Building Canada's Future Defence: The Role of the Defence Investment Agency

Canada launched its Defence Investment Agency on 2 October 2025, centralising defence procurement authority to accelerate equipment delivery. Canada has committed to reaching 5% of GDP in defence spending by 2035, including 3.5% for core defence and 1.5% for industry and infrastructure.  It has committed $30 billion to a five-year defence investment¹, in addition to the $81.8 billion allocated to the Canadian Armed Forces over the same period. 

The agency’s mandate emphasises prioritising domestic industrial benefits while streamlining procurement, creating a competitive advantage for investors who can demonstrate established Indigenous collaboration models. With procurements across air, land, sea and digital domains now falling under centralised oversight, the investment landscape will be divided between strategic major procurements managed by the agency and traditional departmental processes. 

Policy Context: From Fragmentation to Centralised Authority 

Canada’s defence procurement system operates across multiple departments, including the Canadian Armed Forces, Public Services and Procurement Canada, and the Canadian Coast Guard, resulting in overlapping approvals and extended delivery timelines. In response, the House of Commons defence committee and other oversight bodies have called for reform. 

The Defence Investment Agency is established as a Special Operating Agency within PSPC, reporting to Stephen Fuhr, with CEO Doug Guzman overseeing daily operations. The agency officially began operations in autumn 2025, focusing on foundational tasks such as onboarding staff, deploying integrated procurement teams and setting internal processes. Early engagement with the industry prioritises alignment on strategic objectives and operational requirements, creating near-term opportunities for investors who demonstrate capability in the agency’s high-priority domains. 

Investment Scale: $63 Billion Annually Expanding to Unprecedented Levels 

Canada is committed to reaching 2% of its GDP in defence spending—approximately $63 billion—in fiscal year 2025-26 ², representing the most significant generational investment in Canadian defence since the Second World War. The 5% GDP target by 2035 represents even more substantial capital deployment, driven by NATO's enhanced Defence Investment Pledge following sustained pressure from the United States administration. 

This spending trajectory creates material opportunities across multiple sectors: 

Arctic Infrastructure Development: $2.67 billion committed over 20 years for Northern Operational Support Hubs in Iqaluit, Inuvik, and Yellowknife, with additional hub locations under assessment. These installations comprise airstrips, logistics facilities, and equipment that support a year-round Canadian Armed Forces presence while serving federal partners, territorial governments, and Indigenous communities. 

Naval Capabilities: Eight new icebreakers under procurement, including two polar icebreakers enabling year-round Arctic operations. Additional submarine programme for up to 12 conventionally powered, under-ice-capable vessels, enhancing sovereignty assertion in contested waterways. 

Aerospace and Advanced Manufacturing: Over-the-horizon radar technology procurement continues the $6.9 billion system, which monitors airspace from the Canada-US border to the Arctic. Integrated air and missile defence systems require the development of domestic manufacturing capabilities. 

Dual-Use Infrastructure: Explicit government commitment to investments delivering immediate benefits for both military requirements and civilian populations, particularly relevant for northern communities where infrastructure deficits remain pronounced despite recent improvements. 

Indigenous Partnership Imperative: From Consultation to Co-Development 

The Defence Investment Agency operates within Canada's evolving Indigenous rights framework, where meaningful partnership determines project viability rather than representing regulatory compliance. The Inuit Nunangat Policy recognises Inuit Nunangat as a distinct geographic, cultural, and political region, requiring engagement "in the early stages of programme renewal or design" to maximise initiative impact. 

Prime Minister Mark Carney's March 2025 Iqaluit announcement included:$253 million for Indigenous reconciliation initiatives⁴: $94 million for upgrading power plants in Cambridge Bay, Gjoa Haven, Igloolik, and Iqaluit;$20 million for the Nunavut Nukkiksautiit Corporation hydroelectric project; and $66 million for building and repairing homes across Nunavut. These investments demonstrate how defence infrastructure spending integrates community development objectives. 

The Canadian Armed Forces explicitly commit to working "in partnership with Inuit and Northern Indigenous governments and communities" to maintain a persistent Arctic presence, respecting Northern land claims agreements, implementing the Inuit Nunangat Policy, and aligning with the United Nations Declaration on the Rights of Indigenous Peoples Act Action Plan. For investors, this policy framework means that Indigenous participation must be "operationalised" through explicit decision-making rights and consultation triggers, rather than procedural formalities. 

Arctic defence analyst recommendations emphasise that "Northern communities provide presence, knowledge and domain awareness no satellite or distant radar can match," with insights requiring integration "upstream into surveillance, intelligence, planning, procurement, and basing" through structured mechanisms. Projects demonstrating this integrated approach secure faster regulatory approval and reduced completion risk compared to those treating Indigenous engagement as a compliance exercise. 

Procurement Transformation: Speed, Domestic Benefits, Allied Integration 

The Defence Investment Agency restructures procurement around three strategic priorities directly relevant to European investors: 

Streamlined Decision-Making: Integrated procurement teams consolidate expertise from multiple departments, eliminating duplicative approvals. Only projects exceeding $100 million fall under agency purview, with continuing procurements gradually transitioning during the initial 8-12 month rollout phase. This threshold creates strategic segmentation, major infrastructure and equipment programmes benefit from accelerated timelines, whilst smaller procurements remain in traditional departmental channels. 

Domestic Industrial Capacity: The agency explicitly mandates tying procurement to Canadian industrial benefits, with Secretary Fuhr stating historical 70-75% procurement expenditure to the United States "we don't want to do that anymore." This recalibration prioritises Canadian workers, companies, and technologies, creating opportunities for international investors who demonstrate a commitment to domestic capability development through joint ventures, technology transfer, and workforce training. 

Allied Coordination: The agency positions Canada alongside the United Kingdom, Australia, and France procurement bodies, facilitating joint defence purchases and partnerships. European Union Readiness 2030 alignment strengthens defence supply chains and industrial capacity amongst allied nations, with Canada positioning itself as a leader in multilateral procurement coordination. 

Sector Opportunities: Where Capital Deployment Concentrates 

Aerospace and Advanced Manufacturing: CAE, Canada's sovereign defence partner, welcomed the agency launch as enabling "advanced training and simulation technologies" deployment. The sector benefits from its historical capabilities while requiring modernisation investment to meet current requirements. Indigenous partnerships in aerospace manufacturing remain underdeveloped compared to mining and energy sectors, creating first-mover advantages for investors establishing these frameworks. 

Shipbuilding and Marine Systems: The procurement of icebreakers and submarine programmes requires expanded Canadian shipyard capacity, with explicit requirements for Indigenous workforce development and community benefit agreements. Coastal Indigenous communities possess generations of maritime knowledge applicable to vessel design and operational planning, yet systematic integration of this expertise remains inconsistent across programmes. 

Arctic Infrastructure and Logistics: Northern Operational Support Hubs require construction firms that demonstrate extreme-environment capability while navigating complex Indigenous land claims and treaty rights. Dual-use infrastructure ³ mandates mean projects must serve military requirements alongside community needs, roads, telecommunications, and power generation, creating complexity that favours experienced operators over lowest-cost bidders. 

Cybersecurity and Digital Systems: Communications infrastructure across Arctic regions remains unreliable, with cyber defences "poorly funded and unevenly deployed" according to security assessments. Indigenous communities require protected digital connectivity for both sovereignty assertion and community development, creating convergent requirements where defence and civilian needs align. 

Risk Assessment: Execution Challenges and Political Sustainability 

Bureaucratic Integration Risk: Conservative opposition critic James Bezan characterised the agency as "another level of bureaucracy and red tape," reflecting broader political scepticism. The agency must demonstrate tangible procurement acceleration to maintain cross-partisan support essential for decade-long infrastructure programmes. 

SME Access Limitations: The  $100 million threshold excludes small-to-medium enterprises from direct agency engagement, despite no specific support mechanisms being announced, despite SMEs comprising over 85% of Canada's defence industry. Large contractors face expectations to support Canadian SMEs, yet enforcement mechanisms remain unclear. 

Indigenous Consultation Complexity: A policy institute analysis notes that while "Indigenous consultation" is "legally and morally necessary," it "remains procedurally rigid and politicised, often becoming a brake on critical national security decisions rather than a channel for partnership and empowerment." Projects require structured Indigenous co-development frameworks rather than compliance-focused consultation to achieve both regulatory approval and operational success. 

Technology Relevance Risk: Defence procurement technology develops rapidly, whilst procurement cycles extend years. The agency's emphasis on "speed of relevancy" must overcome historical patterns where equipment specifications became obsolete during procurement processes, requiring continuous reassessment and adaptive contracting approaches. 

Investment Implications for UK and European Institutions 

Strategic Positioning Requirements: Investors should evaluate partnerships with Canadian firms that demonstrate proven Indigenous collaboration, rather than pursuing standalone market entry. Joint ventures providing technology transfer, workforce development, and community benefit structures align with the agency's domestic industrial capacity mandate. 

Geographic Focus: Arctic sovereignty projects offer the highest potential returns given policy prioritisation and infrastructure deficits, but require demonstrated extreme-environment capability and Indigenous partnership frameworks. Southern Canadian aerospace and shipbuilding opportunities offer lower execution risk, thanks to established supply chains and a readily available workforce. 

Timeline Considerations: The agency's initial 8-12 month foundation-building phase creates near-term positioning opportunities before primary procurement mandates finalise. Early industry engagement enables influence on requirement specifications and evaluation criteria, advantaging prepared investors over reactive competitors. 

Due Diligence Priorities: Assess potential partners' Indigenous relationships through direct community engagement, rather than relying solely on corporate representation. Projects with documented Indigenous equity ownership, employment commitments, and benefit-sharing agreements demonstrate substantially lower completion risk compared to those relying solely on consultation compliance. 

Currency and Sovereignty Considerations: All procurement conducted in Canadian dollars creates natural FX risk for European investors, though domestic industrial benefit requirements may necessitate Canadian entity establishment regardless. Geopolitical tensions surrounding Arctic sovereignty, including statements by the US administration regarding territorial claims, introduce political risk that requires monitoring alongside commercial assessment. 

Defence Transformation as Economic Development Strategy 

Canada's Defence Investment Agency represents structural procurement reform, creating investable opportunities where the quality of Indigenous partnership determines project success. The $63 billion annual defence expenditure, which is expected to escalate to 5% of GDP by 2035, channels unprecedented capital toward Arctic infrastructure, aerospace manufacturing, and shipbuilding sectors. These sectors are where European institutional investors possess relevant capabilities, and Indigenous communities hold essential knowledge and land rights. 

The Defence Investment Agency's autumn 2025 operational launch creates immediate positioning requirements for investors seeking participation in major procurement programmes. With integrated teams now deploying and initial mandates including the Canadian Patrol Submarine Project, the window for influencing specifications and demonstrating capability narrows as processes formalise.