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Building the Ultimate Do-Good Portfolio

How one Canadian foundation is going all in on impact investing

Building the Ultimate Do-Good Portfolio

Andrea Nemtin is CEO and founding president of Inspirit Foundation, a granting organization that “seeks to create a more inclusive and pluralist Canada.” Working with Jory Cohen, director of social finance and investment at Inspirit and investment advisors at Purpose Capital, Nemtin developed a five-year strategy to direct 100 percent of Inspirit’s asset base into positive-impact investments (based largely on direct private equity investments, mission themes, shareholder engagement, and environmental, social, and governance criteria). Nemtin spoke at an event organized recently by the Centre for Entrepreneurship, Innovation & Social Impact at Smith School of Business. In this conversation with Smith Business Insight, she talks about how Inspirit developed its impact investment roadmap and what she has learned along the way.

Focus on Systems, Not Symptoms

In a philanthropic organization, you have different ways of achieving your mission. You can do it through granting, through engagement, and through investment. Our mission is around creating a more inclusive and pluralist Canada. This means a society where everyone has an equal opportunity to thrive, participate in, and benefit from the social, economic, and political aspects of our society. We recognize that many of the structural barriers to inclusion are economic.

We do incredible work through our granting programs but we want to do more than that.  We feel it is essential to look at the systems within which these problems show up.  And the economic system is a very powerful one. By shifting capital and creating demand for responsible corporations or projects that have double bottom lines, or even triple, and reducing demand for those companies and projects that contribute to exclusion, for us that’s mission imperative.

What do we have within our investment toolbox to contribute towards our vision? At Inspirit we have identified reconciliation with Indigenous Peoples and Islamophobia as our key priorities for the next five years, and there are many ways in which we can use our impact investing strategies in these areas. On the public market side, for example, we are currently supporting SHARE to develop a shareholder engagement strategy to identify how we can ensure that the companies are contributing towards reconciliation. Looking at questions around how they are aligning with the United Nations Declaration on the Rights of Indigenous Peoples: Are they getting prior and informed consent? Are they re-investing in the communities? Do they have any Indigenous members on their boards or in senior decision-making roles?

Our economic systems can be used to either oppress or liberate communities. For many reasons, historically marginalized communities and individuals often face a lack of access to capital. With this in mind, we look for opportunities to support social enterprise and invest directly in the economic health of these communities.

Building a Full-Impact Portfolio

Our definition of 100 percent impact portfolio is when impact investment strategies are applied to all our assets and aligned with our vision. It’s a continuum. On one end, it may be a responsible investment vehicle — a fossil fuel-free investment or a low-carbon fund. On the other end, it may be a Community Bond or a loan guarantee to the Immigrant Access Fund. Somewhere in between are activities around shareholder engagement.

When developing our roadmap towards a 100 percent impact portfolio, we first looked at identifying the conditions for an inclusive society. The Global Centre for Pluralism has a series of pluralism drivers, and the Club de Madrid with its Shared Societies Project has done interesting work. We came up with four conditions for inclusion and pluralism to thrive: increasing livelihoods; supporting climate change solutions; building community infrastructure; and increasing access to arts, culture, and services. Those are our investment themes.

We created a framework for our impact investing. What do we need from our portfolio? We need to hit a certain return based on a certain risk profile. And then, how can we look at impact investing strategies across all asset classes? We can place 10 percent in private equity, which is easier to tie directly to mission and outcomes. But we also have to be in public markets, so what are the strategies we can apply there? How are we engaging as a shareholder?

Then we progressed to our themes. Our first approach was how could we do good and try to not do harm. And then we moved further: How do we apply our investing themes to all our asset classes?

New Uses For Existing Tools

The tools are out there but we may need to apply them in different ways. There is a very strong, well-established system of environmental, social, and government measurements. The ESG rating is now a standard way of measuring risk. How can we use that process to move beyond our current understanding of diversity and look at reconciliation with Indigenous communities? We know how to measure corporate behaviour but we’re not measuring it with regards to these other social issues.

It’s an emergent marketplace but we’ve already shifted to 55 percent of our portfolio, and we have four more years in our strategic plan. Having said that, everyone can do something. There are tools for every single person’s, and every single organization’s portfolio, to have a more positive impact than they’re having now.

You really need to look at incremental change. We’re working a lot in field building, to help and encourage others to shift their capital. I’m a believer in demand-side economics, so rather than worry that the supply isn’t there, let’s build demand. The demand in the investment marketplace would be for everyone to question whether their investments are aligned with their values, and for portfolio managers and the investment industry to be able to answer that question.

Marketing and Diversity

The big thing I’ve learned is around the process of social innovation. My first activist years with AdBusters, we applied communications and marketing tactics from the corporate sector to non-profits — using market processes for social outcomes. In my second career with PTV (an independent documentary production firm), we were trying to create space for different voices. How do you disrupt the dominant narrative and create space for a diversity of voices?

What I've learned is that you have to combine those two tactics. Healthy social innovation supports historically marginalized voices to better participate in the process of re-applying and re-imagining how you can achieve social outcomes. And I don’t think very many people are doing that well right now.

Innovation requires everyone to be in the room when you’re developing initiatives. The idea that we can come up with a solution that worked over there and just paste it in here — without actually understanding what the needs are or the ecosystem you're working in — is wrong. We have to learn how to move beyond consultation to truly co-creating solutions.

Interview conducted by Alan Morantz