Green infrastructure has been tapped as a strategic asset within Quebec’s pension fund holdings. The newly released provincial budget announces a planned amendment to the Act respecting the Caisse de dépôt et placement du Québec (CDPQ), aligned with targets for a 60 per cent reduction in the carbon intensity of its real estate and infrastructure portfolio by 2030.
Currently, real estate is the sole asset class in which CDPQ — through its subsidiary, Ivanhoé Cambridge — can hold 100 per cent of a company’s shares. Otherwise, the Act restricts CDPQ funds to a 30 to 51 per cent ownership stake. The proposed amendment will also remove the holding limits on infrastructure assets, with the stipulation that no single infrastructure allocation can account for more than 3.5 per cent of CDPQ’s total asset value.
“In the context of the fight against climate change, in particular, institutional investors such as the Caisse are placing increasing importance on infrastructure,” the budget document observes. “This asset class generates attractive returns, particularly when the investor is in a controlling position, and generally offers good protection against inflation. Additional premiums may also be generated when operational value is created.”
To justify the amendment, the budget document maintains it will “make the Caisse more agile and more competitive in the infrastructure investment sector” and support a goal to hold $54 billion in green assets by 2025. The ability to acquire larger stakes of infrastructure projects is expected to convey more flexibility to expand a green portfolio in what’s termed an “increasingly competitive” investment environment.
The move is also framed as complementary to CDPQ’s status as a prominent global institutional investor and the growing sway of climate change and ESG (environmental, social, governance) considerations in financing and investment returns. “The proposed changes will allow the Caisse to position itself favourably among its peers on the world stage in strongly growing investment sectors that will be crucial in the future,” the budget document states.
A breakdown of the CDPQ portfolio, included with the budget, shows 8.5 per cent of total asset value was allocated to infrastructure as of December 31, 2020. Real estate accounted for 12.5 per cent.
