Institutional investors can play a role in reconciliation efforts by embracing the growth opportunities presented by Canada’s Indigenous communities, according to Kevin Thomas, chief executive officer of the Shareholder Association for Research and Education.
Joined by Mark Sevestre, senior advisor and founding member of the National Aboriginal Trust Officers Association, during a session at the Canadian Investment Review‘s 2021 Investment Innovation Conference, Thomas noted the two organizations partnered in 2016 to create the Reconciliation Responsible Investment Initiative, which works with Canadian investors to help them incorporate reconciliation into their portfolios and assist Indigenous communities to make investments that are consistent with their traditions and cultural values.
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“It was a natural partnership when the NATPO approached us,” he said. “We started talking to them about the challenges that Indigenous trusts were facing in governance, oversight and trying to play out their responsible investment values through the investment chain. There was a natural partnership there and we can learn from each other.”
With reconciliation measures in the spotlight following last summer’s discovery of multiple mass graves at former residential school sites, institutional investors can play an important role, said Sevestre. He cited a call to action in the Truth and Reconciliation Committee’s 2016 report that urged Canadian businesses to undertake meaningful consultation with Indigenous communities to seek consent for resource-based projects. “We’re not anti-business or anti-development, but we’re demanding to be part of the process. Another part of it is ensuring equitable access to employment and opportunities within the business.”
Thomas said institutional investors also stand to gain by viewing Indigenous communities as opportunities rather than risks. “Indigenous people aren’t just a risk to be managed — they have their own roles and responsibilities in this process and they bring a lot of value to the Canadian economy, which isn’t being tapped into. The National Indigenous Economic Development Board estimated the loss in terms of value to the Canadian economy from not having full Indigenous participation at roughly $27 billion annually.”
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There are a number of funds and debt products for institutional investors seeking engagement with Indigenous communities, he said, noting these include bonds that operate like municipal debentures and offer an opportunity to invest primarily in First Nations infrastructure, as well as funds allowing for investments into smaller Indigenous-owned businesses.
And while less common, direct investment opportunities also exist, added Thomas, such as the OPTrust’s investment in a $1.5 billion natural gas power plant in Alberta, which brought together a group of partners and six First Nations to invest as an Indigenous community syndicate.
Alison Loat, managing director of sustainable investing and innovation at the OPTrust, said the project changed the investment team’s approach to power generation projects. “[The investment team] came in with a traditional investing lens and that brought them to work very closely with these six First Nations. It’s also impacted them personally as there was trust built between the investors and these communities.”
Read more coverage of the 2021 Investment Innovation Conference.