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The investment crisis that nobody talked about in the 2021 campaign – The Globe and Mail

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Much of the debate in the 2021 campaign focused on the next couple of years – if not the next couple of months.

Throwing money at the housing market, taxing house flippers, half-price restaurant meals: all the parties had promises that were meant to appeal to enough voters for just long enough to squeak by in a tight race or two.

The long view has been conspicuously absent. A better campaign would have taken seriously the issue that the C.D. Howe Institute examined in a report issued on Thursday about the bad-and-getting-worse outlook for business investment in Canada.

Since 2015, the amount of capital for each worker has been at best stagnant, and the rate of gross investment weak, the study says. Even worse, business investment in Canada has lagged the United States and other countries. In the second quarter of 2021, businesses invested just 50 cents in Canada for each available worker for every such dollar invested in the United States.

Coping with the debts of the pandemic. Battling climate change and transitioning from fossil-fuel dependency. Bolstering the health care system as aging baby boomers enter their 70s and 80s and the labour force shrinks. All of that will require money, which will require growth, which will require higher productivity – which will require higher investment.

The typical rebuttal is to chalk up the problem to the woes of the energy sector. But the study notes that investment in the U.S. energy sector fared much better than in Canada, indicating that it’s not just the commodity price environment at work in this country. Co-author and institute chief executive officer William Robson said in an interview that another key issue is that the decline in oil patch investment has not been balanced by a rise in investment in other parts of the economy that could create high-productivity, high-earning jobs.

Mr. Robson notes other warning signs: companies focused on distributing capital through share buybacks, for instance, and pension funds snapping up assets outside of Canada.

A realistic debate would start with the acceptance that Canada needs to have a marginal corporate tax rate no higher than that of the United States, he says. But he acknowledges that such an approach is likely out of step with the populist temper of the times. “There’s not a lot of sympathy for business. There’s not a lot of sympathy for people that have made a lot of money, however they made it,” says Mr. Robson.

Taxing questions

In a recent letter to the editor, Karim Fazal contends that taxes on higher earners can boost economic growth, and allow the rich to get richer, citing a 2014 study from the Organization for Economic Co-operation and Development on income inequality. Failing to reduce income inequality can reduce economic growth, he adds. So, is taxing the rich the way to faster economic growth?

That’s not quite what the OECD said. The 2014 paper did indeed conclude that income inequality cuts into economic growth in the long run. But the OECD said it is primarily the gap between the lowest earners and the rest of society that is responsible, not the gap between high earners and everyone else. So, reducing the wealth of the 1 per cent, as a goal, doesn’t boost growth. The paper did say that tax increases on the wealthy don’t harm economic growth, although it went on to note that closing loopholes rather than raising rates could be both more efficient and fairer.

Reducing the gap between lower earners and the rest of society is what will boost the potential of an economy, the OECD states. But that goes beyond mere income transfers, and includes ensuring access to high-quality education and health care. Those policies increase social mobility and “create greater equality of opportunities in the long run,” the OECD paper states.

So, the key question is not how high taxes are on the rich, but how great opportunities are for the poor.

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Deflated expectations: Capital Economics has revised upward its outlook for inflation in Canada in the next few quarters, pointing to persistent supply disruptions in North America and the sharp jump in maritime freight costs globally. In a research note issued last week, the consultancy now says it expects that inflation will remain near 4 per cent until March, 2022, rather than declining to 3 per cent by then as it had earlier predicted. However, senior Canada economist Stephen Brown wrote that he still forecasts inflation easing to less than 2 per cent in the second half of 2022, as freight rates revert to more normal levels, energy-specific inflation tumbles and the rate of increase in new house prices declines.

Follow me on Twitter, @PatrickBrethour or ask your Taxing Question here.

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Opinion: Caisse's investment in a cryptocurrency company at odds with its pledge to fight climate change – The Globe and Mail

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Caisse de dépôt et placement du Québec announced last week that it is taking part in a US$400-million investment in Celsius Network, a New Jersey-based cryptocurrency-lending platform.

Paul Chiasson/The Canadian Press

The Caisse de dépôt et placement du Québec’s first-ever investment in a cryptocurrency company is providing Canadians with a reality check on its climate commitments.

With the ink barely dry on its new climate change strategy, Canada’s second-largest pension fund manager announced last week that it is taking part in a US$400-million investment in Celsius Network, a New Jersey-based cryptocurrency-lending platform.

U.S. private-equity firm WestCap Group is the lead investor in that transaction. Nonetheless, the Caisse’s involvement is raising eyebrows. That’s because Canadian pension funds, which generally have conservative risk appetites, have largely eschewed significant investments in crypto companies. But this particular investment is also curious because it is inconsistent with the Caisse’s recent environmental evangelism.

To be clear, Celsius Network is not a cryptocurrency. Rather, the company facilitates cryptocurrency lending to retail and institutional investors.

Celsius Network, though, does earn some revenue from cryptocurrency mining. That’s the process through which computers create new digital coins by solving complex mathematical equations to verify transactions and record them on a public digital ledger.

Since cryptocurrency mining requires significant computing power, the process is energy intensive, results in greenhouse gas emissions and contributes to climate change.

Although Celsius Network is not primarily a cryptocurrency miner, digital currencies are integral to its business model. That means Celsius Network (and by extension the Caisse as one of its investors) reaps benefits from other people’s mining.

Why Canada should be the home of the new global sustainability standards board

Trudeau should build a cabinet better suited to the climate fight

For its part, the Caisse is defending its investment in Celsius Network.

“Celsius is a lending platform – not a cryptocurrency – that provides access to fair, rewarding, and transparent financial services, with mining operations that account for a small portion of revenue and are based exclusively in North America, where it can primarily rely on renewable energy sources,” Alexandre Synnett, executive vice-president and chief technology officer at the Caisse, said in an e-mailed statement.

“More importantly, it is also a carbon-neutral business and we expect this to continue going forward,” he added.

The devil, of course, is in the details. For instance, the Caisse can’t guarantee that all cryptocurrency deposited and lent out on Celsius Network’s platform was created using renewable energy.

To illustrate this point, one only needs to consider the environmental impact of bitcoin, which is the world’s most popular cryptocurrency.

Although some proponents have previously claimed that a majority of bitcoin miners use renewable energy, a 2020 study from the University of Cambridge concluded that renewables comprise only 39 per cent of the total energy consumption for mining.

It’s also worth noting that until recently, the vast majority of bitcoin mining took place in China, which generates much of its power from coal. (China banned cryptocurrency mining and trading in May, prompting miners to seek out other jurisdictions. The United States is now the world’s largest bitcoin mining centre.)

This year, a Bank of America report suggested that purchasing a single bitcoin was akin to owning 60 gas-powered cars. Former Caisse chief executive Michael Sabia has also taken a dig at bitcoin, previously comparing it to a lottery ticket – although he did distinguish the cryptocurrency from its underlying blockchain technology.

The Caisse declined to say how it will provide its stakeholders with climate-related disclosures for its Celsius Network investment from here on out.

Other institutional investors are paying close attention to the Caisse’s debut investment in this space. That’s precisely why the Task Force on Climate-related Financial Disclosures should provide detailed guidance on divulging the nitty-gritty of crypto-related investments.

The Caisse’s investment in Celsius Network, however, is just the latest indication that there are limits to its commitment to fight climate change.

Although the pension fund manager plans to sell off its remaining oil-producing assets and establish a $10-billion fund to decarbonize other high-emitting industrial sectors, it won’t divest its investments in oil and gas pipelines.

So, oil-producing assets are unacceptable, but pipelines and an investment in a cryptocurrency company are A-okay? It takes mental gymnastics to reconcile these exceptions with the Caisse’s public pledge to protect the environment.

The Caisse should just admit that it’s a casual climate crusader that has every intention of cherry-picking its goals. It should also come clean about any other caveats in its new climate change plan.

This issue doesn’t just concern Quebeckers. The Caisse has $390-billion in assets, which means its investment decisions matter to the country as a whole.

We get it. It’s not easy being green. But please spare us the spin.

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UN Sees Strong Rebound in Global Investment Outlook for 2021 – Bloomberg

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Global foreign-direct investment flows showed a strong rebound in the first half of 2021 led by high demand for infrastructure projects, according to the United Nations Conference on Trade and Development.

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Kelowna investment banker fined | Business | pentictonherald.ca – pentictonherald.ca

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A Kelowna investment portfolio manager had inadequate compliance systems, record-keeping, and financial reporting, an investigation has found.

Kilburn Ogilvie Waymann Investment Management Ltd. has paid $55,700 to the B.C. Securities Commission in a settlement agreement for not managing business-associated risks and not providing reasonable assurance that it complied with securities legislation.

“Despite the deficiencies, there is no evidence that any clients were harmed,” the BCSC stated in Monday release.

As part of the firm’s settlement agreement with the BCSC, it must retain an independent compliance consultant for two years.

During a 2019 field investigation, BCSC staff found various problems with Kilburn Ogilvie Waymann Investment Management Ltd. These included:

– making unsubstantiated marketing claims

– not maintaining records capable of generating certain account activity reports

– inaccurately calculating its excess working capital

– producing deficient audited financial statements

The company’s chief compliance officer also failed to adequately perform his duties, the BCSC says.

The company’s website shows two employees, Trevor Kilburn, based in Kelowna, and John Waymann, based in Toronto. Between them, they have more than 75 years of combined investing experience, the website says.

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