CPPIB Continues to Bulk Up on Renewable Energy

The Canada Pension Plan Investment Board (CPPIB), Canada’s C$434.4 billion (US$327.7 billion) pension giant, continues to raise its bet on renewable energy by more than doubling its investments in renewable energy firms in 2020 to C$6.6 billion, after nearly doubling it the previous year.

The pension fund reported in its annual sustainable investing report that renewable energy investments now make up 1.5% of its entire portfolio, up from 0.76% last year and 0.41% in 2018. As recently as 2017, renewable energy accounted for a scant 0.02% of the fund.

“CPP Investments’ exposure to renewables is aligned with our belief that the energy evolution provides opportunities for attractive long-term, risk-adjusted returns,” CPPIB said in the report.

In March, the fund acquired Pattern Energy Group Inc., a renewable energy company that owns a portfolio of 28 renewable energy projects in Canada, the US, and Japan. It was among the fund’s largest transactions of the year, which had an enterprise value of approximately US$6.1 billion, including net debt.

“Pattern Energy is supported by a strong management team and offers both a large existing portfolio and potential for growth, with several ongoing projects in development,” said the fund, adding that the firm is also well positioned “to capitalize on opportunities supporting electrical grids in both North America and Japan as they transition from fossil fuels to green energy sources.”

And in May the fund signed a deal with natural gas distributor Enbridge Inc. to acquire 49% of the entity holding Enbridge’s stake in Éolien Maritime France SAS, Enbridge’s partnership with EDF Renewables. The fund said the partnership is developing three offshore wind farms in France, which are expected to become operational between 2022 and 2024. It also said that it expects to continue investing in similar opportunities in the European offshore wind sector through its Maple Power joint venture with Enbridge Inc.

Additionally, the report said the COVID-19 pandemic has reaffirmed its belief in the importance of incorporating environmental, social, and governance (ESG) issues into the investment process. It also said it has a clear preference for ESG disclosures to focus on performance and targets, rather than just policies. It said that when issuers seek the fund’s input, it now indicates a preference for companies to align their reporting with the standards of the Sustainability Accounting Standards Board (SASB) and the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD).

“We believe that by fully considering ESG risks and opportunities, we become better investors and are able to enhance returns and reduce risk for the fund’s more than 20 million contributors and beneficiaries,” Mark Machin, president and CEO of CPPIB, said in a statement. “Addressing sustainability is not just pressing for society and the planet—it is a business imperative.”