The federal government is considering offering up to $15-billion in incentives to encourage Canada’s largest pension funds to invest in green-powered artificial intelligence data centres, The Globe and Mail reported.

According to three sources with knowledge of the discussions, Ottawa floated the proposal during private consultations with pension fund leaders, according to the Globe. The measure is part of a suite of options under consideration for inclusion in the fall economic statement, set to be delivered on Monday. (The fall economic statement serves as a potential preview of the federal budget scheduled for spring 2025.)

However, the proposal’s inclusion in the final statement is not guaranteed, and key details—including the federal commitment’s size—remain fluid.

The Globe did not identify its sources, as they were not authorized to discuss confidential government proposals.

The discussions are part of the federal government’s broader effort to attract more domestic investments from Canada’s pension funds, which collectively manage about $2.4 trillion in assets.

The government’s goal is to stimulate economic growth by enticing pension funds to make larger, homegrown investments. Pension funds have become to receive more scrutiny and criticism as, in many cases, they favour international investments over domestic opportunities.

For much of this year, a national debate has unfolded over whether Canada’s pension funds invest enough domestically, the Globe reported. Prominent business leaders have urged Ottawa to implement rule changes to encourage more local investments. Pension fund executives, however, have pushed back, emphasizing their independence and responsibility to generate the best possible returns for beneficiaries without taking undue risks.

The government’s end goal is to attract capital to Canada by inviting pension funds to make more big-ticket investments in the country, a fourth source told the Globe. The government has paired this approach with measures to reduce investment barriers and increase transparency around where funds allocate members’ money, according to the publication.

A draft version of the proposal suggests the federal funds would be available in the form of both loans and equity investments, the Globe reported. Pension funds would need to invest at least two dollars for every dollar provided by Ottawa and would be required to become controlling shareholders in the data-centre projects, which must be powered by clean energy, two sources told the Globe.

Should the proposal move forward and pension funds take full advantage of the incentives, the total investment could reach as high as $45-billion, according to the Globe. One source also noted that Ottawa has considered designating the development of green-powered AI data centres as a national priority.

Finance Minister Chrystia Freeland’s spokesperson, Katherine Cuplinskas, declined to comment to the Globe.

The discussions follow the federal government’s recently announced $2-billion AI strategy, which aims to expand Canada’s data-centre infrastructure and subsidize the costs of advanced computing resources for Canadian companies and researchers. Ottawa believes Canada’s abundant clean energy—such as hydroelectric and nuclear power—and its colder climate offer significant advantages for hosting power-intensive AI data centres. The government also hopes the initiative will generate jobs.

In April, Freeland appointed former Bank of Canada governor Stephen Poloz to lead a working group tasked with identifying ways to expand domestic investment opportunities for Canadian pension funds. While Poloz’s work has largely avoided prescriptive measures that could interfere with the funds’ autonomy, the latest incentives are designed to be optional, the sources told the Globe.

Over the past few weeks, Freeland and Poloz have briefed pension fund leaders on the evolving proposal. Discussions have been described as constructive, and multiple fund leaders are reportedly comfortable with the government’s approach, according to the Globe.

The federal government’s push to accelerate AI data centre development reflects its belief that Canada has the potential to become a global leader in artificial intelligence technology.

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