The Canadian government is talking to the country’s largest pension funds about investing in billions of dollars worth of infrastructure projects to help stimulate the economy, the Infrastructure Ministry told Reuters on Wednesday.
Prime Minister Justin Trudeau’s Liberals won an election in October on the back of a promise to run three consecutive annual budget deficits of up to $10 billion to help fund investment in infrastructure and will seek to boost that with private funding, sources told Reuters.
The funds are fiercely protective of their independence from political interference and would not be compelled to invest, but their backing for the projects would be a major boost for Trudeau.
“We are engaging pension funds and other potential partners to find areas of alignment,” a spokeswoman for Infrastructure Minister Amarjeet Sohi said. She did not give further details.
Ottawa has room to add another $15 billion to stimulus spending, says economistProvinces set to jockey for share of Trudeau’s infrastructure spending boost
Executives at the pension funds, which are among the world’s biggest infrastructure investors, say that the projects will need to be structured in a way that limits the risk they take if they are to be lured into backing them.
Traditionally, funds such as the Canada Pension Plan Investment Board (CPPIB) have been reluctant to back ‘greenfield’ projects, which are built from scratch, because of the risk they carry.
Funds usually prefer investing in ‘brownfield’ infrastructure, projects that have already been constructed, executives said.
Mark Wiseman, chief executive of CPPIB, which has $283-billion in assets under management and invests on behalf of the federal plan that covers most working Canadians, told Reuters projects would need to have sufficient scale to be interesting, be overseen by a predictable regulatory regime and carry limited risk.
“That means projects where we are not going to have to take the build-out, greenfield-type risk because we’re not good at being able to assess those. There’s ways to structurally de-risk these opportunities for institutional investors,” he said.
Bankers say private funding for the projects could amount to several times more than that coming from the public purse and Canadian pension funds, already among the world’s biggest infrastructure investors, would be an obvious source of capital.
One government source familiar with the matter said officials had also had conversations with institutional investors such as Canada’s Brookfield Asset Management, as well as the major Canadian pension funds.
“We’ve talked to Teachers’, we’ve talked to Caisse, we’ve talked to OP Trust, we’ve talked to OMERS, we’re talking to CPPIB, most of the Canadian ones. I think the conversations have gone well and there’s lots of interest on both sides to find a way to partner,” the source said.
The source said the talks were exploratory and specific projects had not yet been discussed. Officials have sought advice on setting up the Canada Infrastructure Bank, which Trudeau had talked about creating during the election campaign to provide low-cost financing for infrastructure projects.
© Thomson Reuters 2016