This year might be remembered as the one when the Brits were mired in Brexit and Americans started joking about hoping Canada doesn’t build a wall, shutting them out, while Canada’s own leader – Justin Trudeau – burnished his reputation for well-articulated positions and savoir faire. That’s why, in 2017, some clever IROs are starting to look for ways to incorporate ‘brand Canada’ into their investment cases.
Richard Leblanc, Associate Professor of Governance, Law & Ethics at York University, points out that what now makes Canada so appealing as an investment opportunity is “political stability.”
Leblanc draws a contrast between the fortunes of the U.S. and Canada, given the possible impacts of Brexit and the swiftly changing agendas of the Trump administration. He notes that lawmakers in the U.S. have proven “intransigent”, with legislation on health care and other key debates stalling.
In contrast, says Leblanc, “Canada has a parliamentary democracy, we’re relatively stable, and we also have a good leader, Trudeau, who’s young, photogenic, and progressive. He seems to be providing the counterpoint to both Theresa May and Donald Trump.” He continues: “It’s sort of like a perfect storm for Canada, and it’s only happened in the last year or two.”
The opportunity to play up the strengths of Canada has not escaped IROs, whose job it is to present their companies’ stories in the best possible light. Linda Boulanger, Vice President and Head of Investor Relations at Banque Nationale du Canada (BNC), points out: “In Europe, many institutional investors have a very macro approach, and Canada compares very favourably from that perspective. [The Canadian story] is a part of our pitch.”
The Canadian Story
The national backdrop has historically been “a fairly sleepy consideration” for investors – and yet this is changing, according to Eric Lascelles, Chief Economist at RBC Global Asset Management in Toronto.
He notes that the global financial crisis and some major political upheavals – such as the U.K.’s decision to leave the European Union – are sufficiently momentous that they have made it onto the radar screens of investors.
Lascelles also says that Canada’s political and economic strengths – what he terms “brand Canada” – are now worth spotlighting as one facet of a company’s broader investment story. “The national reputation of a country has become more important in the past decade for political and financial relations, and Canada has shone particularly brightly on both those fronts,” he says.
Arguably, the Canadian story began capturing the world’s attention during the global crisis of 2008 and 2009. “Going into the crisis, every banking system seemed relatively resilient,” says Lascelles. When that assumption proved untrue, he continues, “Brand Canada was bolstered enormously because it survived the financial crisis with flying colors, and the resilient banking system was a huge reason why.”
Richard Kelly, TD Securities’ London-based Head of Global Strategy, agrees. He emphasizes the stability of Canada relative to international counterparts.
“There’s no question that the performance of Canadian banks in the financial crisis became a badge of honor,” says Kelly. “And it continues to this day as a brand that Canada is able to market around the world.”
IROs at Canadian banks are arguably best positioned to illustrate how the national brand can be a potent investor magnet. Take BNC’s Boulanger, who says she “definitely” uses the Canada story as part of her company's IR pitch. As a Canadian financial institution, she says, “Discussions about the Canadian economic and regulatory environment are core to our meetings with investors.”
While resilience in the financial crisis has proven critical, Leblanc argues that the strengths of Brand Canada extend farther still. His list of Canada’s positive attributes is long: a stable political democracy; well developed transportation and communication systems; an educated, stable and literate workforce; accessible healthcare; diversity and inclusion; a high quality of life and reputation; abundant natural resources; a general absence of corruption; and a well established rule of law.
What’s more, Lascelles notes that intangibles matter, too. For instance, he says, “Canada is thought of as a friendly and calm place.”
On the other hand, Lascelles acknowledges that Canada is not every investor’s paradise. He observes that “Canada has a fairly small domestic market so one’s companies can’t necessarily grow to an unlimited extent.”
Meanwhile, a potential question mark hovering over the Canadian story is its historic relationship with the United States. “While the relationship with the U.S. has been a huge boon over a long time frame,” says Lascelles, “it’s fair to say that some of the rule changes coming in and threats of tariffs lend a competitive disadvantage to Canada. And we’ll see whether that’s permanent or just a multi-year thing.”
The ‘Brand Canada’ Message
Some Canadian IROs are taking their country’s attractive investment message to heart and have begun scheduling more meetings with international investors.
Boulanger, who has been at her current role for just over a year, has already visited investors in Europe three times. At BNC, she notes, an important part of the shareholder base comes from outside Canada and the trend has intensified in recent years, with the percentage of BNC’s European investors growing at a faster pace.
Isabelle Adjahi, Senior Vice President, Investor Relations and Communications for Groupe WSP Global Inc. in Montreal, has always discussed political realities with investors. She says this is because policy pronouncements often have implications for the future of infrastructure in a given country, which directly relates to her company’s business as an engineering solutions provider. “Whenever the President in the U.S. says ‘infrastructure’ in a sentence, we need to explain the impact, or the non-impact, it’s going to have, not only for our company but for the industry in the U.S.,” she says.
Adjahi finds that drawing positive comparisons to Canada is a double-edged sword because many of her companies’ operations lie in the States and beyond. “I think there is a Canadian story to sell right now,” she says. “Canada politically has a stable government, and so it’s not as uncertain as the U.S. or U.K. might be. And that’s an advantage for us as a Canadian company, but it’s just 20% for us [at WSP Global].”
When To Talk Macro
National character might be a factor in why Canadians are reluctant to toot their own horns. “Canadians are very modest,” says Leblanc. “We don’t like to brag so it takes quite a bit to address some of these issues head on. But the facts speak for themselves. In most surveys now, Canada is one of the top 10 countries in the world to invest in and to live in.”
He continues: “From what I’ve seen, companies are not explicit – they’re not saying Canada is a good place to invest – but they’re certainly not underplaying the reputation and goodwill that Canada has.”
One way to ride the coattails of Canada’s economic strengths without appearing too promotional is to take part in a trade mission, says Leblanc. He notes that provincial and federal governments often arrange trips in which Canadian business leaders can participate.
The beauty of these trips, says Leblanc, is that the Canadian story is told by others. “The government tells the Canadian story and you tell your own,” he says. “Officials wave the flag for you.”
That said, some Canadian IROs believe that formally incorporating a pro-Canada story into their own investment case is risky. Richard Downey, Vice President, Investor/Corporate Relations and Market Research, at Agrium Inc., notes that tying a company’s fortunes to a given political or economic scenario can badly misfire if times change.
Instead, he urges IROs to craft an investment case unique to their own companies: “We’re Canadian – and maybe that provides some benefits – but a better story for investors is growing populations and increasing food consumption. Those have been consistent for many years and they’re going to continue for many decades.”
Downey does acknowledge that discussing Canada’s strengths is sometimes appropriate in conversations with investors – when the message is implicit or subtle. However, he believes that making such a case on a conference call is ill advised – especially given that remarks can be quoted out of context.
Lascelles agrees, noting that the decision to highlight Canada’s strengths often hinges on the audience.
He has found that macro discussions work best with truly global managers, rather than those who already know the broad national story. “Investors with a real international orientation can’t track 198 countries simultaneously and would benefit most from that kind of reminder,” he explains.
For Leblanc, showcasing Brand Canada is smart idea if for no other reason than that Canada’s geopolitical stars have only recently aligned this favorably. “It’s taken us a long time to get to this point – but we’re certainly going to exploit it while the U.S. and the U.K. – and New York and London – are in the midst of a political lack of certainty,” he says. “Canada’s time has come.”