Are Canadian pension funds stepping up for Canada at this moment of threat? All signs point to maybe

OMERS announced earlier this week that it will attempt to increase its investments in Canada by $10B over the next five years. The large Canadian pension plan—one of the so-called Maple 8—has set a target of having 25 per cent of its investments in Canada, up from 18 per cent today. 

Our data show that the Maple 8 have invested less and less in Canada over the past twenty years. We have been concerned about this and have made a number of points that have become more urgent in light of the American threats to our economy and economic independence. 

Here’s how we think Canadian pension funds should step up for Canada at this moment of threat: 

 1. Pension funds cannot operate under a business-as-usual approach. There are real threats to the Canadian economy and Canadians. Institutional investors in Canada—and all those who hold and allocate wealth—have a moral responsibility to consider Canadian sovereignty and Canada’s long-term economic growth. Decision-makers should intentionally think about how they can contribute positively to Canadian firms and communities. That means investing more at home, while maintaining commitments to diversification and securing risk-adjusted market returns. 

2. Canadian institutional investors need to gradually pivot more of our capital away from the U.S. and continue to diversify globally. The U.S. today is a much riskier place than it was a decade ago. Canada is a much safer place and deepening our partnerships with democratic countries around the world through investment is a key pillar of Canada’s economic strategy. Those who invest Canadians’ savings cannot pine for a return to the good old days. It’s unlikely to happen, and those charged with assessing risk need to fundamentally change how they assess the realities of the U.S. market. 

3. Canada should stop investing in those who seek to do us harm. It does Canadians no good for funds to generate good returns by investing in companies that undermine Canada’s long-term economic growth, hollow out our productive economic capacity, rob young Canadians of opportunities and finance extractive business practices that consolidate wealth and destroy Canadian communities. At SCP, we have long argued that values other than narrow financial returns must be considered, and that point is more important than ever. It would be a shame if announcements like the one from OMERS resulted in no more than increased exposure to Canada’s most reliable bets, rather than acting as a catalyst to scale investments in affordable housing, community infrastructure and smaller Canadian firms. 

4. A strategic state partner is necessary to help build a stronger, more sovereign Canadian economy. Governments should act as concessionary and catalytic investors in venture funds, mid-cap funds, pooled affordable housing funds and new infrastructure of all kinds, including community and clean-energy infrastructure. The long-term economic, social and national security returns that flow from these investments are easily worth it. Governments can help institutional investors move towards investment strategies that strengthen Canadian sovereignty, resilience and community well-being.  

5. These changes will take real work. Institutional investors will have to change how they organize themselves and the incentive structures for their managers in this new world. They will need to pull back in some areas and build expertise around new Canadian asset classes. They will need to think with intentionality about sovereignty in their investment decisions. They will need to consider American political instability and belligerence in their risk assessments, just as they added climate risk to their traditional investment and governance considerations years ago. None of this will be easy and resources will need to be deployed internally and deliberately to support this pivot. 

All of this, taken together, means that the assumptions of the neoliberal, Washington-consensus era cannot continue to structure the thinking of those who manage our savings and invest on our behalf. We shouldn’t want capital investment if it weakens our sovereignty and strips Canada of productive assets. We shouldn’t invest in companies that deliver high returns but also deliver human misery and threats to our national security. 

The financial return on our investment must not be the only metric that matters. Contributors and beneficiaries want their savings invested in ways that create the places, communities and world that our investments make possible. It is possible to execute on one’s fiduciary duties in ways that align with Canadians’ values, strengthen our sovereignty and help improve Canada’s productivity and resilience. 

It is good to see this announcement from OMERS and I hope it represents a sea change in how they steward their investments and think about their responsibilities. There is a lot of work to do to change mindsets, skills and incentive structures. It appears that some of the leaders of our pension funds know they have to step up for Canada at this moment. But the geopolitical transformation we are living through will require a deep transformation in their investment strategies and practices as well.