The government has placed emphasis on many differing priorities with an overarching goal of making Canada a more complete country, especially from an economic standpoint. There has been a commitment to growth and innovation in the private sector during previous budgets. Innovation, Science and Economic Development Canada have been the center of a number of initiatives throughout the last several years, which include the Innovation and Skills Plan from 2017. The Innovation and Skills Plan had initiatives in place, some of which are still being funded to this day, with a major focus on advanced manufacturing, agri-food, clean technologies, and digital industries. The trend has continued with two major initiatives in this most recent 2022 budget with the Canada Growth Fund and the Canadian Innovation and Investment Agency.
Canada believes it’s a pivotal time as the goal to reach net-zero by 2050 remains in the forefront of most government urgencies. These two programs strive to make Canada stronger and, maybe even more importantly, more innovative.
THE CANADA GROWTH FUND
Simply put, as explained by the government, the Canada Growth Fund will attract private sector investment to help meet essential national economic policy goals that include:
- To reduce emissions and contribute to achieving Canada’s climate goals
- To diversify our economy and bolster our exports by investing in the growth of low-carbon industries and new technologies across new and traditional sectors of Canada’s industrial base
- To support the restructuring of critical supply chains in areas important to Canada’s future prosperity
At the crux of Canada’s thinking is the government cannot fight climate change alone. They estimate, to build a net-zero economy by 2050, between $125 billion and $140 billion of investment every year over that period. Right now, annual investment in climate transition is roughly $20 billion.
Partnering with the private sector with the many challenges currently facing not just Canada but the world. Throughout the world, growth funds have been established that attract private capital funds that create good-paying jobs and open new industries.
According to the budget, the Canada Growth Fund will operate at arms-length from the federal government. It will invest using a broad suite of financial instruments including all forms of debt, equity, guarantees, and specialized contracts. The fund will be initially capitalized at $15 billion over the next five years.
It will invest on a concessionary basis, with the goal that for every dollar invested by the fund, it will aim to attract at least three dollars of private capital.
Funding for the Canada Growth Fund will be sourced from the existing fiscal framework.
CANADIAN INNOVATION AND INVESTMENT AGENCY
The government acknowledged in the budget outline the need to turn Canadian ideas and technologies into products, services, and growing businesses as Canada ranks last in the G7 in research and development spending by businesses. It’s an area of concern that the government hopes to change, especially with this Canadian Innovation and Investment Agency.
Using examples from countries such as Finland and Israel, Canada is leaning on a market-oriented innovation and investment agency—with the private sector leading the way—to grow the economy while creating good, high-paying jobs in the process.
The major issue at hand is solving Canada’s innovation challenges, which is why Canada’s new innovation and investment agency will work with a mix of innovative and established industries and businesses in order for them to make the necessary investments to grow at an appropriate rate in the ever-changing global economy.
In total, the budget proposes $1 billion over five years, beginning this year, to support the initial operations. More details of this operationally independent federal agency will be determined following further consultation later this year.
