The Ontario government’s new investment organization could incentivize institutional investors to take a closer look at infrastructure opportunities in the province, says Iftikhar Ahmed, a wealth solutions partner at Aon.
“We work with a large number of pension plans and other institutional investors who would be keen to participate in infrastructure development in the province.”
The provincial government announced the creation of the Ontario Infrastructure Bank during its fall economic statement earlier this month. The bank, which has an initial $3 billion funding, will seek to develop new long‐term care homes, energy infrastructure, affordable housing, municipal and community infrastructure and transportation.
The provincial organization will attempt to mobilize private capital participation by “preparing and structuring such investments in a more likely executable and bankable way,” says Ahmed.
Following the announcement, a few of Ontario’s largest pension plans and institutional investors — including the Colleges of Applied Arts and Technology pension plan, the Investment Management Corp. of Ontario, the Ontario Teachers’ Pension Plan and the Ontario Municipal Employees’ Retirement System — expressed their support for the new bank and reaffirmed their interest in Ontario-based opportunities.
Indeed, Ahmed has seen a growing interest for investments in Canadian infrastructure assets. “There is tons of private capital available in the market that can be channeled into these projects if designed and structured appropriately.”
The Ontario Infrastructure Bank would benefit from pursuing long-term strategic partnerships instead of one-and-done deals, says Ahmed. “One key yardstick for success, in my opinion, is simply a multiplier effect in private capital mobilization. In other words, how much private equity capital is mobilized for each dollar of [the] bank’s commitment into these projects.”
However, the new bank will have to justify its existence among other similar agencies, such as Infrastructure Ontario and the Canada Infrastructure Bank, he adds, noting it could follow in the steps of the national bank. Since it was established in 2017 with an initial funding of $35 billion, the bank has faced criticism for transaction shortcomings and has only been able to deploy a cumulative total of $9.7 billion as of March 31, 2023.
One policy expert is unsure where Ontario’s new bank fits into the current investment landscape that’s available. In particular, Brian Lewis, a senior fellow at the University of Toronto’s Munk School of Global Affairs and Public Policy, says he’s unsure how institutional investors’ mandates align with the investing goals of the new bank.
“Somebody has to make this worth the investors’ while and is that going to be taxpayers? I hope not. Is it going to be users? I’d be more comfortable with that, frankly. If we’re going to get infrastructure built using private sector money that people would willingly pay for — that the government isn’t — that’s a good public policy outcome.”