The Philanthropic Sector and Sustainable Finance

SPEECH MADE BY JEAN-MARC MANGIN – Photos credits: James Park

Below is the English version of a speech originally delivered bilingually on November 2, 2023 at the second Annual Sustainable Finance Forum in Ottawa, as part of a Lunch and Keynote Event entitled: The Landscape of Social Finance : Integrating finance and policies for a more sustainable financial system.

The speakers were the following :

Jean-Marc Mangin, Philanthropic Foundations Canada
Andrea Dicks, Community Foundations of Canada
Marc-André Blanchard, Caisse de dépôt et placement du Québec
Roger Beauchemin, Addenda Capital
Sir Ronald Cohen, President of the Global Steering Group for Impact Investment (GSG),
The Portland Trust, and the International Foundation for Valuing Impacts (virtual)

Good afternoon. Thank you so much.

Philanthropic Foundations Canada (PFC) is our nation’s largest philanthropic network. Together our members manage nearly half of all assets of public and private foundations in Canada.

Our mission is to strengthen philanthropy – in all its diversity – towards a more just, equitable and sustainable world.

As an integral part of Canada’s non-profit and charitable sector, foundations are charities that invest assets, run programs, and make grants to other charities and non-profits.

As of 2021, Canada’s 10,000+ foundations collectively managed $135 billion in assets.

The most recent analysis demonstrates that foundations contribute nearly $10 billion per year in grants to support a wide range of societal endeavors, from education to healthcare, social services, international development, climate-action, housing, voluntarism, arts, and culture, and more. A true 360 of philanthropy. Just this morning, Queen’s University received a historic $100 million gift.

This generosity is fueled by an important tax policy that encourages donors to contribute to the common good. These tax incentives won’t be as generous starting in 2024 through changes to the Alternative Minimum Tax. Charities should not suffer collateral damage from legitimate efforts to ensure the richest among us pay their fair share of taxes.

Traditionally, foundations’ investment committees and advisors have managed their assets with the aim of maximizing returns, which are then used to fund their charitable activities and grants.

Increasingly, however, we have seen that foundations are keen to engage in activities that go beyond simply maximizing investment returns, and they are now devoting more attention and assets to sustainable finance.

Why is this the case?

Because a growing number of foundations understand that aligning their portfolios with their vision, mission and values is one of the most powerful, effective and responsible ways of using all their resources to achieve their goals.

In a 2021 PFC member investment survey carried out by Millani, 38% of respondents reported having a responsible investment strategy. These strategies reflect endowment investment priorities and tools such as negative screens, positive screens, ESG considerations, and investing in funds that intentionally create positive social, environmental and health impacts.

Relating to impact investments specifically, there has been rapid growth in PFC members reporting their engagement, with a three-fold increase in foundations reporting this type of investing between 2012 and 2021.

I would like to share some examples with you.

The Lucie and André Chagnon Foundation, with assets of over $2 billion, helps to fight poverty, particularly among young Quebecers. It aims to invest its capital sustainably and responsibly, devoting 10% to mission-driven investments.

The Chagnon Foundation is involved in the development of housing mutual funds in partnership with the government, such as the Fonds d’investissement de Montréal (FIM), which finances the purchase and renovation of multi-unit residences by non-profit organizations and housing cooperatives. Earlier this week, the foundation announced a partnership with Investissement Quebec to build 1,500 units of affordable student housing.

One of the oldest foundations in Quebec and Canada, the McConnell Foundation recently announced that it would be changing its investment strategy over the next five years, investing the entirety of their endowment towards impact.

McConnell plans to deploy all $655-million dollars of their assets in the form of both charitable funding and investing toward generating measurable positive impact in our communities and for the environment, coupled with a commitment to achieving net-zero carbon emissions in their portfolio by 2050.

Its investment strategy is inspired, in part, by the work of the Inspirit Foundation, one of the first Canadian foundations to commit to 100% impact investing. Inspirit is a Toronto-based public foundation that fights discrimination, particularly in the media.

And similarly, in British Columbia, the Houssian Foundation’s investment portfolio is 100% mission-aligned and deeply rooted in its climate and gender justice strategies, with an eye to contributing to and advancing the fields of sustainable and impact investing in Canada.

In Manitoba, the Lawson Foundation is leveraging their assets to advance meaningful reconciliation with Indigenous Peoples. They were among the first funders in Canada to support an Indigenous-led community-driven outcomes contract with investment in Aki Energy, which is bringing clean energy solutions to First Nations communities in Manitoba.

They were also proud to support and enable the leadership of Raven Capital Partners, an Indigenous-led financial intermediary, that is helping build an Indigenous social finance market in Canada.

And Lawson has invested in technology to support a program called Restoring the Sacred Bond Initiative, which helps prevent infants from coming into institutional care and reducing time spent in care by early family reunification.

All this work has been undertaken in collaboration and under the guidance of Indigenous partners.

In Nova Scotia, the River Phillip Foundation is partnering with a developer and the United Way to build and sell affordable rural housing In and around Amherst, Nova Scotia. Some housing will be sold, and some will be affordable rental units, with an aim to hit a $500 or less monthly mortgage. The foundation has committed to a $25,000 per unit subsidy matched by the federal government and province.

There are numerous examples of philanthropic organizations all over the country partnering with non-profits, government, and corporate Canada, to use their capital to advance their mission and increase their social impact in major ways.

But while it’s a growing field, it’s still in its infancy. We are playing catch-up – with our competitors, in dealing with our multiple national challenges and to avoid our planet systems collapse.

In previous surveys and current PFC research, respondents cite that responsible investing remains constrained by fund managers, the risk-adverse culture of boards, market conditions, immature market conditions, and administrative burden.

To be sure, government investment in this area is noteworthy. With investments in initiatives such as the Clean Energy Fund, the Investment Readiness Program, the Social Finance Fund, the Equality Fund, and the Foundation for Black Communities, it’s clear that this government is keen to fulfil its share of responsibility and leadership.

The reality is that partnership with government remains a critical success factor to help build a more normalized and thriving sustainable finance market in Canada.

Government needs to keep showing-up, to help de-risk investments, to support innovative ideas and models, and to achieve scale. This is especially true for addressing our affordable housing crisis and the transition to a low carbon economy. Despite very real fiscal constraints, government partnership and imaginative deployment of its investment capacities remain the key catalyst for scaling up and attracting investors.

Philanthropy has billions in assets that can be invested in ways that can advance the common good. While maintaining responsible and balanced portfolios, foundations can be early adopters in developing the field of sustainable finance.

But time is not our friend: we need to combine a sense of urgency with a pragmatic and hard-nose approach in achieving sustainable results that matter to Canadians.

I remain hopeful that the Fall Economic Statement and Budget 2024 will table bold initiatives that will incentivize philanthropic capital to expand and deepen the field of sustainable finance.

Merci. Migwech.

The Philanthropic Sector and Sustainable Finance

Jean-Marc Mangin

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The impact investing guidebook for Foundations

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