Mining Execs Want Pension Funds To Be Invested In Canadian Mining

Veteran mining executives Pierre Lassonde and Frank Giustra are pressing the government to wield influence on pension funds, as it surfaces that Canadian pension funds, boasting a whopping $2.1 trillion in assets, allocate only a fraction to domestic mining ventures.

The call for action comes amidst growing concerns over the dearth of domestic investments in Canadian mining. Lassonde and Giustra advocate for heightened investment in Canadian mining, highlighting the critical role it plays in the nation’s economy and the imperative of bolstering domestic industries.

“They’ve taken the vast majority of this money – 75% of it – and invested it outside Canada to create jobs outside of Canada to the detriment of Canadians,” said Lassonde, a founder of Franco-Nevada (TSX: FNV) and a former president of Newmont (TSX: NGT). “Essentially, the mining industry has been ignored.”

In 1990, Canadian pensions faced stringent mandates, required to allocate a substantial 90% of their assets domestically. However, over time, federal governments gradually relaxed these restrictions, ultimately eliminating the requirement entirely by 2005. This shift has led to varying levels of domestic exposure among pension funds, ranging from 55% for entities like the Healthcare of Ontario Pension Plan down to 13% for others like Public Sector Pension Investments.

Globally, pension funds wield substantial financial clout, collectively holding nearly $50 trillion in assets. Yet, despite their significant influence, the engagement of pension funds in critical minerals projects, particularly in Canada, remains unclear.

With mounting pressure to achieve net zero emissions by 2050, the International Energy Agency projects a need for tripling annual clean energy investments to approximately $4 trillion by 2030. Additionally, the agency highlights the daunting task of mining enough battery metals in the next three years, estimating a staggering cost of around $450 billion.

In response to these challenges, Ottawa earmarked nearly $4 billion for critical minerals spending by 2030 in 2022. However, the extent to which pension funds are being actively engaged in supporting these projects remains ambiguous.

Canada Calls For Proposals For $1.5-Billion Critical Minerals Infrastructure Fund

Michael MacDonald, spokesperson for the federal Natural Resources Ministry, affirms the government’s commitment to engaging critical minerals stakeholders, including pension plans. However, despite this assurance, references to pension funds in government programs related to critical minerals strategy are notably minimal.

In addressing the lack of clarity surrounding pension fund engagement, MacDonald suggests the Canada Development Investment Corp. (CDEV) as a potential avenue for mining companies seeking funding opportunities. The CDEV, a federal Crown corporation tasked with advising the government on financial matters, oversees the $15-billion Canada Growth Fund.

Excluding the Caisse de dépôt et placement du Québec (CDPQ), notable pension funds remained hesitant to engage in discussions regarding the issue. According to Kate Monfette, CDPQ’s media director, the pension fund maintains an active presence in the mining sector, with a strategic focus on promising ventures aimed at generating returns for its depositors.

British Columbia Investment Management (BCI), while investing significantly in Canada with a 29.4% allocation, declined to provide further commentary on the matter. Similarly, the Ontario Municipal Employees Retirement System (OMERS) abstained from offering insights into their stance on the topic.

The Fall Of Canada’s Pension Funds

The spotlight on pension funds comes amidst advocacy from Lassonde and Giustra, who urge Canada to adopt Australia’s superannuation fund model. Australian superannuation funds, holding a staggering A$3.5 trillion, allocate 21.9% of their assets to domestic equities, effectively safeguarding against foreign takeovers.

However, LetkoBrosseau’s analysis reveals a stark contrast in investment patterns, with Canada’s top eight pension funds channeling more capital into Chinese companies than their domestic counterparts. Notably, the Canada Pension Plan, BCI, and Ontario Teachers’ Pension Plan hold minimal percentages of domestic shares.

Giustra has further underscored the crucial role of mining CEOs in lobbying pension funds. He points to China’s economic downturn as an opportune moment for Canadian pension funds to redirect investments towards a country boasting top-tier mining regulations.

“There’s just no source of capital, the industry starves,” he said. “You don’t have the seniors funding them, the pension funds aren’t there and we’ve lost the traditional mining funds here as well.”

Similarly, Lassonde advocates for legislative action by federal and provincial governments to mandate increased investments by pension funds in Canadian resource companies. The mining exec supports LetkoBrosseau’s efforts to raise awareness among finance ministers and officials in British Columbia, Ontario, and Ottawa.

“We’re trying to get to the decision makers and trying to make them understand what Canada is losing by doing nothing,” he said. “They created these funds, it’s in their power to legislate how these funds are managed.”  

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Information for this briefing was found via The Northern Miner and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.