Canada urges pension funds to invest at home in age of ‘economic nationalism’

Federal Industry Minister Melanie Joly speaks at an event organized by the Fredericton Chamber of Commerce in Fredericton, on Oct. 15, 2025. Photo by THE CANADIAN PRESS/Hina Alam

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Canada is calling on its $3 trillion pension system to boost domestic investment as it seeks $500 billion in new finance to reboot the economy and lower its dependence on the U.S.

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Industry minister Mélanie Joly told the Financial Times the new wave of “economic nationalism” means Canada’s financial institutions must foster homegrown investments and major infrastructure projects to kick-start the country’s sluggish economy.

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“I’ve had lots of conversations with our banks, and our pension funds. There’s a sentiment that we need to think about Canada first and that we need to put capital where our mouth is,” she said.

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This month Joly launched an industrial strategy aimed at creating jobs and attracting foreign investment in response to U.S. President Donald Trump‘s tariffs on Canada.

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“For a long time pension funds have said that they need to provide yields to their beneficiaries…but they can have a discussion with their beneficiaries about their impact in their own country, their own environment, where beneficiaries live,” she said.

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Like the U.K., Canada has been examining how to channel more pension assets to domestic targets to combat weak productivity and poor business investment.

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Last year more than 90 Canadian corporate executives signed an open letter calling on the government to amend rules which would allow them to increase domestic investments, saying the amount they allocated to Canadian equities had dwindled from 28 per cent in 2000 to 4 per cent by 2023.

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Ottawa in December lifted its 30 per cent cap for investments in Canadian entities at a time when Trump was threatening tariffs and trade wars against its major trading partner.

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“This will make it easier for Canadian pension funds to make significant investments in Canadian entities,” said the finance ministry’s Fall Economic Statement.

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The Canada Pension Plan Investment Board, the country’s largest fund with $714 billion of assets, revealed its total allocation to Canadian assets dropped to 12 per cent of the fund in March from 14 per cent two years earlier, although the total value of Canadian assets still increased.

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But Paul Beaudry, a former Bank of Canada deputy governor, warned forcing funds to invest locally was “very dangerous” as it risked creating “a type of crony capitalism.”

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Beaudry said the government could identify either socially beneficial projects or mid-level companies that big funds overlooked for investment.

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“I’m not against pushing it but I like it to be more on the incentive part than on the idea of kind of forcing it,” he said.

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Prime Minister Mark Carney launched a “Buy Canada” campaign last month that prioritises local products for procurement as a way to make Canada “the strongest economy in the G7.”

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It is an ambitious goal considering the country’s economy shrunk more than expected in the second quarter while exports fell 7.5 per cent compared with the first three months of the year because of the tariffs, according to Statistics Canada.