Firms fumbling reconciliation investment opportunities

New report highlights how far Canada’s investment industry still needs to go

Kevin Thomas, CEO of the Shareholder Association for Research and Education (SHARE), says integrating Indigenous policies and issues into investment organization policies is still a nascent practice | Submitted

Asset owners, financial services providers and investment managers are positioned to influence investor and executive behaviour through environmental, social and governance mandates. 

While policies on environmental and gender issues have gained attention and traction, a new report has found that most companies in the Canadian investment chain are not yet integrating Indigenous issues into their policies and practices. 

For example, while 87 shareholder resolutions on pay equity were filed for Canadian companies between 2011 and March 2019, just 15 were filed on Indigenous issues.

“This is still a nascent practice,” said Kevin Thomas, CEO of the Shareholder Association for Research and Education (SHARE). “Most of the investment organizations we talked to haven’t yet integrated Indigenous questions into their policies or into their decision-making in any really comprehensive or systematic way. But the interest is there.”

On September 26, SHARE and the Canadian Council for Aboriginal Business (CCAB) released Moving Capital, Shifting Power – a first look at how investment-related organizations can enhance demand for Indigenous employment, advancement and contracting.  

It found resource constraints, the absence of suitable investment vehicles and a lack of awareness and education are barriers to the greater integration of Indigenous employment and economic outcomes into investment-related practices and policies. 

Just 5% of 173 public companies evaluated for the study reported on Indigenous employment in professional and senior roles. Only 1% had Indigenous board members, while 22% report their contracting and procurement with Indigenous businesses. 

The CCAB and SHARE also noted that their focus groups – individuals in Canadian capital markets – tended to think of Indigenous issues in relation to risks surrounding Indigenous opposition to activities such as resource extraction. 

“Getting out of that risk mindset solely and getting a little bit outside of our narrow investor box is probably the first step,” said Thomas. “If we adjust our thinking and think a bit more broadly about the Canadian economy in general, we have to realize that its growth is tied up in how we deal with the growing Indigenous population.”

Thomas said there is increased industry interest in discussing how to begin acknowledging and incorporating policies and practices around Indigenous issues. Education, he said, is a crucial first step.

The report found it “notable” that a quarter of the investment-related respondents who participated in the survey registered low, very low or no interest in advancing their organization’s policies and practices around Indigenous employment. Some 28% of respondents noted high or very high interest in doing so. Another 47% didn’t know or had no answer.

“Investment firms that do not incorporate Indigenous peoples into their decision-making are missing an opportunity to contribute to reconciliation in Canada and leaving themselves open to significant liability,” Max Skudra, the CCAB’s director of research and government relations, wrote to BIV. “By not considering Indigenous peoples, businesses or communities in their decisions, firms run the risk that their investments will be tied up in legal battles they have not considered, which can delay or even derail projects completely.”

Many large banks are taking a lead in considering Indigenous peoples, business and communities in their decision-making, Skudra said, but more could be done to further reconciliation. 

Research from the Urban Aboriginal Knowledge Network estimates Canada’s Indigenous economy is facing a $40 billion capital gap, and Skudra said investors are missing out on an opportunity to work with the more than 50,000 Indigenous businesses that operate in Canada.

Bank of Montreal (TSX:BMO), Bank of Nova Scotia (TSX:BNS) and Toronto-Dominion Bank (TSX:TD) have attained gold certification through the CCAB’s Progressive Aboriginal Relations program – a corporate social responsibility program that certifies companies that demonstrate sustained leadership in Indigenous relations.

Mandated corporate disclosure obligations, better data and shareholder requests for voluntary disclosure are several additional avenues proposed in the SHARE and CCAB report for gaining better insight on Indigenous employment, procurement and representation in Canadian public companies. 

Thomas acknowledged that figuring out how to quantify success will be part of the challenge.

Measuring greenhouse gas emissions and gender diversity on corporate boards has provided the corporate world with a way to quantify and measure socially driven practices and policies. Doing so for Indigenous issues would help advance progress within Canada’s investment chain.

The report builds on the final report of the Truth and Reconciliation Commission, which called on Canada’s corporate sector to commit to meaningful consultation with Indigenous peoples, to ensuring Indigenous peoples have equitable access to jobs and to providing education to management and staff on Indigenous history and issues.

“By ensuring that investments go to companies with clear targets for working with Indigenous businesses and that are committed to hiring Indigenous people, the banking sector could have a massive impact on reconciliation and on the day-to-day prosperity of Indigenous peoples,” said Skudra.