on Climate Adaptation at Ontario’s University of Waterloo, is coordinating a national effort to make homes and communities more resilient to increased flooding. Feltmate believes that as climate change brings more extreme weather events, climate adaptation is key. He goes on to say, “A growing problem in Canada from Halifax to Victoria is the growing uninsurability of the housing market in this country. Where insurers find themselves in situations now where the flood risk is so high, with such repetition, that they simply can’t offer insurance coverage in many regions for water flooding in the basement.”