The CCPIB (Canada Pension Plan Investment Board) is a monolithic force in the world of institutional investing. As of September 2018, the board wields a fund of $368.3 billion CAD, placing it amongst the largest state-run funds in the world. What differentiates the CCP from other national funds is that it offers a look at the fusion between the private and public sectors. This indicates how Canada, a state heavily committed to public welfare, can still operate effectively in worldwide capital markets. Canada has long held a commitment to universal healthcare and a social safety net, and by properly using its domestic wealth, the CCPIB has been able to maximize returns to citizens’ tax dollars, consistently raking in returns of over 9%.
Tied for fifth in the largest total wealth used for investment (with Singapore’s wealth fund), the CPPIB has a distinct commitment to foreign equity. This has led to investment in Ant Financial in China, Lendlease in the UK, and the Abu Dhabi Commercial Bank, among others. However, this presents a conflict for the Canadian government and populace: How do they reconcile their foreign policy decision-making with their investment approaches?
Currently, Canada is embroiled in political conflict with China, the high point of this being the arrest of Meng Wanzhou, CFO of Huawei, at the behest of the United States. Since this, China has detained two Canadian nationals in response. This, combined with Canadian tariffs levied upon Chinese solar panel exporters, have aggravated tensions between the two nations. Meanwhile, likely unbeknownst to the majority of the Canadian populace, the CPPIB has roughly $5 billion CAD invested in various Chinese corporations. The ties that the Chinese government has with its large corporations fuse the state and economy, and by investing in these companies, this can be taken as implicitly recognizing the legitimacy of not just the companies, but the Chinese state as well.
The CPPIB’s Chinese holdings include 1.7 billion dollars’ worth of Alibaba and 1.4 billion of Tencent, two of China’s largest companies. These investments will likely continue to provide the social safety net that Canadians have become used to, yet at the same time it clashes with the stance against China that Canada has taken. The tradeoff that emerges here is intriguing, as it demonstrates the separation of the CPP from domestic politics into its own realm, acting privately with public funds.
As populations in Western countries age and begin to outnumber the youth, it has become apparent that there is a need for larger funds to support both their lifestyle and health costs. At the same time, the growing automation that threatens employment across the globe has created a trend towards basic income projects, seen experimented with in Finland, in order to support those lacking the skills for a digitized economy. As the world economy shifts, the changes that government will be forced to make begins with their ability to reasonably assess both domestic employment and domestic financial security.
While the economy mutates around the world towards a computer-centric focus, Canada has enabled itself to provide for the citizens left behind by the tide of progress. But if this requires supporting nation-states that clash with its domestic value set, do the Canadian populace and its elected representatives wish to challenge this profit-based approach? Canada’s pension plan has fashioned itself into a major world player through savvy investing and by making the private sector-influenced decisions required to support a welfare state. The impacts on the world economy would be huge were they to take a more ethics based approach. However, will Canada hinder its future in order to satisfy its present?
