For every dollar that flowed into Canada between 2015 and 2024, two dollars left the country, with the net outflow of $1 trillion being the “

most significant capital exodus

” in modern Canadian history, according to a new study by the country’s biggest bank.

Canadian investment abroad isn’t necessarily a bad thing, but it took place when the country was “

starved for capital domestically

,” said Jordan Brennan, managing director at RBC Thought Leadership,

Royal Bank of Canada’s

research and analysis division.

“The imbalance was what was striking,” he said. “We’re exporting capital at scale at the same time that Canada is ranking dead last in the G7 when it comes to capital investment. Our investment in machinery, equipment and IP is half the United States’ level.”

But f

oreign direct investment

in Canada hit nearly $100 billion last year, the highest since 2015 and the first time in a decade when inflows exceeded outflows. Canada has been announcing measures to speed up

major energy-related projects

with an aim to reduce its reliance on the U.S.

“Canada is back on the radar of global investors and companies looking to rebalance their portfolios amid global uncertainty,” the RBC report said, adding that the federal government needs to “capitalize on this moment,” with an eye on leading the G7 in “

economic growth

and industrial dynamism.”

In order to do that, Canada

needs to make $1.8 trillion in investments

over the coming decade to boost six sectors:

oil and gas

,

metals and minerals

,

electricity

,

agriculture

,

defence and space

.

RBC said investing $705 billion in the oil and gas sector to help build new oil pipelines and LNG terminals would “elevate Canada to energy superpower status.” It would also foster large-scale carbon capture and sequestration to reduce emissions.

It also said an investment of $670 billion in electricity systems would boost the energy Canada receives from sources such as wind and nuclear.

“The coming decades will test every part of the grid,” the report said. “Electrification of vehicles, buildings, industry and data centres means demand could double by 2050. To keep the grid reliable and affordable, Canada must massively expand and modernize a system that was built more than half a century ago.”

RBC said Canada doesn’t lack capital for these investments, but that the capital doesn’t flow to where it is needed at the speed or scale required.

“The country is awash in savings,” Brennan said. “We have trillions of dollars sitting just in those Maple Eight pension plans.”

But large investors have thresholds that need to be met for them to deploy the capital and Canada has “too few of those types of projects and too few of those companies that are of sufficient scale to attract that capital,” Brennan said.

There are lots of mid-sized companies in Canada that need that “extra leg of capital” to grow and reach scale, he said, and this “mismatch” needs to be addressed.”

But making these large-scale changes and taking advantage of the renewed interest in Canada won’t be easy, RBC said, since Canada isn’t the only country looking to build and the global competition for capital is intense.

But Brennan remains cautiously optimistic and hopes the report helps “nudge” Canada in the right direction.

“We have missed the last 10 years,” he said. “We missed that wave of investment and so it’s really on us now to change the playbook.”

• Email: nkarim@postmedia.com

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