Ottawa Considers Infrastructure Bank to Draw ‘Long-Term Commitment’ from Investors
The federal government may be moving toward setting up an infrastructure bank to fund major projects worth billions of dollars—much of it earmarked for green infrastructure—and tap into a global investment push that has been pegged in the tens of trillions over the next 15 years.
The Toronto Star reports that Ottawa has been wooing international financiers, reorganizing some segments of the public service, and assigning senior cabinet ministers to support the effort. The paper cites two massive figures—the $16 trillion in bonds that are losing money for the investors who hold them, and the $57 trillion price tag the McKinsey Global Institute has attached to the worldwide infrastructure needs that will have to be met by 2030.
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“You see where this is heading,” Wells adds. “On one hand, a vast global capital pool invested at low-growth, no-growth, or give-it-back rates of return. On the other, governments that would easily, if they only could, spend far more than they can raise through taxes.”
Much of the push for infrastructure investment in Canada is coming from the Advisory Council on Economic Growth, a private sector panel appointed by Finance Minister Bill Morneau in March. More recently, though, “the file is accelerating so audibly in Trudeau’s Ottawa that the Public Policy Forum sped up the publication of a report calling for the creation of an infrastructure bank, for fear that Morneau would announce it before the think tank could demand it,” the Star notes.
Advisory council member Michael Sabia, a Mulroney-era civil servant who now heads the $259-billion Caisse de dépôt et placement du Québec, said an infrastructure bank could be designed so that every dollar of federal money triggers four to five dollars in private investment.
“I’d give this organization, this new bank, the opportunity to structure and negotiate transactions in a highly expert way, because this is a technically complex area,” he told a recent conference in Ottawa. And “I’d create inside that bank what I call a national centre of excellence, where you assemble the expertise that’s required to audit our national needs for infrastructure and on that basis develop a national infrastructure plan.”
He added that Canada has an opportunity to move boldly to close the infrastructure gap because the issue is already high enough on the public agenda. “We are so far ahead of the Americans in infrastructure, in how we think about it, that it’s a joke. They’re in the rear-view mirror.”
The Caisse is already involved in a $5.3-billion plan to build an automated light rail network in Montreal.
Morneau said he’s interested in getting a “pipeline of projects” off the ground and drawing investors into a “long-term commitment” on infrastructure. “My hope is that we can invest a dollar of federal money and multiply that five or six times — by having provincial and municipal investments, and also have other investments from institutional investors,” he said. “I think you’ll see that our approach will deal with the political risk that institutional investors see.”
The Star article lays out the factors in the current investment climate that are adding momentum to the push for an infrastructure bank, as well as the likely elements of the bank itself. “What’s the catch?” Wells writes. “Not everything a government needs to do or build will attract private investors. There have been impressive one-off projects, but systematic use of private investors has so far been more of a dream than a reality around the world.”