Bloomberg Canadian Finance Conference
September 28-29, 2022
Each year, ministers, regulators and CEOs join the Canadian Finance Conference to share their visions, expert analysis, and future plans. The event covers wide-ranging and timely topics of strategic importance, such as the economic landscape, logistics, energy transition, connectivity, ESG strategies, and infrastructure. 2022 marks the 10-year anniversary of our Canada-focused tradition of providing timely, actionable insights and strategies for a global audience of leaders and decision-makers.
- David Ayre, Treasurer, CMHC
- Rod Balkwill, Executive Director, Treasury Management Branch, Government of Saskatchewan
- Mike Belenkie, President & CEO, Advantage Energy; President & CEO, Entropy
- Mac Bell, Managing Director, Infrastructure Investments, Fengate
- Romy Bowers, President & CEO, CMHC
- The Honourable François-Philippe Champagne, Minister of Innovation, Science and Industry, Canada
- Ian Charest, Senior Director, Treasury, CDPQ
- Ehren Cory, CEO, Canadian Infrastructure Bank (CIB)
- Earl Davis, Managing Director, Head, Fixed Income & Money Markets, BMO Global Asset Management
- Andre Delgado, Lead Funding Officer, Inter-American Development Bank (IADB)
- Andrea Dore, Head of Funding, Capital Markets & Investments, World Bank Treasury
- Steve Douglas, Senior Vice President & Chief Financial Officer, Hudbay Minerals
- Michael Emory, President & CEO, Allied Properties REIT
- Laurent Ferreira, President & CEO, National Bank of Canada
- André Frenette, Acting Consul General, Consulate General of Canada in New York
- Kevan Gorrie, President & CEO, Granite REIT
- Rodney Gray, Executive Vice President & Chief Financial Officer, Baytex Energy
- Martin Grosskopf, Vice-President and Portfolio Manager, AGF Investment
- Wyatt Hartley, Managing Partner & Chief Financial Officer, Brookfield Asset Management
- Bryce Hamming, Chief Financial Officer, Taseko Mine
- Martine Hébert, General Delegate in New York, Government of Quebec
- Sonia Hernandez, Vice President, Sustainable Development & ESG, National Bank of Canada
- Jim Hopkins, Assistant Deputy Minister of Provincial Treasury, British Columbia
- Attila Juhasz, Principal Portfolio Manager, Head of the US Fixed Income Desk, TREAA Department, Treasury, World Bank
- Zauresh Kezheneva, Funding Officer, International Finance Corporation (IFC)
- Éric Lachance, President & CEO, Énergir
- Mike Manning, Executive Director & Chief Investment Officer of the Capital Markets, Ontario Financing Authority (OFA)
- Stéfane Marion, Chief Economist & Strategist, National Bank of Canada
- Éric Martel, President & CEO, Bombardier
- Bill Morneau, Former Minister of Finance, Canada
- Nik Nanos, Chief Data Scientist & Founder, NANOS RESEARCH
- Jeff Norman, Chief Development Officer, Algonquin Power
- Nicoleta Oprea, Director, Capital Markets, Government of Manitoba
- Anthony Phillips, Co-Head of PPP & Projects, John Laing
- Wayne Pommen, Head of International, Affirm
- Bob Rae, Permanent Representative of Canada to the United Nations
- Anne Robinson, Chief Strategy Officer, Kinaxis
- Aldo M. Romani, Head of Sustainability Funding, European Investment Bank (EIB)
- Brian Rosen, President & CEO, Canada, Colliers International
- Fate Saghir, Head of Sustainability, Mackenzie Investments
- Brian Schmidt, President & CEO, Tamarack Valley Energy
- David Schwartz, Chief Financial Officer, Nuvei
- Ken Seitz, President & CEO, Nutrien
- Randy Smallwood, President & CEO, Wheaton Precious Metals
- Paul Soubry, President & CEO, NFI Group
- Heather Taylor, Chief Financial Officer & Treasurer, City of Toronto
- Marcel Teunissen, Senior Vice President & Chief Financial Officer, Parkland
- Elizabeth Wallace, Senior Manager, Funding & Foreign Exchange, Ontario Finance Authority (OFA
- Brandon Weening, Executive Vice President, Corporate & Capital Markets Finance, OMER
- Sara Wilshaw, Chief Trade Commissioner & Assistant Deputy Minister, Global Affairs Canada
- Vern Yu, Executive Vice President & Chief Financial Officer, Enbridge
- Lisa Abramowicz, Co-Host, Bloomberg Surveillance, Bloomberg Television & Radio
- Ari Altstedter, Reporter, Bloomberg
- Theophilos Argitis, Ottawa Bureau Chief, Bloomberg
- Shelly Banjo, New York Bureau Chief, Bloomberg
- Danielle Bochove, Toronto Bureau, Bloomberg
- Margaret “Peggy” Collins, Washington Bureau Chief, Bloomberg
- Derek DeCloet, Managing Editor, Canada, Bloomberg
- Mathieu Dion, Montreal Bureau Chief, Bloomberg
- Lynn Doan, Managing Editor, Energy & Commodities, Bloomberg
- Abigail Doolittle, Markets Correspondent & Segment Host, Bloomberg Television
- Esteban Duarte, Reporter, Bloomberg
- Katie Greifeld, Reporter & Anchor, Bloomberg
- Kriti Gupta, Anchor, “Bloomberg Markets Americas”
- Ritika Gupta, Reporter & Producer, Bloomberg Television
- Amanda Lang, Anchor, Bloomberg Television
- Naureen Malik, Energy Reporter, Bloomberg
- Stefanie Marotta, Reporter, Bloomberg
- Liz McCormick, Chief Correspondent, Bloomberg
- Sandra Mergulhão, Executive Producer, Bloomberg Television
- Layan Odeh, Canada Investing Reporter, Bloomberg
- Kevin Orland, Canadian Banking Reporter, Bloomberg
- Denise Pellegrini, Executive Producer, Bloomberg Radio
- Brian Platt, Canadian Government Reporter, Bloomberg
- Taylor Riggs, Anchor, Bloomberg Television
- Eric Roston, Sustainability Editor, Bloomberg
- George Schindler, President & CEO, CGI
- Jen Skerritt, Agriculture Reporter, Bloomberg
- Alix Steel, Anchor & Reporter, Bloomberg Television
- Jennifer Surane, Finance Reporter, Bloomberg
- Tara Weber, Western Bureau Chief, Bloomberg
Day 1 Session 1
The Economic Landscape
What do current trends portend for the near and far future of the economy? These panelists will share their views and how their expectations for the economy are informing their strategies.
Stéfane Marion, Chief Economist & Strategist, National Bank of Canada offered insights on rates and inflation in the short term. He is hopeful the policy rate will settle at 4% on both sides of the border. “My personal view is that when all the central banks are now doing this most synchronized tightening cycle, as everyone is draining the global economic pool at the same time, clearly, the water level is coming down much faster than what your normal models would suggest.”
Offering a prediction on the long term, Earl Davis, Managing Director, Head, Fixed Income & Money Markets, BMO Global Asset Management said it’s important to distinguish between the destination and the path. “This destination is a secular change in environments. The last 40 years, we had lower volatility, lower inflation, lower interest rates. It buoyed all risk assets.” The last time we were in this regime, he noted, was 1956 to 1982. “Seventeen years! We’ve only been in this 17 months.” He predicted inflation will be six percent by the end of next year.
Strategic Metals Production
Steve Douglas, Senior Vice President & Chief Financial Officer, Hudbay Minerals
noted the U.S. Strategic Metals list doesn’t include copper and its role in future decarbonization. “It’s a naive point of view to think that we’re not going to need massive amounts of additional copper in order to decarbonize. It’s just a fact. There’s no other substitute for it.” There are plenty of resources, he said, just within their own mines. “But the fact remains, it’s still seven to 10 years, on your best day, from discovery to production.” Mining could accelerate closing the supply gap, “but it would take a massive shift in the way governments and other stakeholders adjudicate whether or not these projects are viable, and, frankly, helpful to the world at large.” Otherwise, the outcome could be “pretty nasty.”
“If we really want to achieve the goals we’ve set out for 2050 of net zero, we really have to double the mine supply of copper by 2035, and that’s a big order, on a magnitude we’ve not seen before,” said Bryce Hamming, Chief Financial Officer, Taseko Mines. He echoed that it comes down to the regulatory process. On critical minerals strategy, and Canada’s “pretty ambitious” new program, “It’s not that the industry needs capital to explore the resources. It needs governments and regulatory bodies to invest in themselves. To not sacrifice their principles, but to make the process more streamlined.”
Case Study: Strategic Mining
Randy Smallwood, President & CEO, Wheaton Precious Metals said gold looks pretty attractive against every currency, except for the very strong U.S. dollar. But it’s not going to remain that way forever. “When I look around the world, I’m actually pretty excited about where gold can position itself in a situation like that.” Everyone will want some gold in their portfolio at that point, he said. On gold becoming its own asset class, and what it will look like against other assets, Smallwood said there’s a lot of recommendations for 5-10% exposure on gold in personal portfolios.
Advances in Sustainable Agriculture
Ken Seitz, President & CEO, Nutrien said rising prices for basics like seed and fertilizer, and supply chain issues, were already threatening food security. Then the war in Ukraine broke out, all but shutting down exports from two of the breadbaskets of the world. The situation has the potential of causing them to “abuse” their sustainability efforts to shore up the planet’s food security. “We don’t see it that way. We see that some of our sustainability efforts will improve yields and improve outcomes on food security.”
As an example, their Carbon Pilot, being conducted across three provinces and 15 U.S. states on 225,000 acres, is expected to triple this year. About 3,900 crop consultants are working with farmers, daily, on both sustainability and yield perspectives.
The Canadian Real Estate Market
On what’s safe in the real estate market right now, Michael Emory, President & CEO, Allied Properties REIT said he lived through the interest rate escalation in the 1970s and early 1980s. “Compared to that, this is nothing.” Most of the organizations in Canada, he said, have used modest amounts of leverage and have fixed their interest costs for very long periods of time. “There’s no need to hide, and frankly, there’s no need to panic, although people are clearly panicking.”
Brian Rosen, President & CEO, Canada, Colliers International agreed that there is nothing to hide from, although certain asset classes are doing better right now. “Given the macro forces behind them, industrial and multifamily residential have had a great couple of years,” with lack of supply on the market, immigration, the eCommerce boom and warehousing logistics being huge drivers. “Those are all things that are driving those asset classes into sustainable future growth.”
Advances in Fintech
Reports that Toronto is the next Silicon Valley are a little overrated, according to Wayne Pommen, Head of International, Affirm. “It’s night and day compared to 10 or 15 years ago, in terms of the tech depth here. It’s good for Canada. But there’s a long way to go to catch up.”
Merchant acceptance is what really signals when a payment method is breaking through and is here to stay, he said. “We now, in the United States, are live on something like 60% of all U.S. eCommerce sales in what we have access to, whether that’s through an Amazon or Walmart, or through our Shopify partnership.”
David Schwartz, Chief Financial Officer of consumer-facing Nuvei talked about developing markets and the unbanked, and even in North America, where younger people are less likely to have credit cards but are playing online video games. “Those are the use cases that are really driving the growth in the alternative methods that we see.”
On the most exciting trends in FinTech right now, Pommen said that, unlike other countries, alternative payment methods are just starting to sweep the country. Schwartz added to that a pandemic-induced acceleration of omnichannel, as well as payment orchestration and real-time payments.
Keynote Interview: Laurent Ferreira
Laurent Ferreira, President & CEO, National Bank of Canada reported their balance sheet and strategies to be in a good place. In terms of market uncertainties, the most important thing right now is to remain very focused on strategy and maintaining a solid revenue mix. “We’re really big fans of the universal banking model. I think that balance between retail, commercial, wealth, and wholesale has performed really well.” On future opportunities, their ABA Bank in Cambodia is expected to provide very good earnings growth. Ferreira spoke to confusion right now with various policies to combat inflation, domestic demand and wage pressures, and supply side inflation.
Keynote Interview: President & CEO Éric Martel, A Culture of Innovation
During the pandemic, 47 of Bombardier’s facilities were shut down, President & CEO Éric Martel said. He described how they survived and restructured, including selling their train division and moving into private aviation, reducing their U.S. debt by $800 million so far this year and how a large number of people who switched to private flights during COVID-19 have stayed with it.
That growth is vital as Bombardier is developing the environmentally friendly EcoJet. The new shape alone is expected to reduce emissions by close to 20%, and they are on the path to an overall 50% reduction. Private aviation, Martel said, has been a factor in attracting over 2,000 new employees this year, which enabled them to launch the high-speed Global 8000 and Challenger 350. “So, we’ve got a lot of momentum here right now and we’re building for the future for the long run. This helps in attracting people, but it is a challenge. We still have about a thousand people to hire today and about 400 of them are technicians in the service center, which we are also growing this year by a million square feet.”
Keynote Interview: Bill Morneau, Former Minister of Finance, Canada: The Road to Growth
Bill Morneau, Former Minister of Finance, Canada spoke about his book; a combination of his public life experiences and his observations on what Canada needs to think about to move forward in prosperity. On what is blocking the creation of smart public policy, issues include the challenge of recruiting capable people to get into public life, the news cycle, and the need for focus, he said. “One of the things I always said around the table as minister of finance was that we needed to focus on those few important things that could make a sustained difference for us over the long term.” He added that he wasn’t criticizing the current government, but making an observation on the challenges of government today.
Keynote Interview: George Schindler, President & CEO, CGI
On the impact of inflation and commerce’s IT budgets, George Schindler, President & CEO, CGI said despite uncertainty, one of the solutions their clients are using is more investment in IT, looking to gain additional efficiencies, “and as they look at the last set of slowdowns, and the rapid digitization that’s going on, they don’t want to fall behind.” The goal is to be best positioned to grow coming out of this cycle. Data comes from talking to more than 1,600 clients and prospective clients across 10 different industries in 30 different countries. Eighty-percent said they planned to keep their IT budgets flat, or increase them.
Day 1 Session 2
André Frenette, Acting Consul General, Consulate General of Canada in New York spoke to his fellow citizens’ concerns over the rising price of energy and other basic necessities. “This is why the government of Canada recently introduced its affordable plan to deliver $8.9 billion in new spending to support and make life more affordable for millions of Canadians.” It includes cutting child care fees, support for renters, dental care coverage and increased pensions. He called on cooperation from their “most trusted” international partners, like the U.S.
Canadian Infrastructure Opportunities
How does the Government of Canada leverage its infrastructure investment to close the infrastructure gap while creating space for private capital?
The CIB is one of the new tools in the toolkit needed to build more infrastructure, according to Ehren Cory, CEO, Canadian Infrastructure Bank (CIB), with a goal of pairing private capital with government funding for a more targeted approach to closing the infrastructure gap.
Priority infrastructure for the $35 billion in funding includes five sectors; clean power, green infrastructure, transit systems, trade and transportation, and broadband. “What all of those have in common is they’re important elements of increasing our economic competitiveness and meeting our green ambitions. And they’re all areas where there is this chance for an interface between public and private.” Four years in, significant advancements have been made in each, with 40 investment projects well on their way to completion.
US Infrastructure Opportunities
Mac Bell, Managing Director, Infrastructure Investments, Fengate and Anthony Phillips, Co-Head of PPP & Projects, John Laing discussed the public-private partnership space projects that will drive improvements across the country, with schools, courthouses, and EV charging the current major focus.
In the U.S., so much is about the Infrastructure Bill. It targets transit, roads and bridges, “all major projects which we think will provide opportunity for the long term,” Phillips said. “But one of the major initiatives of the infrastructure jobs act that we are following closely is electric vehicle charging infrastructure. The infrastructure act provides over $5 billion in funding over the next five years to develop EV charging networks. And we’re starting to see the money flows.”
A model for Canada and other nations to follow appears very doable, Bell said, with expertise ramping up as PPPs on a variety of projects get underway. “The expertise in the documentation and the processes are out there. It’s almost just a matter of getting them all into a certain entity so they can be shared and have other counties and other states and other cities be educated through that one government-domiciled body.”
The Evolution of Transportation
Paul Soubry, President & CEO, NFI Group expressed his excitement over his company leading the revolution to zero emission propulsion and technology across transportation. Making electric trolleys since 1969, the challenge has been getting them off wires. NFI has 80,000 public transit buses on the road in North America and up to 2,000 fully electric vehicles currently in service. They are headed toward 20% being battery electric. “We think, given the funding and the infrastructure drive, as well as the environmental perspective, by 2025, half of what we build is going to be some version of electric vehicles.”
Soubry talked about the trade-off of needing to recharge battery-operated vehicles, source and distribution of energy, such as solar canopies, wind farms in addition to utilities, policy, the timeframe of needed transitional support and the potential obstacles.
Oil & Gas Producers: Reflecting on Efficiencies from the Recent Energy Cycle
Brian Schmidt, President & CEO, Tamarack Valley Energy spoke to the $1.425 billion acquisition of Delta Energy Stream and how it will help discover more efficiencies in the region. “It really does position Tamarack as a clearwater performer. I think there’s a total of 93,000 barrels a day produced in the play right now, and, pro forma, we should be around 33,000, so it really does drive down our corporate costs over the next number of years.” He gave credit to the service sector for driving down costs with new technologies, as well as new efficiencies across the industry.
On expansion, and technology being key to that, Rodney Gray, Executive Vice President & Chief Financial Officer, Baytex Energy said that leveraging technology across all operations, including monitoring, has brought exceptional returns, such as their Peace River asset, where wells are now generating IRRs in excess of 500%. “It’s an incredibly exciting play and tying it back to shareholder returns, we’ve actually been able to grow that asset in terms of the production, within cash flow, and this year alone, we expect to generate over $80 million of pre-cash flow.” As for jobs, technology, such as remote monitoring, has caused a reduction. “Through the downturn, there was always a push to do more with less, and I think we’re being very thoughtful about adding people back to the workforce to assure full cycle, but also making sure that people have the training and development they need to be successful.”
Challenges and Opportunities in Volatile Markets: An Issuer and Investor View
On the challenges of navigating a volatile market, David Ayre, Treasurer, CMHC, called volatility “the new norm,” and expanded on their issuance strategy, typically using all of their 40 billion CAD cap, having a financial stability mandate in the mortgage market, being transparent and creating a quality asset for investors. “We’re obviously well-positioned, during times of volatility, with our issuance strategy, with the level of secondary liquidity our program provides, and just the strength of the Canada name, generally, and our guarantee, specifically, to be able to weather the storm quite well.”
Attila Juhasz, Principal Portfolio Manager, Head of the US Fixed Income Desk, TREAA Department, Treasury, World Bank highlighting two things; increased liquidity, with the U.S. level at its highest in 11 years, and, obviously, where the rates are going to go. On upsides in this market, “From the perspective of liquidity, the very interesting opportunity here, if we just look on the macro level, is the increase of the relative value trade opportunities. As the mispricing is getting bigger and bigger, the opportunities set is actually increasing.”
Logistics, Supply Chain and the Future of Commerce
Anne Robinson, Chief Strategy Officer, Kinaxis, brought perspectives from both supply and software sides of the supply chain, and offered an unsettling take on the current situation. “If there’s anything that I hear articulated over and over again, it’s that the only constant is change. The disruptions seem to be cascading. And I don’t expect us to see that normalization really come back anytime soon.”
Kevan Gorrie, President & CEO, Granite REIT, agreed, and added some eye-opening statistics about the pandemic and eCommerce. “It took 25 years effectively for Amazon to build up its portfolio to 200 million square feet, something like that. And they doubled it in two years, 2020 and 2021. So a massive amount of uptake of space over two years, and I don’t think anyone in our sector thought that that was sustainable or healthy, frankly, for the sector.”
Robinson talked about the unique approach of a software company purpose-built for the supply chain, using digital twins, and reshoring, nearshoring and dual sourcing, while Gorrie expanded on tariffs, EV manufacturing sites and eCommerce’s migration from Eastern to Western Europe.
Day 2 Session 3
Martine Hébert, General Delegate in New York, Government of Quebec spoke to the ties between Canada and the U.S., and the Quebec government office in New York City that opened in 1940, one of the first tenants in Rockefeller Center. “Eighty-two years ago, Quebecers could already see the multiple benefits of building closer ties with our American neighbors.” The financial ties go back much further, she said. In 1879, the Province of Quebec became the first foreign issuer of bonds on Wall Street.
Growing ESG Funding Opportunities
According to Elizabeth Wallace, Senior Manager, Funding & Foreign Exchange, Ontario Finance Authority (OFA) the influence of green bonds issuance is spilling over, “where you see particular issuers referencing things such as UN SDGs or even the green bond principles. It’s interesting to see that ripple effect.” Since Ontario entered the market in 2014, it has seen trends emerge, a proliferation of investors, and pricing evolve. Impact reporting is one of the things that has become far more robust over the time period. The Canadian green bond market has not only seen fairly successful growth, there has been participation from international entities.
The City of Toronto launched a green bond program in 2018, and added social bonds in 2020, said Heather Taylor, Chief Financial Officer & Treasurer. The ESG bond program is now 25-30% of its total debt issuance. Having been informed by investor feedback, “We knew our programs had very-targeted green outcomes. We felt that we were actually meeting the demands of investors by going out under two separate labels. But we are committed to continuing to evaluate new labels. From the city’s perspective, the green and social labels align very nicely with many of our program investments.”
Zauresh Kezheneva, Funding Officer, International Finance Corporation (IFC) noted they issued two ESG-labeled bonds in Canada over the years, and have been very frequent issuers of global green and social bonds, both public format and private placement. “What we see overall is that this year the cumulative sustainable bond issuance, globally, reached $3 trillion, with more than $2 trillion issued since the start of 2020.” In the current year, new issuances of sustainable bonds matched the general market trend, dropping by 16% over last year, driven by social bonds that posted a decline of more than 50%. “We also need to be mindful that social bond issuance really skyrocketed and thrived in the previous two years on the back of needs for COVID-19 relief programs financing,” Kezheneva said, terming it a hiccup.
ESG and ETFs Eligibility
On ETFs as an investment vehicle, Fate Saghir, Head of Sustainability, Mackenzie Investments said she hopes what’s happening in the U.S. starts to translate into Canada. Going on to speak to the ESG counter, “I want to just clarify when we’re talking about ESG, there’s a couple of nuances, which we haven’t really figured out, and we have a lot of work to do to clarify for investors and to clarify for the industry.”
Martin Grosskopf, Vice-President and Portfolio Manager, AGF Investment spoke to the difference between ESG and sustainability, agreeing that it still needs to be figured out, even as ESG becomes used broadly as a risk framework, with any kind of company now found in an ESG portfolio. He referred to his background in environmental consulting and remembering a time when there was no terminology around ESG. “I think ESG now is so broadly adopted, it can mean almost anything to anybody. And that’s why I tend to use the term sustainable because, when we’re making investments, it’s really in companies that we think are providing some kind of solution to a particular sustainability issue.”
They discussed regulators going after greenwashers and how responsible companies prove themselves. Saghir said extra oversight is key. ”The Canadian regulator has asked that if any fund does take ESG into consideration, that you lay that out in the investment strategy of the prospectus documents. So with most of the asset managers in Canada, I believe, you’ll now see that added layer of disclosure.”
The Impact of New Climate Disclosure Rules
While Canada’s businesses rank at the bottom of the G7 in the number climate targets, Sonia Hernandez, Vice President, Sustainable Development & ESG, National Bank of Canada sees good news in proposed SEC regulations. It will naturally impact Canadian companies doing business in both countries, she said, pointing out that it will help improve the quality and reliability of data, offer better monitoring of impacts of targets and provide investors with better data to make good decisions. “For me it’s a good sign. Regulation will also bring standardization.”
It’s the market itself that has been striving for more clarity in sustainability, said Aldo M. Romani, Head of Sustainability Funding, European Investment Bank (EIB). He spoke to progress of the development of the EU taxonomy and the lessons learned that may apply to Canada and elsewhere. “It’s not a one-size-fits-all approach, but is it possible to move in the right direction? Yes it is. You have to agree on certain, internationally comparable indicators that permit investors and issuers to compare and interface their preferences in a better way.”
Managing a Rising Rate Environment
On inverted curves and borrowing short, Rod Balkwill, Executive Director, Treasury Management Branch, Government of Saskatchewan said they set an annual plan, but as different opportunities arise, they tend to follow investor demand. Then there are other aspects, such as their capital program for government infrastructure and their crown corporations, like the power company’s building of more transmission and generating capacity, which will go out to longer parts of the curve. “It generally is difficult in that environment to try to change your techniques based on where the curve is or where you think it’s going.”
On foreign demand for their debt, Nicoleta Oprea, Director, Capital Markets, Government of Manitoba said there has been some shift. “When the pandemic hit that year, there was hardly any international issuance that we did in terms of Euro and Aussie where we’ve seen private placement interest. Last year, however, was much better. We had a 40/60 split between domestic and international issuance.” Investors are currently on the sidelines, waiting to see what central banks will do with rates.
Mike Manning, Executive Director & Chief Investment Officer of the Capital Markets, Ontario Financing Authority (OFA) spoke to the difficulty of being a provincial debt manager relative to the global financial crisis. He credited the federal government’s support for getting the markets functioning again during the pandemic, being able to get money in the door and benefiting from a highly liquid borrowing program, and agreed that it’s difficult with so many investors staying out. “Where we are now is challenging because we always say that you don’t really want to be borrowing at a time when central banks are in an aggressive tightening mode, and that’s exactly what we have now. But we have been getting issues done.”
Navigating Markets in an Environment of Spread Decompression and Reduced Liquidity
How do they view the current credit market?
Central banks are faced with mixed signals and are not tolerating multi-decade highs, said Jim Hopkins, Assistant Deputy Minister of Provincial Treasury, British Columbia. “They will aggressively tighten monetary policy. And even if that means a recession, de-leveraging and recessionary fears explain the current inversion of the yield curve. And I believe that it’ll probably continue well into 2023,” he said, going on to list the factors he expects will keep rates higher and credit spreads wider.
On how the decompression of yields is impacting the Inter-American Development Bank (IADB), Andre Delgado, Lead Funding Officer, said they have very strong and robust liquidity management policies, with funding based on the dollar. “The short answer is there is very much no impact in our balance sheet, simply because all financing that we do is swapped back into the U.S. dollar floating rate.
On the impact of current market conditions on World Bank Treasury’s funding strategy, Andrea Dore, Head of Funding, Capital Markets & Investments said the key thing is increased level of volatility. “The few windows of the funding program for many of our payers has increased given the multiple crises that we’ve seen over the last couple years coming from COVID.” Emerging nations, where they fund development loans, were hardest hit.
The Shift to Renewable Power
When it comes to reliability and resiliency of power grids in the effort to decarbonize, Wyatt Hartley, Managing Partner & Chief Financial Officer, Brookfield Asset Management, said the backdrop for renewables and clean energy is as strong as ever. Driving that are three things; support from government, and increasingly, from commercial actors, stronger economics for wind and solar, “and then third, is really kind of on the back of energy security, just given some of the concerns that have come out of what’s occurring in Europe.”
Jeff Norman, Chief Development Officer, Algonquin Power, talked about diversifying clean energy sources, with hydrogen also coming into the equation, although different forms of storage will be needed. “In order for us to get the grid reliability and to make the energy transition we need, we need to keep our aperture open and consider those alternative forms of generation and storage.”
They spoke to the interconnection queue, the Inflation Reduction Act, new projects and MISO, the not-for-profit, high-voltage Midcontinent Independent System Operator in 15 U.S. states and Manitoba.
Mike Belenkie, President & CEO, Advantage Energy; President & CEO, Entropy said that in Canada, there’s a sense that carbon capture is the most direct and fastest way to decarbonize, but there’s no replacement that’s feasible to scale up and size. Policy is evolving first, at the forefront globally, with investors to follow. “Policy drives all these things for us, and behind that all the technology and all the developers should flood in.”
Marcel Teunissen, Senior Vice President & Chief Financial Officer, Parkland noted their focus on sustainable fuel, EVs and chargers. They have one refinery. “But we know that only 15% or so of carbon emissions come out of the production and refining of fuels, and that the majority of emissions actually comes from the consumer. We are very focused on that and making sure the power supply gets greener.” That is a solution for the near future, but doesn’t work for commercial customers and airlines, which is why they are investing in sustainable aviation fuel. Teunissen added that there are big disparities across the provinces in terms of EV adoption, with development following the availability of government subsidies.
Energy Transition: Balancing ESG and Energy Security
Asked to describe what his business will look like in the next decade, Vern Yu, Executive Vice President & Chief Financial Officer, Enbridge reported their current investment breakdown is 5-10% in renewables, which has risen along with their energy transition curve. That may seem small, he said, but amounts to $4 billion up to 2025. “Ten years from now, I hope that we’re spending around 20-25% of our total investment budget on renewables or other forms of energy transition, whether it’s hydrogen, renewable natural gas, carbon capture and sequestration, or some other form of energy transition investment that’s not known today.”
A big question right now is on existing pipeline systems. Éric Lachance, President & CEO, Énergir, said the need will be reduced, but still exist. “Keeping the infrastructure is key, and it’s not only natural gas infrastructure that is tough to build now, but any kind of infrastructure nowadays. The value of the assets that we have and the importance of maintaining them is really important.” With every new initiative Énergir launches, Lachance said they make sure that the economic value the infrastructure brings is well-reflected in the products they offer, “so that we can maintain the infrastructure in the future and it can play its role within the energy portfolio of the provinces that we are in.”
Day 2 Session 4
Bob Rae, Permanent Representative of Canada to the United Nations described the challenges as not just economic, but social, with “the underlying challenge of an unequal world, of a world where there are profoundly different circumstances facing countries around the world and where there are not only positive signs of growing prosperity, which we’ve seen over the last 25 years, but also really challenging realities as it relates to the growing inequality between many parts of the world.” Along with getting back to Sustainable Development Goals, we need to get back to the basic principles of human wellbeing.
Keynote Interview: Sara Wilshaw, Chief Trade Commissioner & Assistant Deputy Minister, Global Affairs Canada: Tradewinds
Sara Wilshaw, Chief Trade Commissioner & Assistant Deputy Minister, Global Affairs Canada said the most-frequently raised concerns are about supply constraints and uncertainty, geopolitical developments and a tendency toward protectionism in some really important markets. The strategy is to foster diversity of the export markets and build resiliency into supply chains. “Diversity for us means also providing international opportunities for businesses in an economy that is increasingly green, and increasingly digital.” Diversity is expanding with the addition of chapters that include trade and gender, eCommerce and SME.
Keynote Interview: The Honourable François-Philippe Champagne, Minister of Innovation, Science and Industry: Canada: A Hub of Innovation
The Honourable François-Philippe Champagne, Minister of Innovation, Science and Industry, Canada said he hears from investors and CEOs all the time, who “realize that Canada offers unparalleled stability and predictability. Top of mind is critical minerals, renewable energy, and access to market, and that plays very well to Canada’s strengths.” His ambition is to be the green supplier of choice to the world, including green steel, aluminum, batteries and semiconductors. He expanded on the very relevant topic of critical minerals, which are prevalent in Canada. “All we need now is to speed and scale.”
Keynote Interview: The World Needs Canadian Energy
Nik Nanos, Chief Data Scientist & Founder, NANOS RESEARCH stated that it is very clear Germany is looking for energy partners around the world, noting they won’t likely end up with the partners they want. Canada is at the top of the list, but not the best candidate to directly supply the LNG Germany needs right now. Interestingly, the requested solution was for LNG to be exported to an existing pipeline out west to alleviate some of the pressure on global supply. Nanos’ insights were gleaned from participating in sessions last month with Germany’s chancellor and vice chancellor, who traveled to Canada seeking help with the European energy crisis. He mentioned the east coast hydrogen deal, and needing an infrastructure investment program in Canada and Germany to move things forward. “If not, who’s going to invest, for example, in LNG, where the long term horizon is not really that great.”
Nanos also spoke to what Canadians think about the energy transition and their degree of willingness to pay to lower greenhouse gas emissions.
The Canadian Affordable Housing Strategy
After estimating earlier this year a national housing price decline of 5%, a revised CMHC forecast in October will likely put it at 10-15%. It has to be put into context, said Romy Bowers, President & CEO, noting that the increases during the pandemic were unsustainable. “What’s really important to remember is there’s a very significant supply shortage in Canada and a significant demand being unfulfilled, and in our view, the supply/demand mismatch is what’s going to sustain the housing market in the long term.” She spoke to strong employment numbers reducing losses for mortgage lenders, a major pullback in the development pipeline, a one-time government housing benefit and being in the process of launching the third round of the Rapid Housing Initiative.
The Use of Leverage in the Public Sector
Created by the government in 1965, but independent, the CDPQ is focused exclusively on public asset management in Quebec, said Ian Charest, Senior Director. It has more than 45 clients, in excess of 75 assets outside of Canada. When it comes to leverage, they act as an internal bank, with transactions and daily collaboration. Describing their strategy, “Clients own units in each of eight specialized portfolios, like real estate, public equity, credit. It’s how we add value and optimize return.” They add overlay strategies involving investments in sustainables and technology.
Brandon Weening, Executive Vice President, Corporate & Capital Markets Finance, OMERS said that with about 550,000 municipal employee members and $120 billion in assets, OMERS is one of Canada’s largest pension benefits plans. Their focus is on deploying capital into an optimal asset mix, with the emphasis on long term. “Our youngest investor is 17 and our oldest is 107,” he said. “That is the perspective we try to maintain.” Leverage gets a dual approach; debt capital for some assets for some, the proceeds of leverage for others. “We fungibly add proceeds to liquidity capital and just use it to fund our equity investments, wherever they are across the enterprises.”
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