Trudeau’s gamble: Is the revamped Infrastructure Bank ready to help carry his climate agenda?

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More than three years into its existence, the Canada Infrastructure Bank has finally been put in a position to succeed.

Now Prime Minister Justin Trudeau’s Liberals really need to hope that it is capable of doing so, because much of their ambition for a climate-friendly economic recovery hangs on it.

The bank is supposed to leverage public dollars to attract private and institutional investment in projects of national interest. Since being launched with much fanfare during Mr. Trudeau’s first term, it has mostly seemed like a fairly low-stakes failure. It has spent only a tiny share of the $35-billion it was allocated, and there has been speculation that the government might just need to write it off as a failed experiment and shut it down.

Trudeau announces new plan for Canada Infrastructure Bank focused on broadband, retrofits and agriculture

On Thursday, the stakes were instead raised by an announcement that the bank has received sign-off from the government on a planned $10-billion in expenditures. The bulk is toward investments – energy retrofits for commercial buildings, upgrades to electricity grids, purchases of zero-emissions buses to replace diesel ones – which are pivotal to the Liberals' hopes to build a greener postpandemic country. (The other two forms of spending that were announced, broadband and agricultural infrastructure, also have some environmental-sustainability upside.)

That’s supposed to be only the start. In an interview with The Globe and Mail, Michael Sabia, who took over as the CIB’s chair earlier this year, said that the bank “has the financial capacity to go beyond the $10-billion” on the announced priorities if opportunities dictate. And he framed them as the forms of spending that could be rolled out most quickly because of the government’s desire to swiftly create jobs, with more to come soon.

Some of the plans unveiled on Thursday will be swifter than others, Mr. Sabia acknowledged. Procuring electric buses should be relatively straightforward, even though it requires working with transit authorities. Co-operating with energy utilities on the grid measures, including transmission lines to increase the flow of clean power between provinces and regions, is “at the more complicated end” and likely to take a bit longer. But the bank has already been working behind the scenes on the details and expects to announce specific expenditures in at least some spending areas before the end of 2020.

Mr. Sabia also said that, while the CIB was mindful of the Liberals' policy agenda and desire to marry short-term job creation with long-term sustainable growth, it crafted the spending plans itself based on its read of attractive investment opportunities. “This is a plan developed by the bank, over a period of months,” he said, and it “fundamentally didn’t change” before the government approved it.

Nor, he said, will further sign-off from the government be needed as the bank implements its new plan. Specific investments, within the envelopes announced on Thursday, will only have to go through the CIB’s board of directors.

Entrusting that level of responsibility to the CIB could blow up on the Liberals, if it still struggles to get money out the door despite its promises, or if it places bad bets in its haste to prove its worth.

It could also pay off handsomely. Just earlier this week, a report from the new Institute for Sustainable Finance at Queen’s University predicted that at least half of the capital needed to meet Canada’s 2030 emissions-reduction goals could come from private investment – and that the CIB could help unlock it.

Mr. Sabia pointed to working with large property owners on building retrofits as an example of how that could work, while also giving the CIB a return on investment that facilitates more future spending. The bank, he said, will “finance at a very low cost the upfront capital that’s required” to improve energy efficiency, which will lead to lower operating costs that create a pool of capital with which it can be repaid. If it can “prove that model works,” he said, private capital will then flow toward the same sorts of projects.

That Mr. Trudeau and Infrastructure Minister Catherine McKenna are willing to place this bet reflects a confidence that the CIB has to this point been held back by a couple of factors.

One of those is leadership. A view commonly expressed by those who have worked on federal infrastructure policy in recent years is that the team that initially ran the bank struggled to navigate Ottawa’s political landscape and to land on the sorts of projects that were ambitious enough to meet the government’s expectations. Mr. Sabia, the savvy former head of the Caisse de dépôt et placement du Québec who served on the federal advisory panel that recommended the CIB’s creation, was brought in to change that culture; a new chief executive officer, whom Mr. Sabia said is to be announced within weeks, is supposed to do likewise.

The other perceived obstacle has been bureaucratic resistance, with the Infrastructure Department not leaping to fast-track proposals by a new quasi-independent agency to lay claim to spending initiatives that might otherwise be handled by the public service. Ms. McKenna now appears to be signalling to her department that the CIB has her trust, and the leeway afforded to the bank to pursue its new spending plans backs that up.

Those obstacles removed, we’re about to find out whether the basic concept of the CIB is a sound one.

Back when he first came to power in 2015, Mr. Trudeau campaigned on it as a way to bring more private capital into public infrastructure without going the more common route of selling off assets.

He could not have imagined, then, that it would be expected to capitalize on a global pandemic and the worst economic crisis in generations to speed the transition to a decarbonizing economy and help save the planet. Let alone that such circumstances would present its first real test.

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