Bronwyn Eyre is a former Saskatchewan Minister of Energy and Resources for four years. She has also held the portfolios of Justice & Attorney General, Education, Advanced Education, SaskPower, SaskEnergy, SaskWater and Status of Women. She resides in Saskatoon.
Bronwyn Eyre on April 8. Photo by Brian Zinchuk
There’s a reason why Norway’s US$1 trillion sovereign wealth fund isn’t allowed to invest domestically: to ensure diversification and prevent political interference.
Current and future Canadian pensioners dodged a bullet when Justin Trudeau resigned on Monday. With Parliament now prorogued, proposed federal bills and most policies died, including the Liberals’ recent, harebrained plan to spend billions incentivizing Canadian pension funds to invest in AI data centres powered by green energy.
The Green Slush Fund era appears, at last, to be over. But this is no time for reticence.
Chrystia Freeland, who presided as finance minister over hundreds of millions of misspent green project dollars, is a leading contender for Liberal leader. Another one, Mark Carney, spearheaded the 2021 Net Zero Banking Alliance (although leading banks, most recently Morgan Stanley, are bailing as opposition to environmental, social and governance measures grows by the day).
Explicit reference to green energy for AI data centres was removed in the final version of the federal Fall Economic Statement last month. But billions in incentives could still, someday be on the table. And if the Liberals ever have anything to do with them, you can bet that any incentives will be for green energy by default.
Through the Liberal leadership contest and eventual federal election, Canadians must send a clear, collective message to Ottawa: don’t monkey with our pensions. And don’t pick winners and losers. If you can’t attract private investment dollars for green energy projects, don’t try to artificially tip the balance and offer sweeteners to independent pension funds, which are rich with our hard-earned money.
Go Canada
Canada’s major pension funds, the so-called Maple-8–which include the CPP and manage assets of about $2 trillion—were an extremely tempting target for a cash-strapped government grappling with a record-high, $62 billion deficit.
The AI plan was the latest iteration of Liberal command economics: two dollars in pension fund capital would be invested for every one federal dollar. The feds estimated such a scheme could generate $30 billion for green energy projects.
And this wasn’t the first time we’d been treated to jingoistic tropes about “encouraging more investment in Canada.” Last spring, Freeland considered earmarking pension funds for Indigenous procurement initiatives, as part of a plan to award at least five per cent of federal contracts to Indigenous businesses.
Immediate blowback followed, including from pension fund managers. The project was further discredited after a number of companies, which claimed Indigenous roots, were outed as “pretendian.” (Hello Randy Boissonnault!)
The most recent changes would have allowed pension funds to own greater controlling stakes in Canadian companies by removing the rule that their voting shares be limited to 30 per cent.
Not a good idea, according to Mark Wiseman, former chair of the Alberta Investment Management Corporation (AIMCO), who says the Maple-8 reflects the “winning formula of independent governance, scale, geographical diversification, and top-tier investment and managerial talent.”
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Going Canadian is fine—pension funds already do. But, “It’s essential to diversify investments outside the country. The nightmare scenario is that overexposure to an underperforming Canadian economy would see poor investment returns at the same time as higher unemployment and lower wage growth, leaving both diminished inflows and flaccid asset returns to pay fixed pension obligations for Canadians.” (Globe and Mail)
Canadian pension funds have been successful precisely because they’ve been managed independently. Since the 1980s, their governance has also focused exclusively on maximizing “risk-adjusted” returns. Paul Martin reformed the CPP in the 1990s, then on the verge of collapse, by creating both a reserve fund and independent asset manager. In the 1980s, teachers in Ontario demanded—and got—independent control of their now mighty Ontario Teachers’ Pension Plan.
Independence is key. As Wiseman points out, there’s a reason why Norway’s massive US$1 trillion sovereign wealth fund isn’t allowed to invest domestically: to ensure diversification and prevent political interference.
Now, as Canada faces plummeting productivity and general economic stagnation, lower taxes, a return to pro-energy policy, and less red tape is the answer—not political meddling.
For years, pension funds have been under pressure from environmental and other like-minded groups to go green and divest of oil and gas holdings. Fortunately, for the sake of Canadians’ financial futures, they haven’t. Yet.
But we have to stay on guard—and not imitate some UK and Australian pension funds, which recently urged the British government to use its National Wealth Fund to support the commercial development of “higher-risk undertakings in the clean-energy sector.” (Bloomberg)
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“Tapped-out” electricity grid
Which brings us to AI data centres—eminently worthy of private, but not federally subsidized, investment.
Kevin O’Leary, of Shark Tank fame, has been pitching to international sovereign wealth (and presumably pension) funds a $70 billion AI data centre—which is fully-permitted, utility-connected, and on the site of a previously-approved oil refinery—in Greenview, Alberta.
He told the National Post that while fund managers have been skeptical—“nobody wants to invest in Canada…the place has been tainted for nine years”—the falling Canadian dollar makes the investment more cost-competitive.
After years of fluctuating prices and province-wide outages (precisely what AI data centres to do not need) Alberta is reforming its electricity market. To that end, Premier Smith’s office reached out to O’Leary.
“A data centre requires power above all else,” he told the NP. “The electrical grid in America is tapped out…and large tenants like Amazon require a minimum of one gigawatt of power, which powers a million homes. You can’t just buy that off the grid, or everybody’s electrical bill will go up 20 per cent….. To build a data centre, you have to create your own power. We have to find either nuclear, which is expensive and not going to be ready for 15 years, or get stranded gas into clean turbines and make electricity.”
Web of conflicts
We can only hope that any new, federal AI green power plan—if it ever sees the light of day—isn’t run through any iteration of the Sustainable Development Technology Canada Fund, aka the “Green Slush Fund.”
For three months leading up to Christmas, parliamentary business was all but suspended as Pierre Poilièvre’s Conservatives pressed for the names of those awarded contracts and for basic accountability over the money lost.
According to a recent Privy Council report, the Green Slush Fund “created a web of conflicts with insiders who made ‘increasingly questionable decisions….and gross mismanagement cost taxpayers more than $150 million.” (Blacklock’s Reporter)
No wonder federal Liberals were nervous about the Opposition’s push to hand over Fund information to the RCMP.
Federal Liberal anti-energy, anti-power policies have left Canada woefully behind the ball. Now as the Liberals, and eventually the national electorate, navigate their way through long-overdue policy conversations, a not-to-do list of “what we can never allow”—including the politicization of pension funds—should be top of mind for all of us.
Bronwyn Eyre was the former Saskatchewan Minister of Energy and of Justice and Attorney General.
Eyre and Pipeline Online editor Brian Zinchuk will be launching the Pipeline Online Grimes Sales & Service podcast, with the first edition scheduled for 1 p.m. on Monday, Jan. 20. It will be livestreamed on LinkedIn, Twitter and Facebook, as well as be available for viewing afterwards. Watch for it.
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