The ABCs of CPP – K

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The Canada Pension Plan Investment Board (CPPIB) has billions of dollars invested in real estate, financial institutions that lend to home builders and home buyers, and the insurance companies that insure these buyers. Two U.S. lenders declared bankruptcy in 2009 and 2010 leaving the CPPIB with a loss of over $2 billion and many more are likely to follow, given the recent increase in the frequency and severity of extreme weather events.

With global warming bringing rising sea levels, many coastal communities at-or-near sea level are in danger of having their properties submerged. This poses a huge potential risk to the CPPIB.

Submerged homes are not merely a possible future threat–in the Borough of Queens, New York, communities surrounding Jamaica Bay such as Hamilton Beach, Broad Channel, and Howard Beach, among others, have streets that are now permanently under water. And that water is rising.

Home builders, those who lend money to them, and the insurance companies who insure properties may face severe financial downturns, even bankruptcy, should these conditions continue and worsen as scientists expect they will. It would not be the first time that the CPPIB has had a commercial lender that it was invested-in file for bankruptcy.

In November of 2009 the U.S.-based CIT Group, a century old lender to hundreds of thousands of small-and-medium-sized businesses filed for bankruptcy. Theirs was the 5th. largest bankruptcy in U.S. history.

Similarly, in April 2010 U.S.-based Pacific Coast National Bancorp, a lender to small-and-medium-sized businesses and consumers, filed for bankruptcy.

From these two bankruptcies alone, CPPIB suffered unrecoverable losses of over $2 billion.