The Canada Pension Plan Investment Board’s (CPPIB) renewable energy investments of C$400.6 billion ($302.9 billion) more than doubled last year, and have increased by more than 100 times since 2016.
“Over the past year, we advanced our goal to be a leader among asset owners in understanding the risks posed, and opportunities presented, by climate change,” CPPIB CEO Mark Machin said in a statement that coincided with the fund’s annual report on sustainable investing. “We’re mindful that fully understanding the implications of climate change – including physical, transition and adaptation risks – will be a continuous process.”
The CPPIB said that as of June 30, it had $3 billion invested in renewable energy companies. That is more than twice what it was last year, and 100 times more than the C$30 million it had invested in the sector in 2016.
Europe is the most mature renewable energy market in the world as many of the world’s leading suppliers and project developers, who the CPPIB sees as potential partners, are based there, the report said. The fund cited specifically the offshore wind market as an attractive investment, saying the latest turbines can generate energy at an increasingly competitive cost. It expects a global market worth up to US$500 billion over the next 10 to 15 years.
To access the market, the fund earlier this year established Maple Power, a 50/50 partnership with Canadian energy transportation company Enbridge. The fund said the partnership will allow it to partner with European utilities to develop, construct and own offshore wind farms. The partnership’s initial investments are in Germany and France, with plans to expand to other parts of Europe. The joint venture is based in the UK, with staff based in London and Paris.
In May 2018, CPPIB signed agreements with Enbridge to acquire 49% of its interests in select North American onshore renewable power assets, as well as 49% of Enbridge’s interests in two German offshore wind projects. The assets included 14 operating wind and solar assets in four Canadian markets, and two operating wind and solar assets in the US.
The fund said there are two main drivers propelling the European renewable power market, which is stabilizing at about US$80 billion to US$100 billion in investments a year. The main driver is long-term regulatory goals, such as the Europe-wide target for reducing greenhouse gas emissions by 2030, and the UK’s goal to be carbon neutral by 2050. This creates a long-term framework that supports building of new renewables, said the fund.
The other driver is the competitiveness of renewable technologies, compared to traditional energy sources such as coal and gas. CPPIB said solar costs have plunged by more than 90% since 2010, and the cost of wind energy has dropped by more than 50% over the same period. The fund said that investors can now make an attractive return from building solar plants in Southern Europe without any subsidy. The situation is the same for wind power in parts of Northern Europe.
Other CPPIB investments in renewable energy include acquiring a 6.3% stake in Indian renewable energy developer and operator ReNew Power. In June, CPPIB participated in a rights issue by ReNew Power for an additional US$100 million, bringing its total investment to US$491 million.
CPPIB also signed an agreement in April 2018 to acquire a portfolio of six Canadian operating wind and solar power projects from NextEra Energy Partners for C$741 million. The business now operates as Cordelio Power. In October 2018, CPPIB expanded its existing joint venture with Votorantim Energia through the acquisition of a stake in the Brazilian hydro generation company from the state of São Paulo’s Companhia Energética de São Paulo (CESP) for BRL$1.7 billion ($408 million).