Canada can no longer afford to be 'shy' about investing in defence, says Business Development Bank of Canada (BDC) chief executive Isabelle Hudon, as Ottawa channels billions of dollars toward strategic industries, supply chains, and economic sovereignty.
Canada's defence investment shift
Speaking at the CVCA conference in Halifax, N.S., on May 28, Hudon emphasized that Canada is rethinking its approach to investment, productivity, and defence. She highlighted the proposed Defence, Security and Resilience Bank (DSRB), a multilateral institution aimed at expanding financing for defence-sector small businesses and strategic industries across allied countries.
'What BDC is trying to do and where we're trying to contribute with our defence platform is to contribute to the growth of our economy's sovereignty,' she said.
DSRB launch and capital
The DSRB could officially launch as early as the North Atlantic Treaty Organization summit in Ankara in July, Hudon said. It is intended to address financing challenges facing small and mid-sized businesses operating within defence supply chains.
'It's one thing to have big companies producing defence products and services, but they cannot do this alone. They need SMEs along the way to fully participate in the journey,' she added.
Hudon, who served as Canada's lead negotiator for the proposed institution, said the goal is for the bank to be operational before year-end. Canada secured the right to host the bank, though its final location has not yet been determined. Various cities are vying to be its home, including Toronto, Montreal, and Vancouver.
Capital and lending capacity
Hudon said the multilateral bank is expected to launch with roughly $20 billion in capital, potentially supporting as much as $200 billion in lending capacity. Canada's contribution could exceed $1 billion.
'We've negotiated in the charter that each country will benefit equal to at least the minimum of their capital requirements,' she said.
BDC's expanded defence focus
The shift is also reshaping BDC itself. Hudon said the Crown corporation significantly expanded its focus on defence and strategic industries over the past year after determining it had relatively limited exposure to those sectors in its roughly $55-billion portfolio.
'When we dug into our portfolio last year to see how much exposure we had to the defence sector, we only had $400 million,' she said.
BDC announced a $6-billion defence financing and investment platform in March to help expand support for companies tied to defence, security, and dual-use technologies. Hudon said BDC has been studying aspects of how the British Business Bank (BBB) supports defence-sector companies.
Much like BDC, the BBB is also a government-owned economic development bank focused on improving financing access for smaller businesses, but has more experience supporting defence-related companies and supply chains, she said.
