Green Urban Development: The Impact Investment Strategy of Canadian Pension Funds
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GRI was pleased to welcome Sebastien Betermier, one of the co-authors of Green Urban Development: The Impact Investment Strategy of Canadian Pension Funds, to our latest National Pension Hub Insight series on June 10, 2021. Professor Betermier, Desautels Faculty of Management, McGill University, discussed how the scope of involvement by Canadian pension funds in green urban development is broad and generating value.
He explained that Canadian pension funds invest heavily in real estate. These investments include retrofitting existing buildings and developing new buildings to meet Leadership in Energy and Environmental Design (LEED) standards.
Canadian funds are two times more active in LEED value-add strategies than global peers. The benefit of this results in:
Through their research, the team manually studied hundreds of real estate transactions from annual reports and news coverage at nine of the largest funds (AIMCo, BCI, CDPQ, CPP, HOOPP, IMCO, OMERS, OTPP, PSP) and constructed 3D maps of the transactions. They overlaid these maps into major urban centres like Montreal, Toronto and Vancouver.
What they discovered is that Canadian funds are more geographically diversified than their peers, invest more in mixed-use properties and have an ability to extract the full economic profits from real estate ventures. Over a 15-year period from 2005 to 2019, and with full control over their operations, large Canadian funds generated an average return of 9.7 per cent on real estate portfolios.
Direct green urban development seems to be a win-win for Canadian pension funds. Not only do these firms contribute to sustainable urban development, they are able to create long-term value for pensioners.
Associate Professor of Finance
Desautels Faculty of Management
Other webinars in our 2021 NPH Insight series include: