Morningstar DBRS Confirms CPP Investments at AAA and CPPIB Capital Inc. at AAA and R-1 (high); Stable Trends

DBRS Limited (Morningstar DBRS) confirmed the Issuer Rating of the Canada Pension Plan Investment Board (CPP Investments) at AAA. Morningstar DBRS also confirmed the credit ratings of CPPIB Capital Inc., including its Medium-Term Notes at AAA, its Canadian Short-Term Promissory Notes, Euro Commercial Paper Notes, and U.S. Commercial Paper Notes at R-1 (high). All trends are Stable.

KEY CREDIT RATING CONSIDERATIONS
The credit ratings and Stable trends are supported by the legislative and governance frameworks that provide an exclusive mandate to CPP Investments to manage assets for the base and additional Canada Pension Plan (CPP). The CPP is expected to continue to provide significant net contributions to CPP Investments for the foreseeable future, and to be sustainable at current contribution levels, providing a very stable, large scale asset base for CPP Investments to execute its investment strategy. CPP Investments has a sophisticated investment team, broad expertise across diverse asset classes and geographies, and access to leading third-party managers and investment opportunities. The credit ratings are further supported by CPP Investments' $714 billion net asset position, substantial available liquidity, low recourse debt burden, solid long-term investment returns and lack of direct pension, or insurance liabilities. CPPIB Capital Inc., a wholly owned subsidiary of CPP Investments, issues debt with recourse to CPP Investments. The credit ratings on the debt issued by CPPIB Capital Inc. are supported by the unconditional and irrevocable guarantee provided by CPP Investments.

CREDIT RATING DRIVERS
Morningstar DBRS would downgrade the credit ratings in the event of unexpected legislative changes that would compromise CPP Investments' role as an exclusive and independent asset manager. In addition, sustained investment losses, resulting in a material decrease in net assets and higher debt leverage, would have negative credit ratings implications.

CREDIT RATING RATIONALE
Legislated Framework: AAA
CPP Investments was created by the Canada Pension Plan Investment Board Act (CPPIB Act) of the Canadian Parliament to manage the assets of the CPP. Parliament cannot amend the CPPIB Act, or pass any other laws which directly or indirectly alter the CPPIB Act, without approval of at least two thirds of the included provinces, having in the aggregate not less than two thirds of the population of all of the included provinces, providing a very secure and stable mandate to CPP Investments. This produces a highly captive asset base, ensuring continuity in CPP Investments' operations and investment strategy. CPP Investments' board members are appointed by the Government of Canada, but the CPPIB Act has safeguards against any political interference. The assets of CPP Investments are managed in the best interests of the participants of the CPP and are strictly segregated from government funds.

Plan Sponsors and Demographics of a Plan's Membership: AAA
Both the base and additional CPP are funded through contributions from workers and employers in all Canadian provinces and territories expect Québec. Contributions to the CPP can be and have been adjusted in the past and are currently set at a level, which ensures the sustainability of the plan in the long-term, despite the aging of the Canadian population. Compared to other large Canadian public pension plans, the base CPP relies more on current contributions and less on investment returns to fund current benefit payments, providing a longer investment horizon and more ability to assume investment risk. Indeed, CPP Investments is expected to receive positive net contributions for the foreseeable future.

Management Framework: AAA
CPP Investments has a sophisticated investment and risk management framework with widespread global capabilities commensurate with the size of its portfolio and investment teams. CPP Investments targets more market risk than some of its peers (as defined by a global equity and Canadian government bond exposure) and aims to deliver superior returns to risk-equivalent benchmarks by diversifying across public market and alternative asset classes with a collection of internal, external, active, and passive strategies. In addition, it uses investment leverage to achieve the desired market risk exposure. In fiscal 2025, CPP Investments updated its benchmark portfolios, re-labelling its reference portfolios as market risk targets and developing new benchmarks more closely aligned with its investment strategy to better incentivize and report on performance, which has been lagging behind strong U.S. public equity returns in recent years.

Financial Resources: AAA
With $714.4 billion in net assets, CPP Investments has ample financial resources to execute a diversified investment strategy and gain access to world class investment opportunities and third-party investment managers. These resources also allow CPP Investments to absorb some volatility in its returns over time while continuing to have ample liquidity to deploy into new investment opportunities, especially when considering continued net contribution inflows.

Funding Status: AAA
As an exclusive asset manager, CPP Investments does not have any direct pension liabilities and receives a AAA score for the funding status. At current contribution rates, CPP is expected to be sustainable into the long-term, as outlined in its most recent actuarial reporting (as of YE2021)

Liabilities: AAA
On March 31, 2025, CPP Investments' investment liabilities were $222.5 billion, up from $178.0 billion at March 31, 2024. CPP Investments has been increasing investment leverage in recent years as it targets a more diversified and resilient portfolio with lower correlation to market risk, which allows for additional leverage without increasing the risk profile. While the market risk exposure remains capped, this leverage still exposes CPP Investments to execution and operational risks. CPP Investments' recourse debt liabilities remain prudent at $76.6 billion, or 9.7% of adjusted net assets (net assets plus recourse debt liabilities), up from $67.9 billion in 2024, which was also 9.7% of adjusted net assets. Positively, CPP Investments has significant unused commercial paper and credit facility capacities available.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025), https://dbrs.morningstar.com/research/454196.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology is the Canadian Methodology for Rating Public Pension Funds & Exclusive Asset Managers (June 3, 2025; https://dbrs.morningstar.com/research/455482). In addition, Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025; https://dbrs.morningstar.com/research/454196) in its consideration of ESG factors.

The following methodology has also been applied:
-- Morningstar DBRS Global Corporate Criteria (February 3, 2025), https://dbrs.morningstar.com/research/447186

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found on the issuer page at https://dbrs.morningstar.com.

The credit ratings were initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for these credit rating actions.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with these credit rating actions.

These are solicited credit ratings.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' trends and credit ratings are under regular surveillance.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com.

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