Trade Hub Commentary

On the eve of Canada hosting the G7 Energy and Environment Ministers’ meeting in Toronto, John Stackhouse, Senior Vice President, Office of the CEO, RBC, delivered a keynote at the IEA Energy Innovation Forum 2025. He focused on three forces redefining how the world operates.  

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As you all know, we live in a new era of urgency, in which ambitions are growing and horizons shrinking.

• It took 15 years for the semiconductor to change the world

• It took 5 years for the Internet to change the world

• And it’s taken barely 15 months for Generative AI to change entire landscapes

I was reminded of these new forces of compression during a visit to Silicon Valley last week where a few major tech CEOs said the same thing: “Long term is now six months.”

Yes, we live in a time of unprecedented change and unprecedented compression. And we live in a world that’s being restructured, in our view, by three defining forces. These forces are converging to redefine how nations, markets and societies operate—and they are all connected by energy security.

The first mega force of the 2020s will not surprise any of you. It’s frontier technology. 

Roughly 45% of the S&P 500 today is comprised of AI Hyperscaler stocks. These hyperscalers are spending more than half a trillion dollars a year, collectively, and that’s rising. For 2025-2027, that could mean $1.5 trillion.

It’s a huge concentration of capital that towers over what now seems like a distant memory: the big capital swings that the U.S. Inflation Reduction Act unleashed just five years ago.

Energy is essential to that growth, as you don’t scale—let alone hyperscale—without a new quantum of energy. And it needs to be secure energy.

The second mega force are the growing geopolitical divisions over trade.

Global trade as a percentage of GDP grew steadily following the Second World War from 10% to reach roughly 60% at the onset of the Great Financial Crisis. It has since plateaued in the mid-50s. This likely falls further next year, with trade volumes expected to increase a meager 0.5% in 2026, much slower than global GDP growth of 2.6%.

We don’t see an end to globalization, but this new age of re-globalization will lead to further capital shifts and energy innovation, just as we saw a quarter century ago when China joined the WTO.

Why? Countries trading less will inherently need more of their own energy, or at least energy from a smaller range of suppliers. Bring on the innovation.

Third, we’ve entered a new security paradigm in which defence—including space—will make major claims on both public and private capital in this more fractured, uncertain and conflictual world. Increased defence and security needs are top of mind for most of our governments. And, as you all know, defence supremacy requires energy.

NATO countries are targeting spending on defence and security to be 5% of GDP by 2035. That’s an annual spend of $2 trillion–and this in rapidly aging societies that may have less productive capacity and greater social need.

This trio of global shifts—in technology, trade and security—will require capital and demand innovation. Critically, these forces point to a clear global need: low-cost, accessible, reliable energy.

You don’t have security in the 2020s without data, critical minerals and energy. Every major advancement in AI will rely on enormous computing power. By 2035, global data center power demand is expected to reach 1,600 TWh, that equals the current power needs of Germany, the UK and France.

Just this week, the U.S. government announced a massive partnership with Brookfield Asset Management, Cameco and Westinghouse Electric, to accelerate the deployment of nuclear power—in part because of America’s ambition of AI supremacy.

Nations and companies that secure abundant and ideally low-carbon power will own the digital future. I stress low-carbon power because renewables are still the cheapest form of electricity generation. Low-carbon power because nuclear is the most energy dense, and increasingly adaptable with the advent of SMRs. Low-carbon power because Big Tech remains committed to procuring affordable, reliable and clean over the medium to longer term. For the G7, low-carbon power can be a competitive advantage and key to a security agenda.

Nations that master the ability to generate, store and distribute these diverse power sources, locally, will also reduce security vulnerability. From drones, sensors and cyber defence–modern militaries are increasingly electrified and digitized. And in an economic environment that can feel more like a battlefield than a marketplace, energy self-sufficiency will reduce exposure to price shocks and geopolitical pressure. Nations that master next generation energy technologies—think large-scale battery storage, or carbon removal and storage—will govern the industries of the future.

This competition for those industries may be won by those that have secure, affordable access to data, energy, and critical minerals. And that competition will be shaped by the two great techno-powers, the U.S. and China. As I mentioned earlier, the new security imperative depends on three inputs—AI, energy and critical minerals. The U.S. has two of these three. China is well on its way to having three out of three. Through collaboration, the G7+ can have an overwhelming security of all three. But we need to be faster, faster and faster. Back to that Silicon Valley ethos of time.

For energy, faster means removing frictions in key inputs traded across our nations. And faster means removing our own internal frictions. Across the developed world, it simply takes too long to build major projects. We have not found a way to disrupt NIMBYISM.

If we do, removing these frictions can quicken development, reduce uncertainty, improve economics and unlock capital to move in both speed and scale. Faster, faster and faster.

This is what is needed to keep pace with the speed in which our energy systems are transforming. Systems that used to evolve over decades now need to reinvent themselves in just a few years.

Energy efficiency–the “first fuel”—has slowed in the past decade. Grid modernization, renewable integration and EV infrastructure must scale faster than any energy transformation in history. Supply chains for lithium, nickel and rare earths are being rebuilt in real time to reduce our dependence on China.

A collaborative approach to responsible resource development across the G7 could be streamlined, with common regulations, standards and financing to mobilize cross-border flows. But let’s not fool ourselves, retooling energy systems at breakneck speed is not cheap. Ten years ago, the economic conditions were, frankly, more accommodating.

• Low-cost capital

• More fiscal capacity for subsidies

• More aligned policy support and favourable market conditions

All those made clean energy projects financially attractive and relatively low risk. Today, higher long-term interest rates, trade frictions, and inflationary supply chain pressures have made the same investment environment more challenging.

And that presents a dilemma. Sustainable energy investments for all of the above could require $2 trillion per year—globally. And that is at the heart of our collective energy innovation challenge. Venture Capital and Private Equity are needed to drive innovation and new technologies to proof of concept. But we’ve reached a point where demonstration projects are too expensive for traditional venture capital and too risky for mainstream capital. This is challenge known as the ‘missing middle’ of capital.

Yet this challenge, is an opportunity. While China has become a global trading nation and clean tech leader, the G7 still dominates capital flows. G7 currencies account for 85% of global foreign exchange volume and dominate the $12.3 trillion in global currency reserves. And a lot of that capital—public and private—is flowing toward these opportunities around security.

Just think of how much has changed in the past six months—a.k.a. the new long term.

First, governments are now investors. We’ve seen the Pentagon create what’s essentially a private equity arm–a firm signal that governments will take more active roles as procurers, capital allocators and resource captors to ensure their economic prosperity and energy and resource security.  The Canadian government is standing up a new Defence Investment Agency with similar ambitions and will likely be using key financing arms to direct more venture capital to defence, space and other strategic security needs.

Secondly, we’re seeing much more assertive and strategic approaches to procurement, including indications from some key allies to create strategic reserves of critical minerals, secure supply chains for energy infrastructure and strategic offtake agreements.

Thirdly, we have seen nations explore new ways to use their collective balance sheets. Here’s one example: RBC is one of 10 global banks that is helping to stand up a new entity called the Defense, Security and Resilience Bank, to facilitate capital expenditures across the defense industry–some of which could conceivably be earmarked for energy and mineral development.

This is all part of a new chapter of what some might call state capitalism—or at least the economically activist state. This will be important for the G7+ and others to, at least, monitor, if not coordinate. Especially in terms of how markets across our countries can align and connect to facilitate new capital flows to these growing strategic imperatives.

Governments can also bridge market failures specific to regulatory uncertainties, demand and financing of first-of-a-kind projects. They can procure, finance and invest.

For example, U.S. Defense Procurement Act Title 3 allows for funding of critical minerals. Here in Canada, public entities like the Canada Infrastructure Bank and Canada Growth Fund can be used to help build out the dual use infrastructure of energy, minerals and defence.

The same opportunity exists for business development banks and export finance agencies across the G7+, to help underwrite the risks of new energy ventures as part of a bigger security strategy. It’s these new approaches to finance—ideally through public and private sector cooperation—that can unleash new waves of capital for this new imperative of energy security.

And do it with Silicon Valley speed.

Consider this: In 2022, climate tech private equity and venture capital outraised defense tech at a scale of 7:1. In 2025, the two are essentially even. I think we can all guess how 2026 is shaping up.

For emerging climate tech ventures, tapping into this new paradigm of defence and security capital may be key to the next few years of global innovation. There isn’t time to wait to see how it plays out. Technology is moving fast. Geopolitics are shifting. And a new map of global security is taking shape. Energy and critical minerals will be the ink on that map, and the G7—and the innovators in this room—have the chance to help draw it.