‘Shifting’ markets leave questions over InBC’s exact ROI for $500M fund

Crown corporation’s executives leave wiggle room for ROI after initially targeting 5% returns

B.C. Jobs, Economic Recovery and Innovation Minister Ravi Kahlon | submitted

The newly created InBC Crown corporation will begin divvying up its $500 million taxpayer-backed investment fund by year’s end. But the potential return on that investment in the years to come remains murky.

“The markets [are] changing and shifting, and we are … definitely focused on generating financial returns,” CEO Jill Earth said when asked Tuesday if the fund was targeting returns beyond the 5 per cent it initially set out to do when InBC was created in May 2021.

Since then, inflation has gone from 0.5 per cent to 7 per cent on an annual basis as of this past August. It is particularly challenging for investors to deliver returns above the rate of inflation during periods of high inflation.

“Ultimately our goal is to become an evergreen fund, and so as such we do want to demonstrate market-level returns that are risk-adjusted based on obviously all the different variables that go into any investment decisions,” InBC’s chief investment officer, Leah Nguyen, said during Tuesday’s announcement that unveiled the fund’s investment policy statement.

InBC is investing first in venture funds by the end of this year before it plans to begin investing directly in B.C. companies in 2023.

The fund’s mandate includes securing financial returns on investments, investing in what the government describes as the low-carbon economy, and investments that result in job creation, the promotion of diversity and further reconciliation with Indigenous peoples.

The $500-million fund has come under criticism over concerns the taxpayer-backed endeavour is lacking sufficient transparency.

Information Commissioner Michael McEvoy took aim at it last year for not being subject to the province’s Freedom of Information and Protection of Privacy Act (FIPPA).

Instead, the Crown corporation faces annual reporting in addition to staggered independent audits.

“Its annual reports are to be in a form and manner specified by the minister and external reviews will occur only every five years,” McEvoy said at the time.

“These accountability mechanisms fall far short of what is needed and lack the ongoing transparency afforded through the access to information regime.”

Ravi Kahlon, B.C.’s minister for jobs, economic recovery and innovation, said Tuesday that the fund’s predecessor corporation, the B.C. Immigrant Investment Fund Ltd., also was not subject to FIPPA.

“It was decided at that time that in order to protect privacy of those that are potentially looking for investment, that it should not be included under protections,” he said Tuesday.

“That being said, we've built in several protections and ensured a lot of public transparency in this bill that we put forward in setting up InBC.”

He cited his annual reports and the five-year external audits as examples of measures aimed at making the fund transparent.

“We're not creating something that's never been done. It's been done in many jurisdictions, and it's worked very well for many years,” Kahlon said when asked by why the fund is not subject to external audits on an annual basis.

Meanwhile, Kahlon told BIV last year that chief investment officer Nguyen is not to have contact with him or anyone else in government as part of efforts to assure the investment community that the government will not be influencing investments. She is also not to have contact with InBC’s board, which includes deputy finance minister Heather Wood and former BC NDP finance minister Carole James.

Kahlon acknowledged that he’s met with Nguyen three times since the fund was created “but never had discussions about any of these topics.”

InBC has pledged not to invest in infrastructure projects, distressed businesses, illegal industries and seed companies. Although exceptions for seed companies will be made via indirect investments through venture capital funds.

torton@biv.com

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