How the Government Can do More to Advance Impact Investing in Canada
In this excerpt from The Philanthropist, Senator Ratna Omidvar and Aatif Baskanderi, president and CEO of the Northpine Foundation, suggest that investments should not just be viewed as a means to create income to fund grants, but as an extraordinary opportunity to make a difference with the bulk of the money being managed.
In September 2021, the federal government announced a consultation process on the disbursement quota (DQ) – the minimum percentage of assets charities are required to grant out or spend on charitable programs each year. Subsequently, an increase from 3.5% to 5% for charities with assets over $1 million was announced in Budget 2022 this past April. While DQ regulations are relevant to all charities, they are extremely pertinent to charitable foundations, as, under their typical operating models, they invest charitable assets, with earnings from those invested assets granted out regularly.
Understandably, the consultation process kept many in the sector and the government focused on the DQ as a policy priority and topic of discussion, but in fact, the DQ is a very narrow and small part of the whole. Investments should be viewed not just as a means to create income to fund grants; there is extraordinary opportunity to make a difference with the bulk of the money being managed, and the government needs to start paying more attention.
The reality is that all investments have environmental or social impact: positive, negative, or neutral. Positive investments might place capital in businesses or non-profits and funds in industries such as renewable energy, affordable housing, microfinance, or sustainable agriculture. Those with neutral or negative impacts might exacerbate environmental or social issues that charities have missions to address, such as climate change, poverty, or labour conditions.