The capital allocation challenge
Volatility, climate uncertainty, and policy friction make traditional forecasting unreliable. Yet sitting on cash destroys value. The TSX 60’s average cash-to-asset ratio is 11 %, the highest since 2009.
| Metric | 2010 | 2020 | 2025 | Source |
|---|---|---|---|---|
| Corporate cash ratio (TSX 60) | 6 % | 9 % | 11 % | Bloomberg 2025 |
| Avg. cost of equity | 7 % | 8.4 % | 9 % | RBC Capital Markets |
| Cap-ex growth (y/y) | +3.2 % | +0.8 % | +0.6 % | StatsCan 34-10-0035 |
New capital logic
- Optionality over certainty. Stage investments to retain flexibility.
- Data-driven scenario analysis. Blend macro forecasts with AI-based risk signals.
- Portfolio resilience. Diversify across geographies and energy intensities.
What leaders can do
- Institutionalize “war-gaming.” Simulate regulatory, rate, and demand shocks annually.
- Establish venture budgets. Allocate 5 % to exploratory bets with capped downside.
- Link ESG and return models. Green assets often yield lower volatility.
- Adopt rolling capital committees. Continuous review replaces static annual budgets.
Arcus Insight: The best hedge against uncertainty is velocity — the ability to re-deploy capital faster than competitors.