Canada’s CDPQ eyes infra, energy transition opportunities in India

Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) is bullish on infrastructure investment opportunities in India and wants to fund the net-zero transition journey of Indian firms, according to senior executives.

CDPQ, which began investing in India in 2016, has so far invested Canadian $8 billion in the country across infrastructure, real estate, public markets, fixed income, and private equity. “We are very bullish on India. There is great potential for investments there. The government is putting a lot of emphasis on—and money into—infrastructure, and it is very focused on increasing the ease of doing business in India. Accordingly, there are a lot of growth opportunities for CDPQ, and we are looking at a range of options,” said Kenneth Juster, senior adviser, CDPQ Global and a former US ambassador to India.

Given the long-term, patient nature of its capital, the pension fund wants to focus on building partnerships and platforms to invest and reinvest large sums of capital over long periods instead of investing in single assets. “Our core strategy is building partnerships where we can deploy constructive capital, which means that each investment we make brings long-term value to that business and to the planet. This also means that ESG and sustainability are fundamental pillars of our investment strategy. We want to build businesses for the long term, where we can put in meaningful governance, forge strong partnerships and alliances for sustainable growth, and ultimately create leaders in their respective sectors who can shape the future through thought leadership and impact,” said Saurabh Agarwal, managing director, CDPQ India and managing director, infrastructure, South Asia and the Middle East.

“We are building long-term platforms based on our constructive capital theme. It’s not about investing in a specific project or a one-time transaction; we are investing in holding companies, aligning with—and backing—our partners and the management teams, which allows us to continuously reinvest capital over a period of time as the company or partnership grows,” added Agarwal.

Through its platforms, the pension fund is investing across the spectrum from greenfield to brownfield projects in infrastructure and from stress to performing credit in fixed income.

For instance, the fund has invested Canadian $650 million in its solar energy platform Azure Power since 2016, taking the company from 350 megawatts operating business to 3 gigawatts (GW) operating assets and a pipeline of 5GW.

It has also set up a platform for investments in roads called Maple Highways, which is in the process of acquiring three operating assets, including one under the National Highways Authority of India’s Toll-Operate-Transfer (TOT) model.

“In addition to renewable energy and roads, we are also exploring investment partnerships in sectors such as fibre, towers, and data centres,” said Agarwal.

Another major opportunity that CDPQ is exploring is the energy transition space in India. “Energy transition is very important for us. Industry is simply not going to be able to move from fossil fuels to renewables overnight. Thus, there is significant opportunity in funding the transition phase for companies from fossil fuels to renewables,” said Juster.

Agarwal added that the fund manager is keenly watching the energy transition space, where it wants to see how it can expedite and accelerate the transition of the Indian carbon-based economy into a green one.

“CDPQ is committed to working with—and providing our capital to—best-in-class energy companies on a transition towards a greener economy. As part of our new climate strategy, we have an envelope of capital reserved for funding energy transition businesses and can make investments into businesses which are currently carbon-heavy but have a clear path towards becoming net-zero,” he said. “Not many investors can take that stance today, and we strongly believe this will be a source of attractive investment opportunities,” he added.