Canada's pension funds oversee over CA$2.1 trillion in assets but invest minimally in domestic mining companies essential for producing metals needed for EVs and clean energy technologies, according to mining veterans Pierre Lassonde and Frank Giustra.
They argue that pension investment in large Canadian miners could preserve domestic ownership and fund smaller exploration companies, strengthening the industry's ability to deliver metals vital for achieving net zero emissions globally.
Lack of Domestic Investment
Pension fund investment in Canadian equities has steeply declined after Ottawa removed domestic ownership requirements starting in the 1990s. Currently, Canada's eight largest pensions only devote 3% of their portfolios to domestic stocks. The average allocation among global pension funds is 52%, according to Mining Technology.
This lack of domestic investment has enabled foreign takeovers of prominent Canadian miners. For example, Switzerland's Glencore International Plc (GLNCY:OTCMKTS) recently acquired most of Teck Resources Ltd.'s (TECK:TSX; TECK:NYSE) metallurgical coal assets for US$6.9 billion.
According to Lassonde, former President of Newmont Corp. (NEM:NYSE), "Essentially, the mining industry has been ignored." Without significant domestic investment, Canadian mining giants risk continued erosion through buyouts by international conglomerates.
Priority of Foreign Investment
Research by Montreal Investment Management firm Letko Brosseau indicates that leading Canadian pensions have invested far more in China than in domestic companies. The Canada Pension Plan holds just 3% in Canadian equities. Such low domestic ownership leaves Canadian miners constantly vulnerable to foreign acquisition.
In contrast, Australian pensions keep around 22% of their AU$2.6 trillion assets invested in domestic stocks. Lassonde and Giustra highlight that this funding environment has helped preserve Australian mining companies and industry vitality.
"That's what keeps their domestic mining industry alive," Giustra said in a Mining.com article. "We're a comparable country in terms of how prolific our mining opportunities are, same as Australia, and we don't have that same opportunity."
Capital Flows Redirected
Beyond pension funds, dedicated Canadian mining investment vehicles have also declined sharply over the past fifteen years. Giustra notes that these specialty funds have fallen from CA$16 billion in 2010 to just CA$2.8 billion in 2022.
He argues that between waning domestic pensions and specialized institutional investors, "There's just no source of capital; the industry starves."
Without Available Funding, Projects and Innovation Stall
Giustra warns that declining capital flows are already strangling promising explorers and junior miners. Lassonde argues that even substantial companies like Teck Resources struggle to find Canadian funding partners for major acquisitions.
He explains, "If you want steel and you want the lowest carbon-emitting steel in the world, it's that coal, OK, and there was nobody to talk to."
Ultimately, aging nickel and metallurgical coal mines will need large-scale reinvestment as the global energy transition accelerates. But pension funds show little interest in financing domestic mining's crucial role in delivering essential EV battery metals like lithium, nickel, and graphite. This lack of available capital leaves Canada's mining industry lagging precisely when explosive demand growth is expected.
Redirecting Investment Mandates to Support Decarbonization
Lassonde insists that "the government of Canada continues to engage with critical minerals stakeholders, including pension plans and other. . . investors." However, details on specific pension engagement are lacking. Giustra argues that mining executives must directly make the business case for pensions for investing in domestic companies.
More aggressively, Lassonde believes "federal and provincial governments must legislate pension funds to increase their investments in Canadian resource companies." Giustra highlights that with China's growth slowing, now is the ideal time for Canadian pensions to redirect capital back home. Canada boasts an enormous land mass brimming with mineral potential to enable the global energy transition.
Unlocking Essential Metals for a Net Zero Future
With clean energy build-outs requiring trillions in annual investment this decade, Canadian mining should attract substantial domestic pension funding. These essential metals must come from responsibly operated, efficient mines that Canada has demonstrated leadership on.
Veteran mining financiers argue convincingly that mandating our enormous pension funds to invest billions back into domestic mining may ensure our industry can supply the vital copper, nickel, lithium, and other metals required for decarbonization worldwide.
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