Under the direction of the then Canadian Finance Minister Paul Martin, the CPP Investment Board was created in 1997 as an organization independent of the government to monitor and invest the funds held by the Canada Pension Plan (CPP). In turn, the CPP Investment Board created the CPP Reserve Fund. The CPP Investment Board is a crown corporation created by an Act of Parliament. It reports quarterly on its performance, has a professional management team to oversee the operation of various aspects of the CPP reserve fund and also to plan changes in direction, and a board of directors that is accountable to but independent from the federal government.
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The CPP Investment Board invests in more than 2 900 public companies around the world, including more than 600 Canadian companies. As a long-term investor and owner, they believe that responsible behavior by these companies with respect to environmental, social and corporate governance (ESG) factors can generally have a positive influence on corporate financial performance.
As outlined in their Policy on Responsible Investing, first adopted in 2005, they consider ESG factors from a risk/return point of view and encourage companies to adopt policies and practices that enhance long-term financial performance.
In keeping with their commitment to disclose responsible investing activities, the 2009 Report on Responsible Investing provides a detailed review of CPPIB's activities and achievements.
According to the Office of the Chief Actuary of Canada, the CPP Fund needs a real rate of return – that’s return after inflation – of 4.2 per cent, over the 75-year projection period in his report, to help sustain the plan at the current contribution rate.
In July 2009, the Chief Actuary has reaffirmed that the CPP is sustainable throughout the 75-year timeframe of his 2007 report; the Chief Actuary will publish a new projection for the CPP in 2010. Over this long timeframe it is expected that there will be periods where returns are above or below this threshold.
Consistent with the CPPIB's mandate to maximize investment returns without undue risk of loss, they pursue a value-added strategy that seeks to deliver returns over and above a market-based benchmark over the long term. That benchmark is called the CPP Reference Portfolio and under reasonable capital market assumptions, it can generate the long-term 4.2 per cent real rate of return required to help sustain the CPP.
The performance and the market value of the CPP Fund is reported on a quarterly basis.
Investments held by the CPP Fund include equities, fixed income (primarily government bonds), and inflation-sensitive assets (real estate, inflation-linked bonds and infrastructure).
Historical information on the performance of assets available to the Canada Pension Plan, and financial statements of the CPP Investment Board, can be found under the Quarterly Reports and Annual Reports section of the CPPIB's website.