Is the Canada Strong Fund Built to Last?

Cover image by Nicole Lee.

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Image credit: Canada Centre for Policy Alternatives

Canada is trying to build. This is not a new ambition, but it is an unusually urgent one. For most of the past 50 years, Canada’s approach to infrastructure was premised on a relatively stable assumption: that foreign capital, primarily from the United States, would flow readily into the country. In 2025, American investors made up 46.1% of all foreign direct investments into Canada. Yet the recent rise of American economic nationalism, growing uncertainty over tariffs, and broader disruptions to the continental trading relationship that underpinned Canada’s prosperity have exposed a structural vulnerability of Canada’s heavy reliance on American FDI. The Canada Strong Fund (CSF), announced in April 2026, is the Carney administration’s response to that vulnerability. It is also the fourth major federal or provincial investment vehicle Canada has created in the past decade to solve this problem. 

The Infrastructure Deficit

Canada’s infrastructure gap is large, and growing. The Canadian Centre for Policy Alternatives estimates this debt to be CA$145 billion, a staggering sum just to maintain and renew what already exists, before accounting for new infrastructure the country needs to build. The gaps are not confined to any single sector, but several of them are severe enough to constrain the economy directly. 

Canada moves roughly half of its exports by rail, but the rail network faces significant capacity constraints and limited connectivity to ports and airports. Transport Canada has estimated that upgrading rail infrastructure to meet demand through 2070 will require $284 billion, but current investment levels fall short by roughly $2.8 billion every year. Port congestion, inadequate warehousing, and fragmented logistics capacity compound the problem.

Canada’s power grid is fragmented across ten provincial systems, and connections between provinces are weak compared to connections to American states. Alberta, for example, occasionally issues alerts to residents to reduce their electricity consumption (e.g., “Do not charge your EV, turn off your lights, do not use your oven”) when demand for electricity is about to exceed supply. Alberta’s power grid is tested at its limits more often as the weather gets more extreme, with demand for AC surging in the summer months, and heating during bitter winters. Better inter-provincial connections could help buffer against these peaks by allowing provinces to share surplus power. A recent pipeline agreement between Ottawa and Alberta also includes changes to the electricity grid in the province, with calls to drastically increase power sharing between B.C., Alberta and Saskatchewan and, potentially, nuclear power. In the North, many communities lack year-round road access, reliable energy, and basic digital connectivity, because no private actor has ever had a financial reason to build that infrastructure. 

The causes of this deficit run deeper than any single policy failure. Canada's dependence on foreign capital has been a characteristic of its economy for most of its history, beginning with British investment in railways and canals in the mid-nineteenth century and shifting toward American capital in the resource and manufacturing sectors through the twentieth. Foreign capital arrived so reliably that robust domestic capital formation was never a policy priority over the years.

An aerial overview of Alberta's oil sands. Image credit: The Hill Times

Alberta's oil sands, one of the largest petroleum reserves in the world, were developed almost entirely around the US market. Pipeline infrastructure was not built to reach coastal ports; it was built to serve US refineries in the Midwest and Gulf Coast. With no alternative route to global markets, Canadian producers were captive to American buyers, and 98% of Canadian crude exports went to the United States. Because Alberta's oil was landlocked, Canadian producers consistently sold at a discount to global prices, with Western Canadian Select averaging $18 to $19 cheaper per barrel than the US benchmark in 2022 and 2023.

Building a pipeline to the US Gulf Coast was the obvious solution, but it required a US presidential permit. When private capital proved reluctant to commit to Keystone XL on its own, Alberta stepped in with $1.5 billion in equity and $6 billion in loan guarantees. Premier Kenney said explicitly that without the provincial investment, the pipeline would not be built.

On his first day in office, President Biden revoked the permit. Alberta's final loss was $1.3 billion. A single executive decision in Washington had vaporised more than a billion dollars of Canadian public investment, with no recourse beyond a NAFTA arbitration claim. The Trump administration's subsequent tariffs on Canadian goods extended the same logic into manufacturing and agriculture. Domestic capital offered no easy substitute in any of these sectors. 

Canada's pension funds manage well over a trillion dollars in assets, but for most of the past two decades the majority has been invested outside Canada. Domestic infrastructure was not available at the scale these funds require, and Canadian markets were too narrowly concentrated to offer the diversification institutional investors need. The country has abundant capital that is trained to look elsewhere, and a gap that widens as a consequence.

What the Canada Strong Fund is Trying to Do

The Canada Strong Fund is expected to invest in Canada's burgeoning mining sector. Image credit: The Globe and Mail

In comes the CSF, designed to redirect capital – both state capital and the savings of individual Canadians – into projects the fund judges will generate returns and serve the national interest. It sits within a broader Build Canada agenda that includes direct public investment through the CA$51 billion Build Communities Strong Fund, substantial Northern and Arctic infrastructure commitments tied to defence spending, and a National Electricity Strategy aimed at doubling grid capacity by 2050. The CSF is the piece of that agenda that most closely resembles a financial instrument rather than a spending programme.

It invites retail investors to buy in alongside state capital, creating a constituency of ordinary Canadians with a stake in the fund's portfolio. It is intended to fill the space between what purely private capital will finance and what direct government spending can justify: projects with long time horizons and moderate financial returns that are strategically important but commercially uncertain. Clean energy infrastructure, interprovincial connectivity, Northern development with commercial potential: these are the kinds of investments the fund is designed to support. The ambition is genuine and the gap it is aimed at is real. 

However, would this vehicle be well-designed enough to succeed where related efforts have not?

The Canada Infrastructure Bank, a predecessor of the CSF, launched in 2017 with a $35 billion mandate. However, it is projected to disburse only $14.9 billion by 2027-28 (less than half its target) with its private-public model creating bottlenecks that are seemingly insurmountable for private co-investors to willingly participate in. The Alberta Heritage Savings Trust Fund, created in 1976 to diversify Alberta's resource wealth, was progressively raided to balance provincial budgets whenever oil prices fell. Had it followed Norway's rules of mandatory deposits and capped withdrawals, it would be worth $575 billion today rather than $31.9 billion.

The lesson is not that public investment vehicles fail, but that they fail predictably when governance is too weak to survive a fiscal crisis.

A counterexample is La Caisse de dépôt et placement du Québec. With a dual mandate of financial returns and Quebec economic development since 1965, it now manages $473 billion in assets while also financing major infrastructure including Montreal's REM light rail. It works because its capital base is captive pension contributions rather than discretionary government deposits, and its mandate is legislatively embedded rather than politically declared.

The CSF also faces design questions that remain unanswered. Retail investors provide political legitimacy but volatile capital. They can exit whenever, and a fund accountable to them will face pressure toward commercially safe projects precisely when strategic ones are needed. The mandate conflates commercial returns with public benefits: Prime Minister Carney has described the fund as financing projects whose "wider benefits exceed private returns," while the Finance Minister speaks of "good-paying jobs" and "shared prosperity." These are legitimate goals but not investment criteria, and without clear rules separating them, the mandate is flexible enough to justify anything.

There is also the harder question of whether the fund addresses the cause rather than the symptom: many infrastructure projects stall because of regulatory complexity and permitting delays, not because public capital is unavailable. Finally, the CSF joins the CIB, the Canada Growth Fund, and several other federal financing vehicles in a crowded institutional landscape. The government has acknowledged that mandate reviews will be needed to avoid duplication — which is itself a signal of the risk.

Canada has the capital, the institutional knowledge, and the strategic need to close its infrastructure gap. Whether the Canada Strong Fund is the right instrument to do it depends on whether it learns specifically enough from the vehicles that came before it.

References

1. Addressing the global infrastructure deficit—Can we rely on institutional investors? (2015, December 21). International Institute for Sustainable Development. https://www.iisd.org/articles/insight/addressing-global-infrastructure-deficit-can-we-rely-institutional-investors

2. Anderson, D. (2025, December 23). Grid alerts — threats to Alberta’s electricity system, explained. The Narwhal. https://thenarwhal.ca/alberta-grid-alerts-explainer/

3. Carney, M. (2026, April 27). Prime Minister Carney announces the Canada Strong Fund – Canada’s first sovereign wealth fund. Prime Minister of Canada. https://www.pm.gc.ca/en/news/speeches/2026/04/27/prime-minister-carney-announces-canada-strong-fund-canadas-first-sovereign

4. Fawcett, M. (2020, August 12). Why everyone needs to stop “Norwailing” over Alberta’s oil piggy bank. CBC News. https://www.cbc.ca/news/canada/calgary/alberta-oilsands-heritage-savings-trust-fund-norway-1.5682546

5. Government of Canada. (2026, April 29). Foreign direct investment, 2025. Statistics Canada. https://www150.statcan.gc.ca/n1/daily-quotidien/260429/dq260429b-eng.htm

6. Keystone XL is dead, and Albertans are on the hook for $1.3B. (2021, June 10). CBC News. https://www.cbc.ca/news/canada/calgary/keystone-xl-termination-1.6059683

7. Kusnetz, N. (2020, April 6). Alberta’s $5.3 Billion Backing of Keystone XL Signals Vulnerability of Canadian Oil. Inside Climate News. https://insideclimatenews.org/news/06042020/keystone-pipeline-alberta-oil-coronavirus-canada-saudi-arabia-russia-climate-chante/

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9. Meyer, C., & Anderson, D. (2025, November 27). A guide to Carney’s Alberta pipeline deal. The Narwhal. https://thenarwhal.ca/carney-alberta-pipeline-grand-bargain/

10. Michalyshyn, K. (2025, July 10). Update on the Spending Outlook of the Canada Infrastructure Bank. Office of the Parliamentary Budget Officer. https://www.pbo-dpb.ca/en/publications/RP-2526-005-S--update-spending-outlook-canada-infrastructure-bank--mise-jour-perspectives-depenses-banque-infrastructure-canada

11. Sharma, P. (2025, November 24). Canada’s trade-enabling infrastructure under strain. Export Development Canada. https://www.edc.ca/en/article/trade-enabling-infrastructure-gaps.html

12. Sreekumar, A. (2013, March 4). U.S. Refiners Are Thirsty for Canadian Oil. AOL. https://www.aol.com/amphtml/2013-03-04-why-us-refiners-are-thirsty-for-canadian-oil.html