When it comes to a topic as big as investing in Canada, it’s hard to point to one clear answer. In an increasingly divided and volatile political world, people can be forgiven for giving into emotion and shouting to pick their country above all – just like one could understand a pull toward being more conservative, and focusing on returns over geography to protect against uncertainty.
But long-term solutions rarely come from knee-jerk reactions – and if increasing the amount of capital flowing into Canadian markets, fostering innovation, encouraging public listings to create a more robust economy is the ultimate goal, an open conversation around what may actually help may be the best place to start.
Complex problems don’t often have simple solutions, but here are some ideas experts have presented over the last few months that can get the conversation started.
What the government can do:
- Targeted domestic and foreign investment: While it’s easy to say “invest more,” any investment has to be targeted – both to create the desired outcome, and to give would-be investors a reason to do it. Even the most well-intentioned benefactors need to understand why and how those investments will help.
- Projects that create long-term impact: “Shovel ready” projects backed by the federal government that would help build infrastructure, create jobs, develop technical expertise and lower the cost of doing business in the country would have a multiplier effect.
- Consider regulation: Previous investment requirements like the Foreign Property Rule forced funds to invest a percentage of their money in Canada, but they weren’t popular measures. Still, experts say there could be a role government plays to use policy to encourage domestic investment, especially if it’s a solution that comes in consultation with industry partners, or if it’s focused on tax breaks, reduced red tape and focus on creating a business-friendly climate.
- Find new allies: As the U.S. continues to impose tariffs on Canada and steps away from long-standing trade deals, deals with friendly jurisdictions can also boost growth – although they’re likely to come with trade-offs.
What the financial industry can do:
- Understand the shifts in capital markets: Market composition has shifted away from initial public offerings (IPOs) and toward exchange‑traded funds (ETFs), which has changed how capital is raised and allocated. This has led to more money flowing to larger companies, and to ones that are foreign-owned. Canadian and U.S. capital markets are also driven by different sectors, which provide different opportunities.
- Support innovation: Maintaining ownership of research, ideas and patents developed in Canada and turning those into new sectors and business for the local economy would also help create long-term resilience and stability, but that requires financial support for the country’s startups. Investment funds, pension plans or investment programs could all pitch in – and federal and provincial regulations that make building and selling these products easier would help too.
What individual investors can do:
- Consider what you’re investing in: “Invest Canadian” can be a harder sell than “Buy Canadian,” but the same principles apply. And just like shoppers shouldn’t buy a bad quality product just because it’s Canadian, neither should investors. But some due diligence around what you’re invested in and questions around where your money is actually going is an easy place to start.
Canada has been working to address these issues, and any lasting solution will take some time to work through. But continuing the conversation that includes public and private sector perspectives to find a solution is an important step – and one everyone can continue to build on.
