Caisse de dépôt et placement du Québec‘s $125 million partnership with S2G Ventures is part of a broader push into agriculture to support carbon intensity goals, while facilitating exposure to promising food and ag companies, said a senior vice-president.
The joint platform will invest up to $125 million over the next three years into ventures that make food and agriculture sustainable and climate friendly, while pursuing market-rate returns. The collaboration was presented as contributing to CDPQ’s 2017 commitment to reduce the carbon intensity of its portfolio by 25 percent per dollar invested by 2025.
“People that are following us are getting the message: sustainable investment in its broad form is something that is really important for CDPQ in general. We have spent a lot of time on energy and transition and this opportunity [S2G partnership] is bringing us into something we really believe in,” Mario Therrien, senior vice-president for strategic relationships at the C$333 billion ($253.6 billion; €214.6 billion) Canadian pension, told Agri Investor.
Therrien said CDPQ views the broader agriculture space as a way to continue its real assets investments while adding characteristics that are different from what it has already achieved through private equity, real estate and infrastructure. He added that CDPQ recently recruited an executive to focus on agriculture (who CDPQ declined to identify) that will sit within its infrastructure team.
“We have made a few investments in the past, but they were mostly with funds and we clearly did not pay the attention that we probably should have,” said Therrien. “Clearly, this [agriculture] is something now that is coming back.”
Partnerships like the one with S2G, explained Therrien, are an important tool CDPQ uses to proactively gain exposure to smaller, earlier-stage opportunities in key sectors where it is looking to deploy capital.
S2G managing director Sanjeev Krishnan told Agri Investor capital from the CDPQ vehicle could be deployed into any of the firm’s existing portfolio companies, perspective pipeline investments or new opportunities identified together. The firm is currently evaluating three potential investments for the CDPQ partnership, he added, but declined to identify any market segments especially well-suited to focus on carbon reduction.
Krishnan highlighted instead the capital needs of growing companies in S2G’s established areas of focus – which include digitization, decommodification and health and wellness within ag – whose offerings overlap with climate change mitigation.
“As the ag and foodtech sector grows up, there is going to be more and more need and opportunity to raise and deploy capital to scale some of these early technologies through their deployment,” Krishnan said. “A lot of the themes that I find most exciting today – from what the consumer is doing in the marketplace and some of the tailwinds that covid has presented – all of those will be in the mission of accelerating the sequestering of carbon in food production.”
CDPQ’s investments in agriculture have included a 2012 commitment to TIAA-CREFF Global Agriculture, the creation of a C$40 million co-investment platform with co-op Agropur devoted to Canadian dairy and the launch of a C$125 million fund supporting family-owned agribusinesses in Canada in 2017. Earlier this month, CDPQ was among a group investing $150 million into Sollio Cooperative Group, the largest agricultural co-op in Quebec, to support modernization of agricultural product offerings in the region.
S2G’s Krishnan described the creation of the CDPQ platform, which came after about three years of discussions, as part of institutional capital’s growing willingness to support long-term adoption of sustainable agricultural practices.
“You are seeing a lot of companies – whether it is IPO or SPAC – that are sustainable, ESG-driven companies getting embraced by the public market to provide that long-term capital to scale,” he added.
“You have seen this in the EV [electric vehicle] space, you have seen this in the battery space and I think you are going to start seeing it in food and ag as well. We have seen some successes with the Beyond Meat IPO, the Vital Farms IPO and other food and ag companies going public. It is also further validation of where CDPQ can play across the stack: private company, as well as when companies go public.”