RBC CEO Dave McKay speaks at the annual First Nations Major Projects Coalition conference in Toronto on Thursday.Sammy Kogan/The Canadian Press
Royal Bank of Canada RY-T is launching an Indigenous advisory and finance practice in a bid to increase access to capital for Indigenous-owned major projects and other investments.
Ottawa has pegged major projects for fast-track status, many of which will require buy-in from Indigenous groups. RBC said its new team, housed in the lender’s capital markets unit, will connect Indigenous groups with specialized expertise through advisory services, financing, and by strengthening access to capital.
“With most major projects on or next to Indigenous lands, it’s critical that Indigenous partnership is at the heart of this process – our shared prosperity depends on it,” RBC chief executive Dave McKay said at a conference Thursday held by the First Nations Major Projects Coalition.
Mr. McKay said Canada needs $1.8-trillion in capital investment over the next decade to drive economic growth, including financing major projects. While that is a high bar, he said foreign direct investment is at its highest level in more than a decade, and government, businesses and Indigenous partners are making progress on key initiatives.
Canada has signed 20 trade deals in the last 12 months aimed at reaching the federal government’s goal of $300-billion in new, non-U.S. trade over the next decade. Mr. McKay also pointed to the creation of the Major Projects Office, with 17 initiatives worth $126-billion up for approval, and Canada’s first national sovereign wealth fund, announced earlier this week.
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To ensure Indigenous groups participate in these economic opportunities, loan guarantee programs should be improved, Mr. McKay said.
Currently, 26 deals have been completed across four loan guarantee programs, through which about $1.8-billion has been deployed – a “good start,” which also points “to structural barriers that, if left unaddressed, will limit Canada’s ability to build at the scale this moment demands,” he said.
A recent report by RBC on Indigenous loan guarantee programs and economic participation cited five barriers to progress: banking, reach, scale, geography and equity. Only 8 per cent of Indigenous businesses use institutional loans as a primary financing source, far behind the 31 per cent for non-Indigenous small businesses.
“The reality is that banks are still learning how to operate in this space,” Mr. McKay said. “But we believe they can play a meaningful role in improving Indigenous equity participation in major projects as they continue to learn.”
The practice will also work with RBC Origins, the lender’s Indigenous banking strategy unit and its internal Truth and Reconciliation Office.
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While past projects have been largely focused on energy and power, RBC head of global investment banking coverage Trevor Gardner said current and upcoming initiatives span across sectors and regions in Canada, providing communities with more opportunities for economic growth. He said the bank’s new practice will include experts across disciplines to match opportunities with financing.
“The expertise that you need is people that understand the projects and how the projects might work in-depth across a number of different industries, people that understand how to finance it, and people that understand the programs that are available,” Mr. Gardner said in an interview.
“A huge part of it is people with relationships with Indigenous communities across the country, and we’re bringing it together in partnership with RBC Origins, which is the part of the bank that faces those communities on a day-to-day basis.”
At a conference hosted by by The Globe and Mail last week, First Nations Bank of Canada CEO Bill Lomax said that access to financing and loan guarantee programs is improving for projects involving Indigenous communities, but that capital needs to be made available beyond the government’s major initiatives.
RBC also plans to launch finance leadership circles in the fall to offer Indigenous groups advice on financial management and governance practices.
“For too long, Indigenous equity participation in major projects wasn’t even on the table,” First Nations Major Projects Coalition CEO Mark Podlasly said in a statement.
He said RBC’s plans will “help nations continue to build the expertise and institutional capacity needed to own major projects and shape their economic future.”