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Bank on it: The Canada Infrastructure Bank in International Context

by Helaina Gaspard

As the Canada Infrastructure Bank (CIB) takes shape, it is worth taking a look at how the organization is structured to understand the governance outcomes it may generate from both fiscal and accountability perspectives.  There are infrastructure and investment banks around the world with various mandates, accountability structures, stakeholders, and sources of capital.  However, the CIB’s structure appears to be somewhat novel when compared to other OECD countries (see Table 1). 

Novelty can be associated with both innovation and risk and it is worth considering how similar institutions govern themselves. To put the CIB in perspective, we will consider a subset of infrastructure and investment banks across three parameters:

  1. The specificity of their mandates and stakeholders;
  2. Their accountability structures; and
  3. Their source(s) of capitalization.

While publicly-funded infrastructure banks are not common around the world[1], there are two broad camps of organizations when it comes to mandates and stakeholders.  In the first camp, there are the multi-stakeholder institutions that invest across regions and/or member countries.  In this camp are organizations like the Asian Infrastructure Bank (AIIB), the European Investment Bank (EIB), and the Nordic Investment Bank (NIB).  Each of these banks focuses principally on investing in its member countries to enhance infrastructure, connectivity, research, etc. 

In the second camp, there are the banks that are the creations of a single state, typically designed to exclusively serve its citizenry.  Such organizations include the CIB, the Infrastructure Development Bank of Zimbabwe (IDZIB), and the Nigeria Infrastructure Bank Plc. (NIBP) as well as what used to be the United Kingdom’s Green Investment Bank (GIB).[2]  The UK’s GIB, as a publicly-funded single-stakeholder organization, may appear at first glance to be an apt comparison for Canada’s CIB.  However, the GIB was issue-focused (i.e. environmentally-friendly or green projects) with a defined mandate to fund projects ‘that may not otherwise go ahead.’  Thus, when compared to its typical OECD peers, Canada’s CIB tends to stand out. 

Single- and multi-stakeholder organizations have the potential to fund similar types of projects, although they generate different accountability structures. 

The single-stakeholder organizations tend to be public creations, established through legislation.  This makes the organizations accountable to political entities, i.e. governments that have the (real or perceived) potential to influence decision-making for particular outcomes.  Consider, for instance, the difference between a proposal to the EIB staffed by 900 technocrats and accountable to all member countries of the EU and a proposal submitted to the CIB.  The EIB’s multi-stakeholder structure and approval process make the bank more likely to be removed from the potential political influence of any single government. 

By contrast, the CIB, through appointments and political/policy priority areas, may be more susceptible to political interests owing to its single-stakeholder construction.  The CIB is a Crown Corporation, i.e. an entity at arm’s length of government, with its own board of directors that governs its activities.  As with any Crown Corporation, the CIB is accountable to Parliament, reporting through the Minister of Infrastructure and Communities.  Parliament, the constitutional guardian of the public purse, will have the opportunity to monitor the CIB’s performance, though indirectly, by holding the minister (not the board of directors) accountable for the outcomes.  While governed by a board of directors, it is the government that appoints the directors and sets the CIB’s policy direction and high-level investment priorities.  This raises of number of questions related to accountability and governance:

  1. If the minister is ultimately accountable for the CIB’s outcome, why shouldn’t the government operate the fund? 
  2. Is the CIB’s single-investor (i.e. capitalized solely by the federal treasury) at arm’s length model necessary to achieve the desired goals of infrastructure investment, even though individual deals could have multiple participants/investors?
  3. Could better accountability and transparency be achieved by operating the CIB as a fund within government instead of as a notionally independent agency without a directly comparable model? 
  4. The CIB is effectively a structure designed to make investments but also to award government grants (i.e. subsidies) to private or institutional investors to pay for infrastructure projects “in the public interest.”  Again, might this be achievable through a fund internally managed by the government? 

It remains to be seen if or how the organizational design of the CIB will attract both projects and human capital.  International comparisons suggest that the CIB is unique.  When it comes to spending public money, being unique carries risk in that the lack of clarity may impede the CIB’s effective launch as well as its accountability in the long run.  Little is unique about trying to combine public and private capital to fund public projects, also known as the public-private partnership––though we won’t be exploring the merits of those arrangements in this blog.  It may be preferable, from the principles of democracy and transparency, to have the government openly and directly managing the disbursement of funds from the CIB, as the accountability for decision-making would be clear.  The democratically elected government of the day would be openly awarding grants and generating private investment for priorities that it defines.  Such an approach would be relatively clear as the CIB mandate states that government will set direction and investment priorities and leave the operation to an independent board of advisors.  There is no global equivalent leaving us to ponder how it might work in the Canadian context.

A similar conflation of policy and political interests may be said of the AIIB.  China’s significant initial capital investment allows it to maintain the Bank’s largest voting power at 27% (trailed by India (7.9%) and Russia (6.2%)).  The AIIB, however, has various operating and accountability structures including an international advisory board designed to guide its decision-making.  Accountability regimes are rarely perfect but when it comes to financing institutions that use public money, a diversity in stakeholders may improve standards of accountability.  The more stakeholders involved, the more likely decisions may be called into question, as all have an interest in the outcome. 

Sources of capitalization can also influence organizational accountability.  With exception of the NIB which finds capital in international markets, the other organizations are mostly or wholly funded by member countries.  The banks tend to seek supplementary investment in their projects from the private sector, though that match is not guaranteed.  The AIIB, for instance, co-financed the Trans Anatolian Natural Gas Pipeline Project (in Azerbaijan) with the World Bank supporting development.  In the interest of its members, the EIB financed the restructuring of major Greek roads connected to the trans-European transport line (RTE-T).  Focused domestically, the IDBZ issued bonds to finance the development of the Marimba Housing Projects.  Projects and their financing will reflect the mandate of the organization and potential clients of the investment.

Organizational mandates, paired with governance and accountability structures, guide the banks’ performances.  For those banks that raise money on capital markets such as the EIB and NIB, if their performance was in question, their ability to raise capital could suffer as well.  Similarly, if multi-stakeholder banks like the AIIB lost the confidence of their member countries (i.e. investors), their divestment would be a signal of the less than acceptable performance of the organization.  With a single-investor funded bank like the CIB, performance assessment would be dependent on Parliament (albeit indirectly), the board of directors, and the private sector’s investment.

If there is money to be made through user fees or revenue guarantees and other downside risk protection, the private sector may invest (e.g. airport improvement fee, toll road for fast access, water consumption/disposal, etc.). If users are unlikely to pay fees or if the investment is unlikely to generate an adequate return, then perhaps the infrastructure (likely for collective benefit) is best maintained by the state (e.g. schools, hospitals, community centres). In the cases where risk (i.e. capital expenditure, revenue, operating costs) is not transferred to the private sector––or priced appropriately, care must be taken in the bank’s governance model, due diligence, and deal structuring to limit the exposure of both the bank’s capital and the national treasury to downside risk.

A single-stakeholder publicly funded bank may have different interests, including similarly funding a project to a grant with no expectation of return, willingly writing-off the investment, when it does not depend on private capital to fund its projects.  The CIB may find itself unable to reconcile public and private tensions, thereby limiting the likelihood of private sector investment and turning itself into a granting agency. 

When compared to other organizations, the CIB appears relatively novel relative to its developed-country peers as a publicly-funded, single-stakeholder entity at arm’s length of government and in seek of private investment (albeit not dependent on it).  With this formulation, the CIB faces both the opportunity for a wide-range of investment yet must confront the challenges of accountability with public funding. 


[1] There exist, however, funds that support low-cost financing for infrastructure projects such as ‘State Revolving Funds’ in various parts of the United States (e.g. California, Michigan, Indiana) that focus on water and wastewater infrastructure.

[2] The GIB was privatized (Government announced on March 3, 2016 that it would sell shares and find new investors) and sold to a consortium led by Macquarie (Australia) on April 20, 2017.  Detractors questioned whether the entity would continue its green focus, while supporters lauded its new potential for broader international investment.