Federal government explores incentives to boost pension fund investments in clean energy ai projects
The federal government has explored making up to $15bn in federal funding available to encourage major Canadian pension funds to invest in green-powered artificial intelligence (AI) data centres.
Sources told The Globe and Mail that Ottawa floated the proposal during private consultations with pension funds as part of potential measures for Finance Minister Chrystia Freeland’s fall economic statement, set to be delivered Monday.
It remains uncertain if the proposal will be included in the statement or if its details, such as the size of the financial commitment, will change.
Sources speaking anonymously due to the confidentiality of the discussions indicated that the government proposed offering funding through loans and equity investments.
Under the draft proposal, Canadian pension funds would need to contribute at least two dollars for every dollar provided by Ottawa and take on controlling stakes in green-powered AI data centre projects.
If implemented, and should pension funds fully engage with the plan, the total investments could reach $45bn.
Ottawa has also explored designating, green-powered AI data centres as a national priority, with efforts to expedite permitting and approval processes.
The government believes Canada’s clean energy resources, colder climate, and potential for job creation provide advantages in making the country a global AI leader.
A spokesperson for Freeland did not immediately respond to requests for comment.
Last week, the government announced a $2bn AI initiative aimed at boosting data centre development and subsidizing access to compute infrastructure, such as graphics processing units (GPUs), for Canadian companies and academics building advanced AI models.
The federal push aligns with its broader strategy to address a national debate over whether Canadian pension funds invest sufficiently in domestic opportunities.
Pension funds collectively manage more than $2.4tn in assets, but their leaders have resisted calls for mandated domestic investments, prioritizing global opportunities to maximize returns and minimize risks.
In April, Freeland appointed former Bank of Canada governor Stephen Poloz to lead a working group exploring ways to expand domestic investment opportunities for pension funds.
His recommendations have focused on voluntary measures rather than prescriptive mandates, and consultations with pension fund leaders have reportedly been constructive.
Additional measures floated for Monday’s statement include consultations on requiring federally regulated pension funds with more than $500m in assets to provide detailed investment breakdowns by jurisdiction and asset class.
This data would be published by the Office of the Superintendent of Financial Institutions.
Ottawa has also revisited the idea of removing the “30-percent rule,” which restricts pension funds from holding more than 30 percent of voting shares in a company.
Critics argue the rule is cumbersome, though many large funds have already devised workarounds.
Other potential incentives discussed include encouraging pension fund investments in municipal infrastructure or airports. However, it remains unclear whether these ideas will be part of the economic statement.
The government’s proposals aim to balance encouraging domestic investment with respecting pension fund autonomy.
Nearly all the measures under consideration are optional, ensuring pension funds retain their independence while fostering opportunities for investments that align with national priorities.
Sources indicate that the discussions between Freeland, Poloz, and pension fund leaders have evolved positively, with fund leaders expressing comfort with the government’s approach.
It remains to be seen how these proposals will be finalized in Monday’s economic statement.
