Canada Leads in Global Trust but Faces Pressure to Deliver Infrastructure Projects
Canada ranks near the top of the list of countries where global investors want to deploy more money and scores well on trust and stability, but needs to prove it can rapidly deliver large-scale investment opportunities to attract more international capital, a survey of senior investment professionals says.
Only Japan ranked ahead of Canada among markets where survey respondents expect to boost the amount of money they invest, with 38 per cent saying they anticipate making moderate or significant increases in investment in Canada, according to two reports released Tuesday by the CPP Investments Insights Institute.
Canada stands out for being associated with stability, and it performs well on perceptions of its regulatory predictability and its openness to global capital, according to the survey results. It is also the top-ranked “stay-or-grow” market, with 94 per cent of respondents anticipating they will maintain or increase their Canadian exposure.
Japan came second at 82 per cent and the United States third with 77 per cent, according to one of the reports, called “Trusted, but Untapped,” which focuses on perceptions about Canada.
However, “trust alone does not move capital,” says the second report, “Competing for Capital,” which looks at how global investors choose where to put capital.
Canada’s “greatest weakness” is the perception that there are a limited number of investable opportunities with the scale and depth that major investors require. To attract more capital, the country must show it can build a deeper pipeline of large-scale opportunities, advance them quickly, cut red tape and find models that spread the risks involved.
Investors also cite regulatory complexity and long permitting timelines as factors holding back investment decisions in energy and critical minerals in Canada, the Untapped report says. And they see higher barriers to entry in digital and artificial intelligence infrastructure, which is another leading theme for global investment.
“The survey reveals a consistent paradox: The sectors investors perceive as most attractive in Canada are also the ones they view as hardest to enter at scale,” the report’s authors say.
The institute that carried out the survey conducts research on behalf of the Canada Pension Plan Investment Board, the country’s largest pension plan with $864-billion in assets. It surveyed 65 senior investment executives in 20 countries who represent organizations that manage a combined $65-trillion in capital. Their responses focused on eight major investment markets: Canada, the U.S., Germany, Singapore, Britain, Japan, Australia and France.
CPPIB is a co-organizer of the inaugural Canada Investment Summit on Sept. 14 and 15, which is expected to draw hundreds of the world’s most senior global investment executives to Toronto. Canadian political leaders and executives are looking to capitalize on heightened interest in Canada and translate it into deals and new investment.
The summit will focus on Canada’s resources in energy, critical minerals and mining, defence and advanced technologies, all of which are high on investors’ wish lists. Ottawa is aiming to attract $500-billion in new private-sector investment and $1-trillion of total capital over five years.
But an expanding trade war between Canada and the U.S., and the potential that it could escalate further, are casting a shadow over the summit and a spotlight on Prime Minister Mark Carney’s pitch that investors should look at Canada as an alternative as the U.S. acts more unpredictably.
The U.S. “occupies a category of its own,” with a reputation for unmatched opportunity, depth of capital markets, talent and sophistication, the Competing report says. Canada, Japan, Germany and Britain occupy a second tier, each scoring highly on different attributes.
At the same time, investors are hesitant to accept high levels of uncertainty, and with greater volatility in trade, geopolitics and markets, trust in a market’s stability and predictability is “perhaps more important than ever,” the report concludes.
The world’s most influential investors “are choosing between the systems that make capital easier to deploy and those that leave otherwise attractive opportunities difficult to underwrite,” according to the Competing report.
“Canada is seen as a market where the rules are less likely to change mid-investment,” the Untapped report says.
This article was first reported by The Globe and Mail
