Future of Impact Investing

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Future of Impact Investing Decoding the Green Investment Revolution Last year, sustainable or ESG investing represented over a third of all assets under management. But what exactly does the green investment revolution mean? Here, Jason Sukhram, Director of Impact Measurement and Management at MaRS Discovery District, offers a short primer.

ESG investing is exploding in popularity. What’s behind this?

Jason Sukhram Director of Impact Measurement & Management, MaRS Discovery District

Environmental, social, and governance or ESG is one of the biggest buzzwords in the investment world . T here’s a growing demand for metrics on the impact companies have on society besides just financial returns. It’s not just shareholders and investors who are asking for it — it’s also a priority for customers and employees. ESG has become a way to talk about those non-financial factors.

What’s the difference between ESG and impact investment?

ESG is a framework that companies use to address some of the negative effects they contribute to, such as greenhouse gas emissions or poor labour practices. Impact investing aims to create measurable positive social and environmental outcomes through investment strategy.

Is there a danger of greenwashing with ESG? To its credit, ESG has been effective in making certain criteria around impact very clear. Criteria on such issues as carbon emissions, supply chains, and diversity in leadership provide an easy-to-understand structure for how a company can make a difference or at least mitigate the negative effects it has on the world.

The problem is, with no standardization, measurement, or verification requirements around ESG criteria, companies can generally report on what they want to on a voluntary basis.

This gives them the opportunity to report based on the expectations of their shareholders. It doesn’t create a huge incentive for mitigating harmful effects or creating positive impacts.

How can investors encourage companies to be more impactful?

It’s tough for individual investors because their influence over what can change within a company is relatively minimal. Institutional investors, on the other hand, have the ability to influence the companies they invest in. One important trend we’re seeing is that large investors are creating methodologies and scorecards that show they have an expectation of financial return as well as specific social and environmental outcome thresholds they want a company to reach. And they

make investment decisions based on whether a company is able to meet those thresholds.

We’ve also seen more traditional investors signing up for things like the UN-supported Principles for Responsible Investment — there’s a growing recognition that managing sustainability and environmental concerns aligns with their fiduciary responsibilities to their clients. Over time, I believe that responsibility to society and the planet will be inseparable from their responsibility NOV. 30 TO DEC. 2 to shareholders.

How can ESG investors better measure their impact?

MaRS Climate Impact will explore best practices in impact measurement and what it will take to transform the economy.

Companies and investment firms need to strengthen their ability to measure and manage impact. This is going to require a change in mindset as well as a change in business culture — it will require new skills, new teams, and new functions to manage performance.

The same way an investment team would advise a company on maximizing its financial performance, I would love to see a future where all investors — not just impact investors — are providing advice, guidance, and services around how a company can also improve outcomes for people and the planet.

To learn more, visit climateimpact. marsdd.com.

More Foundations Are Harnessing the Power of Investing for Good Jean-Marc Mangin, President and CEO of Philanthropic Foundations Canada, shares his insights on the integral role that impact investing plays in creating social impact for Canadian charitable foundations.

What does the current landscape of impact investing look like for Canadian foundations?

Impact investing is a burgeoning area of focus for foundations in Canada. Foundations understand that what they grant out each year is a fraction of what social impact their resources are having, and so increasingly they’re looking to align more of their capital with their respective charitable missions. The economy is also changing. Investment opportunities that address critical social and environmental issues, from affordable housing to green tech, are rapidly growing.

How can Canadian foundations incorporate impact investing practices into their frameworks? Why is it important that they do so?

Impact investing is a broad term that encompasses different types of investments and results. Some impact investments are highyield from a financial perspective and some are less so, yet yield critical high social returns.

Each foundation needs to assess what’s pos-

sible depending on its own unique situation and charitable mission. Philanthropic Foundations Canada’s latest survey indicated that impact investing represents about eight percent of foundations’ portfolios. There are many resources available to guide foundations in their choices.

One new opportunity is the Canadian Philanthropy Commitment on Climate Change, which is supported by Canada’s largest funder networks to support foundations’ activities, such as their investment practices, toward greater climate action.

What role does policy play in relation to impact investing for foundations?

It plays an enormous role. Through their tax and fiscal policies, governments can encourage more impact investing that will yield greater social impact. Impact investing should be considered in all policy decisions for our sector — whether it’s in regard to how the disbursement quota might affect future impact investing, how impact investing should be considered in disbursement quota calculations, or how the government can help cultivate impact

investing opportunities and the broader industry, with initiatives like the Social Finance Fund and the Investment Readiness Program.

What excites you about the future of impact investing?

There are over 10,000 charitable foundations in Canada, with close to $100 billion in assets, and so there’s massive potential for Canada’s foundations to make an even greater social impact with their investments, in addition to their granting, which helps support Canada’s nonprofit and charitable sector. It’s critical that we explore and encourage new, innovative operating models to address immediate needs as well as to confront systemic challenges and avert future crises.

Jean-Marc Mangin President & CEO, Philanthropic Foundations Canada

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PHOTO COURTESY OF TELUS POLLINATOR FUND

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TELUS POLLINATOR FUND PORTFOLIO COMPANY GOODMYLK

Celebrating One Year of Investing for Impact: TELUS Pollinator Fund for Good

I

Blair Miller Managing Partner, TELUS Pollinator Fund for Good

n a year where businesses and communities have been stretched, tested, and leaned on more than ever before, socially-responsible investing has surged, demonstrating the importance for organizations to do more than just make money, but also to contribute to their communities through innovative ideas that can improve the world for good. Corporate impact funds are playing a critical role in this social innovation by connecting big businesses back to the startup world.

Ta ke t he $10 0 -m i l lion T ELUS Pollinator Fund for Good. As one of Canada’s largest corporate impact funds, the Pollinator Fund has been working to reset traditional capitalism, connecting socially-conscious companies to necessary resources and empowering entrepreneurs and social innovators to deliver on TELUS’ promise of a friendly future for all.

“The Pollinator Fund was born from TELUS’ deeply-held commitment to social capitalism and a steadfast belief that to do well as a company we have to do good in the communities in which we live, work, and serve. One year in, our thoughtful approach to investing in innovation at an early stage has led us to meeting some of the most inspiring and visionary entrepreneurs across North America,” says Blair Miller, Managing Partner of the TELUS Pollinator Fund for Good.

The size and growing portfolio of the Pollinator Fund underscore the strong business case for supporting socially-responsible companies. In just the past year, the Fund has closed 10 investments and generated early results: 60 percent of portfolio companies are based in Canada, 50 percent are led by Indigenous and racialized people, and 40 percent are led by women ­— demonstrating the significant opportunity to advance diversity and inclusion, and support organizations doing good in our communities while also achieving strong financial returns.

The Pollinator Fund was also created in support of the UN Sustainable Development Goals, where investments are made in the next generation of entrepreneurs who are addressing the biggest challenges in health, education, agricul-

ture, and the environment — connecting them with the resources and capital they need to grow and thrive.

“We’re proud of the tangible impact we’ve made in these 12 short months and look forward to the next phase in our journey as an investment partner for mission-driven founders growing the next generation of responsible, for-profit businesses,” says Miller.

We focus on profit-withpurpose businesses taking on challenges in 4 key areas:

SUPPORTING RESPONSIBLE AGRICULTURE

We’re proud of the tangible impact we’ve made in these 12 short months and look forward to the next phase in our journey as an investment partner for mission-driven founders growing the next generation of responsible, for-profit businesses.

As the Pollinator Fund for Good reflects on one year of impact across North America, the role of these socially-driven, responsible, community focused businesses has never been more important. If we want to create a better future for generations to come, investing in impact is the way forward to creating a more sustainable and friendlier future.

To learn more, visit telus.com/PollinatorFund.

This article was sponsored by the TELUS Pollinator Fund for Good.

Creating sustainable food systems, improving access to healthy food, and promoting zero food waste.

TRANSFORMING HEALTH CARE

Better health care starts with a better health care system. We’re investing in businesses using technology to find efficiencies and improve prevention and treatment in all areas, including substance abuse and mental health.

CARING FOR OUR PLANET

Promoting widespread adoption of zero-emission solutions, and strengthening climate resilience and zero waste.

ENABLING INCLUSIVE COMMUNITIES

Enabling quality jobs and income, and supporting work readiness and care outcomes for vulnerable populations.

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