Should Canada’s pension plan managers buy more Canadian? Economic nationalism might not square with fiduciary duties that are critical to retirement income security.
The “Buy Canadian” movement, through which shoppers are prioritizing domestic goods, has grown in strength the last fewmonths, and some have seen this as an opportunity to discuss how much pension plans invest in Canada.
In March 2024, a letter signed by 92 business leaders, including former CEOs of some of Canada’s largest corporations, argued that Canada’s pension plans have abandoned Canadian investments and that federal and provincial finance ministers should mandate Canadian pension funds to invest in Canadian equities.
It’s true that pension funds were proportionally more invested in Canada prior to the mid-2000s, though it’s a mistake to say that pension plans have cut back on investing in our country. Prior to 1990, the Canada Pension Plan (CPP) and other Canadian plans were legally required to mostly invest in a single asset type: Canadian bonds. As interest rates plummeted, it became difficult for pension funds to generate the returns they needed to meet their obligations. Pension plans have a fiduciary duty to ensure that they invest in the best interest of their beneficiaries and it was clear something needed to change.
By 2005, regulations on foreign investments were lifted and pension plans began to diversify to ensure they brought the best returns for pensioners while also reducing concentration risk — no more putting all our eggs in the bond basket.
While Canadian pension funds are investing a smaller percentage in Canada than they used to, the actual dollar amount has gone up significantly. The Public Service Pension Plan (PSP Investments) had about $19 billion in 2005 and about 70 per cent of that was invested in Canada (about $13.58 billion.) As of 2025, the plan has grown to $299.7 billion. While only 20 per cent is invested in Canada, that still adds up to $60 billion, which is four times more in absolute dollar amounts.
This movement has also focused on investing in Canadian equities, which is a small market relative to the size of our pension funds. It represents three per cent of global equities, two thirds of which are based in finance and natural resources. There are simply limited opportunities for growth and diversification.
Mandating pension funds to purchase more Canadian equities would distort the market, create artificial scarcity and inflate Canadian stock prices. This measure would only benefit current shareholders of the companies on the receiving end of investments, not average Canadians.
As these CEOs and investment managers wrap themselves in the Canadian flag — it comes at the expense of Canadian pensioners. Lining the pockets of shareholders does not help Canada, but ensuring financially secure retirements for Canadians is in the national interest.
If governments want more investment in Canada, they are much better off using a carrot rather than a stick. Pension plans want to invest their funds to generate long-term sustainable returns that can in turn create lasting jobs and economic growth. That means clear regulations, supportive infrastructure and initiatives such as the Clean Electricity Investment Tax Credits (which are available to pension investment corporations.) Initiatives such as these allow pension plans to invest in clean energy companies and projects that align with their public commitments to sustainability.