Incentivizing institutional investment in Canada

 
Co-investment programs, airport land lease reforms, expanded tax incentives, and new approvals mechanisms for major projects are all moving forward with the clear objective of making it easier and more attractive for large institutions to invest at home. These developments also make it clearer that the federal government will not be requiring Canadian pension funds to invest in Canada, as some had previously feared. Instead, the emphasis is on incentives, which is welcome news for investors seeking opportunity without prescriptive mandates.

Co-investment programs

The federal government has committed to several co-investment programs intended to draw more private capital into priority sectors. These include the fourth round of the Venture Capital Catalyst Initiative, with $1 billion in federal commitments, a new Mid-Cap Growth Companies Fund that will match a portion of net new private investment, and significant support for AI-related infrastructure such as data centres. Each is intended to enhance returns and reduce risk, making Canadian opportunities more competitive for large institutions. These programs, while still in development, are intended to crowd-in private capital alongside public commitments.
 

 
To date, the federal government has made only limited announcements in respect of these programs, but further details are expected as work progresses toward formal launches. The specific governance structures, funding obligations and participation requirements will need to be carefully assessed once announced. For Canadian institutional investors, these initiatives nevertheless signal potential opportunities to diversify portfolios while aligning with national priorities in innovation, growth equity and digital infrastructure.

Airport lands

In March 2025, Transport Canada issued a policy statement confirming that airport authorities will have greater flexibility to pursue private capital for on-airport development, including through subleases, service contracts and the use of subsidiaries, with longer lease horizons under review. Previewed in the 2024 budget, the policy is part of the federal government’s broader strategy of courting Canadian institutional private capital into domestic infrastructure. Airports are viewed as particularly well-suited to this strategy given both the scale of capital required, the long-duration nature of the assets, and Canadian institutional investors’ deep experience in airport equity ownership globally.

The policy statement represents a clear signal of federal intention and marks a first step toward fostering conditions more conducive to private investment in Canadian airport infrastructure. For institutions, the legal context remains important: projects are subject to federal ground lease regimes that restrict the scope of subleases and impose obligations on airport authorities. Any new opportunities will need to be carefully structured to align with those covenants and may require negotiation with Transport Canada.

Tax and fiscal incentives

The federal government, through its 2023 and 2024 Fall Economic Statements and the 2024 Federal Budget, announced a suite of tax and fiscal incentives aimed at encouraging greater domestic investment by pension plans and other institutional investors. These include plans to amend regulations to eliminate the 30% rule for investments in Canadian entities and to consider lowering the 90% threshold that restricts municipal-owned utility corporations from attracting more than 10% private sector ownership. Together with expanded clean economy investment tax credits, accelerated capital cost allowance measures, and enhancements to the SR&ED program, these initiatives are designed to strengthen Canada’s investment climate for pension funds and other institutional investors. Additional details and measures are expected in the Fall Economic Statement scheduled for release on November 4.

Major projects office

Launched in August 2025 under the Building Canada Act, the new Major Projects Office (MPO) is intended to help get large nation-building projects done faster and more efficiently by serving as a single point of contact within the federal government (read our full analysis of the Act in our bulletin). The MPO’s role is to streamline regulatory approvals, coordinate across departments, and assist with structuring financing, all with the objective of reducing uncertainty and delay. On September 11, 2025, Ottawa announced the first group of projects to be reviewed under the MPO.

Given that provincial and Indigenous processes will continue to apply, it remains to be seen whether the MPO will be able to meaningfully speed up the approvals process. For institutional investors, the MPO’s effectiveness will be measured by whether it can deliver the predictability and timeliness that large projects require.

Disclosure

In 2024, the federal government introduced amendments to the Pension Benefits Standards Act, 1985 and subsequently released draft regulations that would require large federally regulated pension plans (those with assets of at least $500 million) to disclose annually the distribution of their investments by asset class and geographic region. Framed as a transparency measure, the initiative is consistent with Ottawa’s broader goal of encouraging more pension investment in Canada without formally mandating it. The draft regulations were published in November 2024 with a 30-day comment period, and by 2025 market participants were anticipating further clarity on their coming into force. To date, however, no update has been provided, and the proposed disclosure framework remains pending.

The road ahead

The policy direction is clearer in 2025. Rather than imposing requirements on Canada’s largest institutional investors to deploy capital in Canada, the federal government is advancing incentives, through co-investment commitments, favourable tax treatment, and accelerated approvals.

We will continue to monitor how these programs and regulatory changes are implemented, and how they may affect investment strategies. In the meantime, institutions considering participation in these initiatives should assess both the opportunities and the risks carefully, ensuring structures are aligned with fiduciary duties, governance frameworks, and long-term objectives.