The asset manager of the pension fund for federal public servants, PSP Investments, whose main office is located in Montreal, inherits the mandate to manage the $15 billion envelope devoted to financing business investment in the clean economy.
The fund was first announced at theFall Economic Statement 2022. An initial capitalization of 2 billion has been authorized.
This fund is one of the tools created by the federal government to finance investments by Canadian companies in the decarbonization of their activities.
The growth fund will have a variety of means to finance Canadian companies. He could, for example, invest in their share capital. It will also have the possibility of offering contracts for difference.
This type of contract consists in guaranteeing a price to the customer. In the United Kingdom, which serves as an example for the Department of Finance of Canada, contracts for difference in the price of electricity are offered. Under this contract, a clean renewable energy producer can hedge against price fluctuations. The company can better plan its investments by ensuring that clean projects are more profitable than polluting projects, we read in the budget.
The budget announces Canada’s willingness to offer this type of carbon pricing contract “to make carbon pricing even more predictable”. Consultations will be conducted. At this time, it is specified in Finance, the sums allocated for contracts for difference with regard to the price of carbon are not known.
Canada imposes a tax on greenhouse gas emissions. The tax is set to increase significantly in the future, although the expected increases are not fixed by law. A future government can always change the height of the planned increases. The contract would eliminate this risk.
The same logic applies to Quebec, where the price of carbon is established by an exchange and not by a tax. Its price is bound to increase, even less predictably than a tax.
Sophisticated investment platform
It is Investissements PSP, manager of the pension fund of federal civil servants with assets under management of more than 225 billion, which obtains the mandate to invest the capital of the fund.
These funds will be managed separately and independently from the assets of the federal employees’ pension funds.
A senior finance official justified this choice by the advantages, in terms of efficiency and speed, of using an existing very sophisticated investment platform, which he said is PSP.
The first investments should be made in 2023.
The government is taking advantage of the budget to announce that union representatives of federal civil servants will henceforth have two seats on the PSP board of directors.
Infrastructure Investment Bank
The Canada Growth Fund complements the federal financing offer to businesses, an offer that is also based on the Canada Infrastructure Bank.
The 2023 budget doubles the bank’s investment targets in clean energy and green infrastructure. The target was 5 billion in each of the two categories; it increases to 10 billion.
The bank has committed 8.5 billion in 37 projects since its creation in 2017.
“These investments will make the investment bank the primary government financing vehicle supporting clean electricity generation, transmission and storage projects,” the budget reads.