The Quiet Emergence of Defence Finance in Canada

In Canada’s national security debates, attention has traditionally focused on procurement: ships, aircraft, and armoured vehicles. Parliamentary hearings and media coverage alike tend to revolve around equipment programs and defence spending targets. Yet behind these familiar discussions, a quieter transformation is beginning to unfold—one that may prove equally consequential for Canada’s strategic future.

The growing engagement of Export Development Canada (EDC) in supporting Canada’s defence and security sector signals the early stages of what might be called defence finance in Canada: the alignment of financial institutions, capital markets, and export policy with national security objectives.

It is a shift that reflects broader changes across the transatlantic alliance. In an era of geopolitical competition and technological disruption, military capability is no longer determined solely by defence budgets. It increasingly depends on the financial architecture that sustains industrial capacity, innovation ecosystems, and international partnerships.

Canada is only beginning to grapple with this reality.

Capital as Strategic Infrastructure

Export credit agencies rarely make headlines. Their work—loan guarantees, export insurance, and financing facilities—typically unfolds far from public view. Yet their influence on national industrial capacity can be profound.

Recent figures illustrate the scale of EDC’s growing engagement with Canada’s defence and security sector. The agency has provided hundreds of millions of dollars in financing and insurance support to Canadian defence companies, enabling them to secure international contracts, expand manufacturing capacity, and manage the complex financial structures associated with global defence procurement.

This support addresses one of the structural challenges long facing Canada’s defence industry: access to capital.

Defence companies operate in a financial ecosystem unlike most other industries. Major programs often require substantial upfront investment in research, engineering, and production infrastructure. Contracts may span years—sometimes decades—with payments tied to government procurement cycles and international delivery schedules.

For smaller technology firms and specialized suppliers, these financial realities can be prohibitive. Even companies with world-class technologies can struggle to secure the financing necessary to compete internationally.

Export credit agencies step into this gap. By providing guarantees and financial backing, they allow private lenders to extend credit with reduced risk. The result is a powerful multiplier effect: financial support that enables companies to pursue larger contracts, invest in innovation, and integrate more deeply into allied supply chains.

In this sense, financial policy becomes a form of strategic infrastructure.

The Defence Industry Canada Actually Has

Canada’s defence industrial base is often misunderstood.

Unlike some allied countries, Canada does not rely primarily on large prime contractors dominating the domestic defence landscape. Instead, its industrial ecosystem is characterized by a network of highly specialized companies operating within global supply chains.

These firms frequently occupy critical technological niches—advanced sensors, naval systems, satellite technologies, artificial intelligence, cybersecurity, and aerospace components.

Consider OSI Maritime Systems, a Vancouver-based company whose integrated navigation and tactical systems are used by navies around the world. Companies like OSI exemplify Canada’s distinctive industrial model: highly innovative, globally connected, and technologically sophisticated.

Yet such firms often face structural disadvantages when competing internationally. Defence contracts are frequently won not only through technological merit but through access to financing, industrial partnerships, and government-backed export support.

Countries that align financial tools with industrial strategy give their companies a decisive advantage.

Until recently, Canada’s approach in this domain was relatively modest.

That may now be changing.

Finance Meets Security Policy

EDC’s growing involvement in defence exports reflects a broader shift in strategic thinking across Western economies.

In the United States, financial mechanisms have long supported defence exports and industrial capacity. Government-backed financing programs help American companies secure contracts worldwide while strengthening the country’s defence industrial base.

European governments are increasingly adopting similar strategies. Faced with renewed geopolitical competition and the demands of NATO modernization, several European countries are expanding defence financing mechanisms to support domestic industries and accelerate technological development.

Canada, historically cautious about linking financial policy with defence strategy, is now moving toward a more integrated approach.

EDC’s engagement represents one element of this emerging framework. By helping Canadian firms access capital and manage financial risk, the agency strengthens the country’s ability to participate in global defence markets and allied procurement programs.

In an increasingly competitive geopolitical environment, such participation is no longer optional.

Institutional Change Inside EDC

The shift is not only financial—it is institutional.

EDC has recently strengthened its engagement with the defence sector by creating specialized roles and expertise within the organization. One such initiative is the appointment of Gord Scharf, a Canadian Armed Forces lieutenant-colonel, as National Ecosystem Lead for Defence and Security.

The significance of this move should not be overlooked.

Financing defence projects requires more than traditional financial expertise. It demands a deep understanding of military procurement systems, operational requirements, and international security partnerships. Defence markets operate according to strategic logic as much as commercial logic.

Bridging those worlds requires institutions capable of navigating both.

Toward a Canadian Defence Finance Ecosystem

If EDC’s expanding role represents the first step, a broader evolution may lie ahead.

Canada’s financial sector—particularly its major banks—has historically approached defence financing with caution. Regulatory complexity, reputational considerations, and limited familiarity with defence markets have often constrained deeper engagement.

Yet the strategic environment is changing.

Across NATO, governments are increasing defence spending while emphasizing industrial resilience and supply chain security. The war in Ukraine, intensifying technological competition, and the growing importance of Arctic security have all underscored the need for stronger defence industrial ecosystems.

For Canada, these developments raise an important question: should the country cultivate a more comprehensive defence finance ecosystem?

Such a framework could link public institutions such as EDC with private financial actors—banks, pension funds, and investment vehicles—to support defence innovation, manufacturing expansion, and export growth.

In other allied economies, similar partnerships have already begun to take shape.

Canada’s conversation is only beginning.

Financing Defence Readiness

These questions are increasingly entering Canada’s strategic policy discourse.

They will also form the central theme of the upcoming Conference on Financing Canada’s Defence Readiness, hosted by the Policy Insights Forum in Ottawa. The conference will convene leaders from government, industry, and the financial sector to explore how capital markets can support Canada’s defence capabilities and industrial competitiveness.

Among the issues likely to dominate discussion

• How financial institutions can support Canada’s defence industrial strategy
• The role of export credit in enabling Canadian companies to compete globally
• Opportunities for collaboration between public financing institutions and private capital
• The intersection of defence innovation, emerging technologies, and investment

These conversations reflect a broader shift in thinking about national security.

Military capability is no longer shaped solely within defence ministries. It increasingly emerges from the intersection of technology ecosystems, industrial policy, and financial markets.

A Strategic Inflection Point

For decades, Canada’s defence debate has revolved around how much the country should spend on military capability.

A more complex question is now emerging: how Canada finances the industrial and technological foundations of that capability.

The answer will likely determine the future competitiveness of Canada’s defence sector and its ability to contribute meaningfully to allied security architectures.

EDC’s expanding role suggests that policymakers are beginning to recognize the importance of financial infrastructure within national security strategy.

If this realization continues to deepen, Canada may gradually move toward a more integrated model—one in which financial institutions, defence innovators, and policymakers collaborate to strengthen the country’s strategic capabilities.

Such transformations rarely occur overnight.

But they often begin quietly, with institutional adjustments that seem technical at first glance.

In retrospect, those adjustments can mark the beginning of much larger shifts in national strategy.