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Canada faces a triple economic challenge, and with it, a triple economic opportunity that can lay the foundation for growth through the 2030s.<\/p>\n
The three points of this new growth triangle\u2014economic reconciliation, productivity and climate action\u2014are mutually dependent. In other words, you can\u2019t have one without the others.<\/p>\n
This was clear at COP28 in December, where there was an emphasis on growth, capital formation and economic inclusion to reach our climate goals. And it can be Canada\u2019s strategic advantage if we make some important adjustments.<\/p>\n
Let\u2019s start with climate action, and a blunt reality: Net Zero is going to require a scale of investment that we have not seen in our lifetimes.<\/p>\n
RBC\u2019s Climate Action Institute recently published a report on the state of the transition in Canada, called Climate Action 2024<\/a>, with the core message: We\u2019re making progress but not nearly enough. In terms of financing a transition to Net Zero, we will need to invest $60 billion a year on climate action. Right now, we\u2019re investing $22 billion.<\/p>\n Some good news: that\u2019s up from $15 billion in just three years. Some bad news: it needs to more than double, almost immediately. Which is why we called our report \u201cDouble or Trouble.\u201d (Moreover, for every year we fall short, we will get closer to the need to triple the investment required.)<\/p>\n The amount of capital seems daunting, but it\u2019s only about 1% of GDP. And properly invested, it can add to economic growth and prevent us from sliding back into the pre-pandemic funk of secular stagnation.<\/p>\n As every business builder knows, capital is not something that gets printed by governments or banks, at least not for long. It\u2019s what thriving enterprises and sectors attract, generate and retain. All of which requires productivity.<\/p>\n Unfortunately, about 80% of Canada\u2019s climate action over the past decade has been funded by the federal government. Canada is simply not attracting or retaining investment capital, at a time when we need to attract tens of billions of dollars more a year to finance both economic reconciliation and the transition to a net-zero economy. In fact, between 2015 and 2022, business investment declined 16%, largely because of a wholesale retreat of investment in the oil and gas, mining and forestry sectors. And overall, investment has been at best flat, held up largely by government investments in things like hospitals and highways, and our collective investment in real estate.<\/p>\n Not only are we not capitalizing and recapitalizing our key growth sectors, we\u2019re not attracting enough international capital. Canadian investment abroad is now outpacing foreign direct investment in Canada by a factor of two to one ($102 billion to $62 billion).<\/p>\n We\u2019ll need to revise our collective playbook to finance an energy transition, through capital-intensive projects ranging from carbon capture to methane abatement to wind- and solar-powered electricity, hydrogen, and battery storage. One catalyst is economic reconciliation, especially through Indigenous consent and ownership that cannot only prevent years of court battles but provide the sort of stewardship that long-term, climate- and nature-minded investors are looking for.<\/p>\n