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UBS chair says Canada’s infrastructure bank could be global ‘blueprint’

Axel Weber, chairman of UBS Group AG, looks on ahead of a Bloomberg Television interview in Berlin, Germany, on Tuesday, May 23, 2017.

Krisztian Bocsi/Bloomberg

The chairman of Swiss banking giant UBS AG is throwing his support behind Canada's plans to create a federal infrastructure bank, saying aspects of the plan could provide a "blueprint" for financing global investments.

Axel Weber, a former central banker in Germany, believes Canada has a promising constellation of factors converging to create the Canada Infrastructure Bank, a $35-billion initiative to attract private investment in new infrastructure projects. He pointed to the country's robust capital markets and large institutional investors, as well as strong promise in high-tech and clean-energy sectors.

Although he is confident Canada can sidestep the mistakes that have plagued past infrastructure investment plans, not everyone in Canada is convinced that the federal proposal strikes the right balance between public good and private support. Details are still scarce and there are lingering questions about the Infrastructure Bank's independence, as well as concerns about whether the most influential investors will see the appeal of tying their big bets to the public purse.

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None of that fazes Mr. Weber. An economist by training, he was president of Germany's central bank, the Bundesbank, through the global financial crisis before joining the UBS board in 2012. And after encounters with Finance Minister Bill Morneau over the last two years, Mr. Weber is bullish on Canada's initiative, and believes other jurisdictions would be wise to take notes.

"It probably could serve as a blueprint for how other countries could look into financing sustainable investment," he said in an interview at The Globe and Mail's Toronto offices this week.

"There's some idiosyncrasy around the Canadian project, but there's some stuff that would really fly globally," he added. "Probably Canada is ahead of the U.S. in that sense."

UBS takes a keen interest in infrastructure investing, managing more than $16.5-billion (U.S.) in the infrastructure and private equity asset classes, and has highlighted North American infrastructure needs in recent research. But the bank hasn't yet committed to taking part in Canada's plans.

Ottawa plans to spend more than $187-billion (Canadian) on infrastructure over a dozen years, and Prime Minister Justin Trudeau has been encouraging banks, pension funds, insurers and private wealth funds to take equity stakes in Canadian projects.

In the process, his government has sought to reassure detractors who worry the proposed partnerships may surrender too much control of public infrastructure to public interests, or could cost taxpayers more in the long run. Some are concerned the Infrastructure Bank could be vulnerable to political interference, as cabinet can fire its executives at any time.

Governments around the world are evaluating the best models for funding infrastructure projects, and Canada faces competition in trying to attract interest in these types of projects from investors with large pools of private capital. At the same time, U.S. President Donald Trump has promised to lead $1-trillion (U.S.) in infrastructure projects, leaning heavily on private-sector funds.

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Canada, in turn, took inspiration from Infrastructure Australia, a government agency that has had success, but also backed some controversial projects. Canada's Infrastructure Minister, Amarjeet Sohi, has said Canada's approach has key differences, and "is a very innovative undertaking that no other country has done to the extent that we have."

The new bank should be able to tap a deep well of experienced leadership: Last week, former Royal Bank of Canada chief financial officer Janice Fukakusa was named the first chair of the Infrastructure Bank's board, and former Ontario Teachers' Pension Plan chief executive Jim Leech came aboard as a senior adviser earlier this year.

Mr. Weber thinks large institutional and private investors taking a wait-and-see approach to the Infrastructure Bank will eventually come to the table, and that their participation should bring much-needed transparency to the process. The challenge for the bank's leaders, he said, is to find projects in areas that can drive Canada's economy forward, such as renewable energy or broadband connectivity, and not to focus solely on upgrading roads and railways.

"You don't just need an infrastructure investment bank, you need a very good idea on what part of your infrastructure you want to upgrade, and what part you basically put on maintain," Mr. Weber said.

UBS has committed to raise $5-billion (U.S.) for so-called "impact investments" aimed at sustainable development. It also manages a Swiss clean-energy infrastructure fund worth several hundred million Swiss francs with the country's pension funds as leading investors, designed to help the country meet environmental targets.

"I think Canada, given its geographical position, and given its commitment to sustainability, especially under Prime Minister Trudeau, will have a lot of projects where you can find sustainable investments domestically that also will work for the global good," he said.

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About the Author
Banking Reporter

James Bradshaw is banking reporter for the Report on Business. He covered media from 2014 to 2016, and higher education from 2010 to 2014. Prior to that, he worked as a cultural reporter for Globe Arts, and has written for both the Toronto section and the editorial page. More

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