(Toronto) Canada is poised for significant growth in Indigenous participation in major project financing, international rating agency Morningstar DBRS said Monday.
In a report released to mark the fourth annual National Truth and Reconciliation Day, the ratings agency said Indigenous-related financial market activity is on a steady upward trend with a ” considerable potential for growth.
“We have seen a gradual increase in capital markets activity by Indigenous-related organizations and we anticipate this financing segment will increase significantly in the coming years, supported by increased guarantees from the federal and provincial governments and other forms of support,” the Morningstar report says.
Indigenous communities across the country are showing growing interest in acquiring stakes in major projects and infrastructure as a way to generate revenue and economic opportunities for their populations.
But historically, one of the biggest barriers preventing Indigenous partners from acquiring equity has been lack of access to capital. There Indian Act of Canada prohibits First Nations from using their land as collateral, meaning Indigenous communities struggle to access competitive interest rates in traditional financial markets.
But federal and provincial governments are increasingly aware of the need to provide Indigenous communities and organizations with access to capital to facilitate economic development, Morningstar said.
The report identifies more than $13 billion in funding available through federal and provincial programs, such as loan guarantees, that are leading to increased funding activities for communities and Indigenous groups.
Morningstar puts the value of Indigenous financing activity, including government loan guarantees, at almost $800 million per year over the past five years.
The organization also points out that several large-scale transactions involving Indigenous communities are on the horizon, including Ottawa’s planned sale of shares in the Trans Mountain pipeline to Indigenous groups, TC Energy’s planned sale of its system pipeline to an Indigenous consortium and the development of the Cedar LNG liquefied natural gas project by the Haisla Nation and Pembina Pipeline.
“We believe there is significant growth potential for Indigenous-related financing in the years to come,” Morningstar said, adding that increased Indigenous participation in financial markets is a win-win.