Canada’s Top Pension Funds Focus on Germany

Luigi Serenelli of IPE reports Canada’s top pension funds plan infrastructure investments in Germany:

The largest pension funds in Canada, with assets under management of over C$1trn (€766bn) , plan to step up investments in Germany following a meeting with German chancellor Olaf Scholz and vice chancellor Robert Habeck last week during a three-day visit.

Caisse de dépôt et placement du Québec (CDPQ), with total assets worth C$392bn as of June this year, would like to invest more in Germany, with a particular focus on infrastructure, a spokesperson for the pension fund told IPE.

Investments in infrastructure will address the broader energy transition while CDPQ can generate growth, contributing to a more sustainable world, the spokesperson added.

Charles Emond, president and chief executive officer, and Marc-André Blanchard, executive vice president and head of CDPQ global, and global head of sustainability, represented the pension fund at a meeting with Scholz during his time in Canada, the pension fund told IPE.

Ontario Teachers’ Pension Plan (OTPP) is looking to continue investing in Germany in the coming years, and the meeting with the German chancellor was a good opportunity to express its desire to continue directly investing in that market, a spokesperson for the pension scheme said.

OTPP, with assets of C$242.5bn, would be looking at investments across all of its asset classes in Germany, the spokesperson disclosed.

The pension fund’s current investments in Germany include Lowell, a provider of receivables management, Synlab, a provider of laboratory diagnostic services, mobile tax app Taxfix, service provider for smart buildings Techem, saving and investing platform Trade Republic, and the network of ophthalmological clinics Veonet.

OTTP’s president and CEO, Jo Taylor, met with Scholz during his recent visit to Canada, the pension fund confirmed to IPE.

John Graham, president and CEO of CPP Investments, the investment management organisation for the Canada Pension Plan, totaling C$523bn in assets at the end of June, met with both Scholz and Habeck for high-level discussions about the German market, a spokesperson for the pension fund told IPE.

Ontario Municipal Employees Retirement System (OMERS), with net assets of C$119.5bn at the end of June, was also among the pension funds that met with the German chancellor to discuss possible investments in Germany during the three-day visit, a spokesperson for the scheme confirmed to IPE.

OMERS Infrastructure, the infrastructure investing arm of the pension fund, acquired the provider of fibre-optic network Deutsche Glasfaser with EQT Infrastructure, to merge the company with Inexio already held by EQT in its portfolio.

Other investments by OMERS Infrastructure so far in Germany include Amedes, a provider of medical-diagnostic services for patients, private rail freight wagon leasing company VTG, and the owner of a network of fuel stations, service stations, restaurants and hotels Tank & Rast.

The pension fund has also bought the Sony Centre in Potsdamer Platz in Berlin together with private equity firm Madison.

“[Canadian pension funds] are specifically looking for investments into environmentally and socially sustainable projects. And that is also the message I am hearing from German business leaders at home and on this trip,” Scholz said during the speech at the German-Canadian Business Conference in Toronto last week.

Germany is also planning to increase the import of liquified natural gas (LNG), hoping that “Canadian LNG will play a major role in this,” the chancellor said in the speech.

During the visit last week, Habeck, who is also minister for economic affairs and climate action, signed an agreement with the Canadian minister of natural resources, Jonathan Wilkinson, to ship hydrogen produced in the provinces of Newfoundland and Labrador, Nova Scotia, and New Brunswick in Canada, to Germany as ammonia.

Last week, Serenelli reported Chancellor Scholz was in talks with Canadian pension funds for investment in Germany:

Chancellor Olaf Scholz and other members of the delegation of the German government held talks with representatives of Canadian pension funds, adding that investment opportunities for pension funds in Germany were addressed, a spokesperson for the ministry for economic affairs and climate action confirmed to IPE.

After a meeting with representatives of several pension funds in Canada, the German chancellor pointed out that they reaffirmed their interest in investing in sustainable projects in Germany, Reuters has also reported.

The talks took place during Scholz’s three-day trip to Canadian cities of Stephenville, Montreal and Toronto, where he also met with prime minister Justin Trudeau accompanied by the minister for economics and climate action Robert Habeck and a business delegation.

The focus of the trip was on the bilateral cooperation in the field of climate and energy. The chancellor spoke with the pension funds about investments in general, although energy and renewable energy were topical, the sources said.

Scholz had also planned talks with the United Nations special envoy for climate action and finance Mark Carney, according to the chancellor’s schedule.

During the visit, Habeck and the Canadian minister of natural resources, Jonathan Wilkinson, signed the German-Canadian hydrogen agreement, officially called ”Canada-Germany Hydrogen Alliance”.

Green hydrogen will be produced in the provinces of Newfoundland and Labrador, Nova Scotia, and New Brunswick in Canada, primarily using wind power, and then shipped across the Atlantic to Germany as ammonia, the Ministry for Economic Affairs and Climate Action said.

Germany is trying to wean itself off Russian energy sources after the invasion of Ukraine.

According to the agreement, the partners will facilitate the trade of hydrogen and its derivatives between Germany and Canada, starting with the export in 2025.

Germany will support the import of hydrogen and its derivatives in order to establish an international trade corridor with Canada and other countries to diversify the import of hydrogen in the future, according to the trade deal.

The partners will promote bilateral and multilateral research and development efforts to improve the production of hydrogen and hydrogen-related infrastructure.

When the leaders of Canada's top pension funds are all meeting with German chancellor Olaf Scholz and vice chancellor Robert Habeck, you know there is a keen interest to invest more in Germany.

Their interest spans across asset classes but clearly renewable energy and energy were discussed at these meetings.

Germany is a huge market for Canada's top pension funds which explains why there is an interest to invest more there.

Whether it's infrastructure, private equity, real estate or other investments, there are plenty of opportunities in Germany that warrant the attention of Canada's large pensions. 

The country is an economic powerhouse which needs to revamp its approach to energy in the wake of Russia's invasion of Ukraine.

Last week, Prime Minister Justin Trudeau and German Chancellor Olaf Scholz signed what they called a "joint declaration of intent" that calls on the two countries to invest in hydrogen, establish a "transatlantic Canada-Germany supply corridor" and start exporting hydrogen by 2025:

Under the agreement, Canada will export wind-generated hydrogen to Germany as that country looks to move away from Russian imports. While the Ukrainian war has made for an immediate crisis, Germany has also been shopping for long-term sustainable solutions. 

"Our vision of the future and our shared aims are clear. Canadians and Germans and all our friends around the world look forward to good jobs, a strong economy and pure air," said Trudeau.

"We cannot as a world continue to rely on authoritarian countries that will weaponize energy policy as Russia is, that don't concern themselves with environmental outcomes, or labour rights or even human rights."

Canada hopes to export Canadian-made hydrogen within three years.

Scholz said the German coast cannot keep up with the same wind conditions found in Newfoundland and Labrador, making the province an ideal location for hydrogen production. 

He said hydrogen will play a major role in Germany's future energy supply, especially in industries that are hard to decarbonize, such as shipping and aviation. 

"Germany expects a need of 90 to 110 terawatt-hours of hydrogen in 2030," Scholz said. 

"We believe that Atlantic Canada presents a huge opportunity for us but also for Canada to contribute to a green energy transition. Canada is a close and like-minded partner in the energy transition."

Newfoundland and Labrador Premier Andrew Furey said building wind farms in his province "just makes sense."

The premier said N.L. had already engaged in "positive discussions" with Hamburg ahead of Tuesday's ceremony regarding a declaration of intent on hydrogen. He said he hopes to sign the declaration at a wind conference in Hamburg in September.

"Hamburg's ambition to be a hydrogen hub for northern Europe, and our goal to be the same for Canada, make it an ideal partnership," Furey said.

Wind projects proposed for N.L.

The Port au Port project is already making its way through the red tape in Newfoundland and Labrador.

Situated on Newfoundland's west coast — about 15 kilometres west of Stephenville — the peninsula is the proposed site for a wind farm operation that would make Stephenville the home of a plant that will turn hydrogen produced from windmills into ammonia.

World Energy GH2, the company behind the proposal, expects the Port au Port operation to produce hydrogen by mid-2024. The project is going through an environmental impact statement process that the company, according to the government of Newfoundland and Labrador, has a three-year window to complete.

The operation would be the first of its kind in the province and is expected to create 1,800 direct construction jobs, 300 direct operations jobs and 3,500 indirect jobs, according to a media release issued by the company on Monday.

However, since that project's announcement, some area residents and environmental groups have been raising concerns. 

On Tuesday dozens lined the street near the Stephenville airport beginning at 10 a.m. NT in protest of Canada-Germany declaration, chanting and waving signs with slogans like "Newfoundland Is Not For Sale." 

Marilyn Rowe of the Environmental Transparency Committee, formed in response to the Port au Port wind farm and hydrogen proposal, said peninsula residents are "guinea pigs."

Take the time to learn more about World Energy GH2 and the Nujio’qonik project underway now.

While environmental critics are skeptical on the project, if this deal goes through and Newfoundland and Labrador becomes a hydrogen hub for Canada exporting hydrogen to Germany, it will represent a meaningful investment for Atlantic Canada and allow Germany to secure safer sources of energy.

Clearly there are alliances being formed and Canada's top pension funds have a seat at the table, engaging with the German government officials at the highest levels. 

This is exciting and good news because it opens the door for our large pension funds to invest more in Germany and shape that country's energy transition, as well as ours. 

In other words, it's a win-win because Canada's large pension funds are looking to invest more in energy transition and sustainable energy projects and Germany is looking to decarbonize more industries like shipping and aviation using green hydrogen.

On that note, I beefed up my last comment to make it clear Jack Mintz is wrong about ESG hampering the performance of Canada's large pensions. 

Responsible investing is integral to the long-term success of all pensions and Canada's large pensions are leading the way here. 

The world is heading in a clear direction and our large pension funds are doing their part investing in this net-zero energy transition. 

Below, Canada has signed a deal with Germany to export hydrogen fuel produced in Atlantic Canada to Europe as Germany seeks to reduce its dependence on Russian gas.

Also, William Glucroft of DW News reports on why even though Canada and Germany have signed a deal promising green hydrogen by 2025, a lot needs to happen in that time to realize that goal. 

No doubt, a lot needs to happen to realize that goal but green hydrogen will be an important part of the world's future energy consumption and Canada has the opportunity to take part in the coming green hydrogen revolution (watch clip from Germany's Evonik below).