Archive for the ‘Uncategorized’ Category


Wednesday, September 26th, 2018

a person looking at graphsThis family story is the third of a series in which we discuss some of the common investment challenges families face and what ultimately led them to HighView. Here, we explore what can happen when one member of an affluent family assumes responsibility for money and investments, particularly surrounding the concerns that can emerge as that person ages.

How long will they be able to maintain that level of guardianship? What will happen if they pre-decease their spouse?

In this story, the father had been managing the family’s wealth of approximately $10 million for more than 20 years. Although he had done this well, there were investment options he could not access as an individual investor, and both he and his family were becoming concerned about who would manage the wealth as he aged or if something happened to him.

These apprehensions prompted the father to search for a wealth management firm able to provide the same fiduciary responsibility and level of care that he would for his family over the long term:

  • Carrying out a Careful and Comfortable Transition: Transitioning the family’s assets was a three-year process that occurred in stages for reasons of both comfort and tax mitigation.

Read the full family story here.

HighView is an independent fiduciary portfolio management firm whose sole purpose is to provide our clients with peace of mind by making their wealth sustainable. We would be happy to discuss our goals-based investment approach with you and your professional advisors.

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Wednesday, August 15th, 2018

pig on a scale and people on other sideIn 2017, HighView proudly became a member of the Responsible Investment Association (RIA). HighView believes there is a fiduciary duty to invest prudently without taking undue risk. Incorporating Environmental, Social and Governance (ESG) standards into investment decisions to better manage risk and generate sustainable long-term returns makes sense. We believe ESG due diligence should be designed to measure how a company does business, to identify potential social and ethical issues, and to quantify the impact on corporate performance for disclosure purposes (i.e. better disclosure by companies should include climate-related financial disclosure).

Large public companies can have a social and environmental impact at every level by way of their networks, supply and distribution chains, labour force, and in the communities where they operate. As investors, we can make an impact by being intentional through our allocation of capital and through shareholder engagement with management. There has been a growing interest in assessing how asset managers are thinking about ESG criteria within their research evaluation. In this regard, ESG metrics are not uniform across investment managers. While the “G” has been a significant part of manager due diligence given the ability to measure corporate governance, “S” is also now becoming better understood as it relates to such things as diversity, pay equality, zero tolerance, and the work environment. “E” still has a ways to go. Corporate disclosure on ESG factors will continue to improve as demand for the information continues to increase. Many public companies are taking initiatives in regards to their carbon footprints and committing to clean energy projects suggesting a shift in mindset towards sustainable business decisions.

Given the fast growing movement towards sustainable investing, statistics tell us that 80% of investment managers now practice some form of ESG metrics within their plant growing in the groundinvestment research and corporate actions. The integration of ESG considerations within investment processes and across asset classes continues to gain traction among investors and concerned citizens, both from the perspective of social impact, but also in the form of positive financial performance. While we had long known that our chosen managers integrated ESG criteria—particularly governance—into their investment process to varying degrees, we did not focus specifically on such practices.

So in January of this year, we sent out an ESG due diligence questionnaire to our investment managers to determine their current level of ESG integration. We were pleased to confirm that our investment managers have been integrating ESG into their investment research for some time with most having a specific ESG or Responsible Investment Policy in place. Our investment managers seek to invest in quality companies, and an assessment of that quality will include a company’s practices in each of the “E”, “S”, and “G”. A strongly held belief across our platform of managers is that companies that ignore sustainable practices, disregard the effects of their operations on the communities in which they operate, or have improper practices around protecting rights of all stakeholders, will likely be poor long-term investments. As part of our ongoing monitoring and due diligence of our investment managers, ESG integration and discussion is now a part of our formal review.

Next Steps in Impact Investing for HighView

two people sitting at a desk and working togetherA recent paper by SVX and MaRS suggests that many Canadian high net worth households are interested in the idea of impact investing, particularly younger, wealthier, and female investors. As Amit Bouri, chief executive of The Global Impact Investing Network (GIIN) says, “Investors have been thinking for decades on how to get harmful things out of their portfolios. Impact investing is about proactively investing in solutions. It is a much more intentional step about investing in things like climate change directly.” Impact investments are made with the intention of generating financial return plus positive social and/or environmental consequences. Examples of impact investment might include clean technology investments in agri-tech, energy, smart cities and water, or food in natural and organic foods, and ethical and sustainable foods, or in affordable housing, or helping people in poverty. There are a number of themes, sectors, geographies, and asset classes available to social impact investments.

Many global family offices are engaged in impact investing, and many more plan on increasing their allocations going forward as more ethically minded clients move in this direction and as advisors educate their clients on the opportunities. At HighView, we are exploring the opportunity of a Social Impact Fund that would be available to our clients as part of our portfolio allocation strategy. Our review will include an examination of asset classes, themes, sectors, geographies, and liquidity, in both public and private investments.

Bill Gates predicted that philanthropy would remain the primary way the wealthy help tackle social and environmental issues. Transitioning from philanthropy to impact investing has the ability to create sustainability over the long term.

HighView is an experienced portfolio management firm for affluent Canadian families and foundations. We would be happy to discuss our goals-based investment approach with you and your professional advisors.

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Artificial Intelligence: Embracing Disruptive Change for Business and Beyond

Friday, November 24th, 2017

HighView recently had two educational seminars, one in Oakville and one in Toronto, on the fascinating subject of Artificial Intelligence (AI).

A Primer on Artificial Intelligence

Human progress moves ever more quickly as time marches on. More advanced societies have the ability to progress at a faster rate, so it’s no surprise that 19th century humanity made far more advances than 15th century humanity. This is referred to as the “Law of Accelerating Returns”.

And now, we are entering a new age of rapid AI advancement.

AI investment is growing fast. Tech giants such as Google are spending billions of dollars on R&D. Adoption patterns illustrate growing gaps between digitized early AI adopters and others. AI can deliver real value to serious adopters and can be a powerful force for disruption; it has the potential to improve forecasting and sourcing, optimize and automate operations, develop targeted marketing and pricing, and enhance the user experience. There are no shortcuts for business today. Companies cannot delay their digital journey if they wish to remain competitive. Adaptation will be crucial to survival.

Despite it’s upsides, artificial intelligence is scary for many. The idea of AI as a threat stems from the academic theory known as “the singularity” which argues that researchers will eventually develop a machine smarter than its creators. In doing so, this machine would be able to program itself in more advanced ways than humans can understand.

Welcome to the World of AI: Embracing Disruptive Change

Our first speaker, Gayemarie Brown, embraces AI and sees abundant opportunity.

Gayemarie has more than 25 years of digital transformation experience. A seasoned, bold leader and entrepreneur, Gayemarie, through her work as National Innovation Leader for Deloitte Canada, and now as founder and CEO of her own consulting firm, Wintam Place Consulting, is a strategic visionary, helping companies translate their ambitions into practical plans. She is a sought-after speaker, world renowned female futurist, and a self-described lover of humanoids and artificial intelligence.

Highlights from Gayemarie’s presentation “Welcome to the World of AI: Embracing Disruptive Change”:

  • We are living in an exponential world. Humans understand linear progress, but exponential progress requires new models and new ways of thinking.
  • The rate of change continues to accelerate:
    • Digitalization of everything
    • Disruption of the old guard
    • Costs of technology continue to decline (3D printing, industrial robots, drones, solar energy are just a few examples of how costs have decreased in a short period of time)
    • Accessibility to knowledge and the internet on a global basis
  • Computational power, discoveries, and breakthroughs in AI advancement, the Cloud, the internet, the proliferation of data, and the rise of Quant computing is changing the landscape.
  • Changing business models – many businesses are being disrupted. It’s important for management to stay abreast of change, apply AI, and adapt.
  • AI today is excellent at understanding patterns, learning tasks, and is ok with logical reasoning but still weak at abstract learning.
  • AI is here to make lives better. Advanced machine learning will augment human capability or replace mundane tasks.
  • AI is learning fast. Amazon’s virtual assistant Alexa now has over 15,000 third party skills in just over one year of learning.
  • The 2015 DARPA Robotics Challenge required robots to climb a set of stairs, turn valves on and off, open a door, get in and out of a car, and master an obstacle course.
  • Today robots are being used for many things.

A Machine Learning Revolution

Sri Iyer, Managing Director and Head of Systematic Strategies at Guardian Capital, and portfolio manager for the Guardian Global Dividend Strategy is one of HighView’s investment managers. Sri began his career in the financial services industry in 1995, firstly with Global Value Investors based in Princeton, New Jersey, and since 2001, with Guardian Capital.

Sri spoke about how AI, machine learning, and Big Data are changing the investment industry and how Guardian has applied AI and Big Data into their research and forecasting abilities.

Highlights from Sri’s presentation “A Machine Learning Revolution”:

  • Exponential increase in amount of data available – 90% of world data has been created in past two years alone.
  • Data flood expected to increase digital universe of data from 4.4 zettabytes (or trillion Giga Bytes) in 2015 to 44 zettabytes by 2020.
  • Open source frameworks for splitting complex tasks across multiple machines and aggregating results has dramatically diminished barriers to entry allowing for large scale data processing and opening up big/alternative data based strategies to a wide group of quantitative investors.
  • Significant developments in machine learning methods – big strides in pattern recognition, increased focus on investment applications of Deep Learning.
  • Adoption of Amazon Echo, Google Home, and Apple Siri rely heavily on Deep Learning Algorithms.
  • Goal of machine learning is to enable computers to learn from their experience in certain tasks. Machine learning methods attempt to uncover relationships between variables: when given historical patterns, the machine forecasts outcomes out of the sample.
  • Guardian applies machine learning to help predict outcomes for dividend securities.
  • Collective intelligence of a diverse and independent group typically yields better estimates than any one superior individual.

Artificial Intelligence: Impact and Benefits to Competitive Strength

Another of HighView’s investment managers, Chris Page is President, CIO, and founder of Laurus Capital. Laurus relies on deep fundamental research and maintains concentrated portfolios of financially strong and well-managed companies with long term growth potential. For more than 30 years, Chris has held a number of senior positions within the investment and insurance business and founded Laurus with a vision of a firm focussed on client wealth creation through prudent risk averse investing and a culture that fosters independent thought.

Chris spoke about some of the Laurus Small Cap investments in companies with regards to how AI impacts and benefits competitive strength.

Highlights form Chris’s presentation “Artificial Intelligence: Impact and Benefits to Competitive Strength”:

  • Businesses can use AI to their competitive advantage.
  • AI can add value to knowledge and data, enriching the client experience and enhancing human judgement.
  • Advantages of AI include:
    • Limiting competition (first to market, specialist knowledge, quality differential)
    • Increasing margins
    • Greenfield capability
    • Having a continuous client (locking in client with technology platform)
  • We all know big names like Google and Amazon, but there are numerous investment opportunities in the small cap market where companies are utilizing AI to their advantage.
  • Examples Chris spoke about include Kinaxis, Wabco, and Intuit among others.

For Chris’s presentation, please click here.

In Closing

The capabilities of artificial intelligence are rapidly increasing, which will have a significant impact on business and the economy, as well as the investment industry in particular.

It’s important for savvy investors and forward-thinking investment firms to stay engaged in the ongoing discussion and developments as this exciting technology progresses.

HighView is an experienced fiduciary investment counselling firm committed to investor transparency. We would be happy to discuss our goals-based investment approach with you and your professional advisors.

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Designing Investment Policy for ESG and Impact Investing

Tuesday, October 24th, 2017

“We believe that considering material ESG factors as part of our investment decision-making process, with respect to both direct and indirect investments, along with other material investment factors is consistent with our fiduciary duty”.


There is a mind shift underway in the evolution of fiduciary duty in the world of investing: a move away from the old school thinking of “maximizing returns” without regard to impact and exercising due care, to one of skill and diligence by way of Environmental, Social and Governance (ESG) factor analysis that our fiduciary obligations requires us to consider. Ultimately, using our capital to shape a better society.

At the same time and on the other side of the table, companies are facing an increased pressure for better disclosure of what they are actually doing to address ESG factors in their business to enhance sustainability. As Elisse Walter of the Sustainability Accounting Standards Board (SASB) so eloquently states in her speech at a March 2017 CPA Canada Event, markets are being reshaped by resource constraints, climate change, population growth, technological innovation, and globalization. Sustainability is poised to be the next competitive frontier. In fact, research has already shown that companies can achieve superior results—including return on sales, sales growth, return on assets, and return on equity, in addition to improved risk-adjusted shareholder returns—by focusing on the limited number of materiality-based, industry-specific sustainability topics as identified by SASB. The question is no longer whether companies should disclose information on material sustainability risks and opportunities; it is how they can improve the effectiveness of the disclosures they are already making.

In short, it is not about more disclosure; it is about better disclosure. Many are promoting and supporting corporate environmental disclosures with a focus on climate. Most recently, over management’s objections, shareholder resolutions to disclose climate risks passed at the annual meetings of ExxonMobil and Occidental Petroleum this past May.

So how should we as investors, think about making our world a better place and align ourselves with the United Nations sustainable goals to end poverty, protect the planet and ensure prosperity for all? How can we design our Investment Policy to align with what we believe in?

Responsible Investing

Responsible Investing is an approach that integrates consideration of ESG matters into investment activities with the objective of enhancing long term investment performance.

The integration of ESG considerations within investment processes and across asset classes continues to gain interest among investors and concerned citizens. Evaluation of ESG factors can provide insights into investment risk and management of ESG risks can add to long term sustainable returns. Studies have shown that companies with robust sustainability practices demonstrate better operational performance. Strong corporate environmental performance also links to financial outperformance. Strong ESG standards correlate with good stock price performance, and of course, brand awareness. We all know that poor governance, or poor health and safety measures, or exploitive labour practices directly impacts shareholder value (think emissions scandals, or non-compliance with building codes resulting in collapse).

Investment policies surrounding Responsible Investing are being considered and developed by investors, families and foundation investment committees. There is no “right” way, but the best way is to incorporate policies into an Investment Policy Statement (IPS) that communicates the investor’s wishes and beliefs. Some choose to develop a Responsible Investment Policy to be housed within a section of the IPS or as an addendum to an IPS. Either way, a policy formalizes the practice of integrating ESG issues into investment decision making. An addendum to the IPS may be a simple way to start as to how to include ESG factors. As we move forward, Responsible Investing may become incorporated throughout the IPS.

ESG Issues to Consider:

Examples of Responsible Investment Policies

As per the PRI guide on writing a Responsible Investment Policy, policies can take many different shapes. You might start by identifying high level core beliefs that are central to you, and you might read other IPS’s that have been designed for ESG and Social Impact Investing.

For example, the Western University IPS states a belief that ESG factors may have an impact on corporate performance over the long term. Section 4 of its IPS, titled Responsible Investing, outlines how the university will engage external investment managers and that this engagement will involve increasing the level of scrutiny on ESG factors. The university will keep a registry, updated annually as to ESG related information on its external managers. This may include incorporation of ESG factors into the firm’s investment process, the firm’s target allocation for climate change related investments, the presence of a committee on sustainable investment, the portfolio’s exposure to fossil fuels, sustainable industries, and high impact sectors, and details about the firm’s proxy voting policy.

Another great example is the University of Toronto’s (U of T) annual report on Responsible Investing. U of T has a major commitment to Responsible Investing and in particular, points to a comprehensive approach to the challenges posed by climate change. The University president, Meric Gertler, called on the University Pension committee to incorporate ESG factors into its Statement of Policies and Procedures, a change that was implemented in June 2016. He also called on UTAM (the University of Toronto Asset Management Group) to build a rigorous and systematic approach to integrating ESG factors into investment decisions. UTAM, along with many other universities and investment managers, is now a signatory to the United Nations supported 6 Principles for Responsible Investment (PRI):

  1. We will incorporate ESG issues into investment analysis and decision-making processes.
  2. We will be active owners and incorporate ESG issues into our ownership policies and practices.
  3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.
  4. We will promote acceptance and implementation of the Principles within the investment industry.
  5. We will work together to enhance our effectiveness in implementing the Principles.
  6. We will each report on our activities and progress towards implementing the Principles.

Putting It in Perspective: Sustainable Investment Taxonomy

An excellent model on describing the matrix of Responsible Investing can be found in the TASK FORCE Report on Sustainable Investment Taxonomy: September 2016. This report describes Responsible Investing or Socially Responsible Investing as being synonymous with sustainability and it provides for a simple model on the taxonomy of sustainable investing, dividing it into three distinct orders:

  • Screening Strategies:

Screening Strategies can be negative or positive. Negative screening would simply exclude companies based on what they sell such as tobacco, alcohol, weapons, gambling, pornography, or fossil fuel. Positive screening involves identifying companies that have a positive impact, and often use ESG measurement systems and scores to guide decisions. MSCI and Morningstar/Sustainalytics are providers of measurement and scoring systems used by many investment managers today.

  • Thematic Strategies:

Thematic Strategies are built on focussed and constrained investment universes. Thematic strategies will have very specific allocations and can typically be overexposed to some sectors such as clean technology, renewable energy, industrial and technology, and underexposed to sectors such as energy, financials, or consumer.

  • ESG Practices:

ESG Practices are not an investment strategy per se, but a group of investment practices. They are not the primary driver of an investment thesis but rather practices of making investment decisions. ESG integration is currently being employed by many traditional investment managers as a way to identify new business risks, and improve corporate behaviour through direct engagement and shareholder activism. According to the Responsible Investment Association (RIA), 80% of investment managers now pay attention to ESG issues.

ESG factors include climate change, biodiversity, air and water pollution, corruption, executive remuneration, and board diversity among others. These are all material issues that should be integrated into the investment making decision processes. Voting can affect governance, and provide a management team with valuable feedback. Important voting issues should be reviewed and voting rights used in a responsible way so as to add value to change.

ESG Practices and Designing Your Own Investment Policy Statement

There are three primary ESG Practices:

  1. Identifying emerging ESG risks.
  2. Actively influencing the operating behaviour of management teams through engagement strategies, proxy voting, corporate engagement and shareholder activism.
  3. The measurement and monitoring of environmental and social impact.

In designing your own Investment Policy Statement, and incorporating Responsible Investment guidelines you may want to think about:

  • Incorporating ESG standards for investments. These could be high level, or specific based on certain issues and minimum standards.
  • Your core beliefs such as companies need quality management, strong, diverse and effective boards, transparent shareholder reporting, recognition of environmental and social risks, and executive compensation that aligns well.
  • Setting guidelines for ESG practices across all asset classes. Research has shown that governance scores are most important when determining bond credit worthiness. Bonds with high governance scores suffer credit downgrades less often.
  • Setting guidelines for working with external investment managers; what issues are important, what requirements and measurements are expected.
  • Social or environmental themes that may be important to you such as community housing, clean technology, climate, food, agriculture and forestry, green investing, renewable resources, social impact bonds, waste management and/or water infrastructure and technology. You may wish to review the UN Sustainable Development Goals for further background and understanding.

As described in the Taxonomy model, potential approaches for responsible investing can include negative and/or positive screening, theme investing or ESG integration. You may wish to invest through the traditional public markets or through private markets. You might combine some of the approaches or all of the approaches.

As mentioned earlier, there is no “right” way but rather the way that suits your individual, family or foundation goals and objectives.

Moving Towards a 100% Impact Portfolio

Certain organizations are moving proactively and intentionally toward a 100% impact portfolio where all of their assets are used to generate positive impact. Inspirit Foundation is one such organization. The mission of the Inspirit Foundation is to promote inclusion and pluralism through media and arts, provide support for young change leaders and impact investing—specifically addressing discrimination based on ethnicity, race and religion. The Inspirit Foundation believes it can create positive change through their capital allocation and is on the road towards a 100% Impact Portfolio. They are not the first foundation to think this way and they acknowledge the work that has been done before them by foundations such as the F.B. Heron Foundation, The Hamilton Community Foundation and the Edmonton Community Foundation.

The Inspirit Foundation believes in using financial capital to support companies that behave responsibly and they will engage and respectfully challenge companies that have room for improvement. For Inspirit, the definition of 100% Impact includes:

  • Applying impact investing tools to the public portfolio (90% of the portfolio) by incorporating positive screening and ESG factors into mainstream traditional investments, ensuring shareholder engagement, having some specific product choices (i.e. shift capital to renewable energy sources through a fossil fuel free equity fund), and by not knowingly investing in alcohol, gambling, pornography and adult entertainment, tobacco and related products and weapons.
  • An allocation of 10% to private investments that contribute to inclusive society through mission and program related investment. This is invested by way of private real estate, private debt and private equity.

While Impact investing is not new, it continues to grow in interest and capture attention across the investment community. At HighView, we began our journey through research and meeting with many people and firms that focus their time and energy on sustainable investing. HighView joined the Responsible Investment Association (RIA) this past spring, and more recently, our Portfolio Strategy Committee has enhanced our investment manager selection and ongoing monitoring processes by implementing an ESG due diligence component to understand how our managers integrate ESG factors into their investment research. While only a start, we will continue to look for ways to bolster our expertise and capabilities in this burgeoning sector.

To that end, HighView works strategically and collaboratively with firms that have specific expertise beyond our own. In this regard, we are pleased to align with Purpose Capital. Formed in 2010, Purpose Capital is an impact advisory firm that designs and deploys customized impact investment strategies by mobilizing all forms of capital to accelerate social progress. Purpose Capital has worked extensively with Inspirit Foundation on their impact investment journey. We are excited to continue our focus in exploring new ideas for sustainable investing, and stepping beyond ESG integration to meet our clients’ evolving requirements.


Special thanks to Hyewon Kong and Nadi Naderi of AGF Investments, to Julie Desjardins of RIA, and to Upkar Arora, CEO of Purpose Capital for their knowledge and guidance on Sustainable Investing.

HighView is an experienced portfolio management firm for affluent Canadian families and foundations. We would be happy to discuss our goals-based investment approach with you and your professional advisors.

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Thinking Client-First: Goals-based Investing

Saturday, September 16th, 2017

Goals-based investing is at the core of our investment philosophy, but historically this has not been the case for the majority of the investment industry.We are wealth architects whose sole purpose is to provide our clients with peace of mind by making their wealth sustainable. Goals-based investing is at the core of our investment philosophy, but historically this has not been the case for the majority of the investment industry.

Instead, the investment industry and traditional asset management have been modelled on asset gathering and driving product sales, alongside measuring expected return versus market indices. This focus has steered away from client goals and risk tolerance, and has emphasized “how can we increase returns or consistently beat the market?” rather than “how can we achieve our investment goals with some degree of certainty?”

With new regulations in place and a growing shift in the investment industry, goals-based investing is becoming the new normal in investment management. Why? It addresses the holistic well-being of the family or foundation, directs transparent dialogues about ambitions, fears, and opportunities, defines the goals and priorities of clients, and focuses on risk management and portfolio behaviour.

Recognizing Goals-based Investing

An investment firm that fully embraces goals-based investing should present comprehensive investment policy statements to clients and abandon the asset management perspective of index benchmarking.

Goals-based investing recommends appropriately designed solutions to achieve goals, tracks progress towards those goals, and adjusts the portfolio as necessary. This places performance in the context of achieving goals as the measure of success. Portfolio construction and investment performance is discussed in light of investment goals and risk tolerance as opposed to market dynamics, allowing the focus to move away from a continuous analysis of benchmarks and asset returns, and toward the establishment of progress to real dialogue.

Ideally, goals-based investing comes down to understanding the “purpose” of the funds taking into consideration the levels of risk tolerance, the different investment horizons or liquidity constraints, and then focusing not on the gain or loss of the portfolio but on the probability of the portfolio to meet the financial and investment goals.

As author Ashvin B. Chhabra states in The Aspirational Investor, “If the markets don’t really care about you, as they surely do not, then why should you spend all your time and effort trying to beat them?”

At HighView, we take the time to listen and get to know our clients so we can understand their needs, goals, and tolerance to risk. This insight, combined with our intelligent research, allows us to build a unique goals-based solution for each family or foundation.

HighView is committed to a client-first culture, and our values include integrity, caring, excellence, respect, and teamwork. We would be happy to discuss our goals-based investment approach with you and your professional advisors.

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Making an Impact: Aligning Values with Investment

Friday, November 25th, 2016

“We will be known forever by the tracks we leave.” – Dakota Proverb

On September 25th 2015, the United Nations (UN) with countries around the world adopted a set of goals to end poverty, protect the planet, and ensure prosperity for all as part of a new sustainable development agenda. As the UN believes, sustainable development is defined as meeting the needs of the present without compromising the ability of future generations to meet their own needs; sustainability is a global imperative and investors are essential partners in its achievement.

Investors have a role to play in addressing social challenges. All investments have an impact on our environment and community. We can play a part in ensuring a more sustainable environment through the investment decisions we make. Aligning our values with investment to include both a financial return and a measurable social impact is referred to as a double bottom line. Increasing the flow of capital to investment strategies that generate a financial return while intentionally improving social and environmental conditions will benefit all of us.

Investing for Social Impact

Among our families and foundations there is a growing interest about investing for social impact. The theory of social impact investing has been around for some time but seems to have really taken root in 2006 when the UN launched the Principles for Responsible Investment (PRI).

Although not new to Canada, interest in social impact investing is accelerating. The investment spectrum is wide, from socially responsible investing (SRI) to environmental, social, and governance (ESG) to impact funds to direct impact investments or mission related investments (MRI) for endowment funds. There has been a significant movement underfoot as interest in both responsible investing and impact investing has gained traction.

Recognition that ESG issues are financially material is causing investors to demand more from their investments. As investors move to align their values with investment goals, and as social entrepreneurs seek to make a difference, direct impact investing is growing.

This upward trend is a result of increased opportunities and a greater demand due to growing awareness of environmental and social challenges. The concept of fiduciary duty for investing is morphing from one of financial return only to also include an understanding of how business impacts our environment and the footprint it leaves behind.

As Porter and Kramer so eloquently explain in their article “Creating Shared Value” (HBR Jan 2011), we need to move away from optimization of short term performance and overlooking the greater needs of society to achieve long term success. We need to reconnect company success with social progress and bring business and society back together. At the very least, companies should no longer maximize economic value without taking into account ESG issues.

What Is SRI/ESG Investing?

SRI/ESG investing is made with environmental and social risks in mind but specific return from measurable social or environmental impact is not necessarily a required outcome. SRI/ESG investing focusses primarily on screening out or avoiding investment in harmful companies and encouraging improved corporate practices. There is a growing belief that companies with exceptional environmental and social programs will outperform in the longer term.

What Is Impact investing?

Impact investments on the other hand are investments made into companies, organizations, and funds with the intention to generate measurable, beneficial, social, and environmental impact along with a financial return, hence a double bottom line.

Impact investors want to move beyond SRI/ESG to investments that have social and environmental impact as a primary criterion. Impact investors may receive a range of returns depending on what their investment goals are. Some investments may be below market while providing a social benefit, while other investments can provide market returns with social impact.

Impact investments differ from traditional investments because of the strategy for creating social and environmental impact, and the financial return may be quantified by different risk return calculations. Impact investing may include direct investment into underserved communities or individuals, and debt or equity financing provided to businesses with an environmental or social purpose.

Incorporating Values Investing with Goals-based Investing

For both families and foundations, the passion for alignment of investments with values and beliefs is growing.

As part of a Goals-based Investing approach, questions may include:

  • Alongside our personal or foundation goals, how do our investments reflect our sense of values and the impact we want to have?
  • What social and environmental challenges are we interested in as a family?
  • Do we have a responsibility to use wealth for the greater good of society?
  • Should we allocate some of our investments to social impact?
  • Should the fiduciary of our investment assets consider ESG or impact investing?
  • Do any of our current investments conflict with our foundation goals or philosophies?

There are many ways that families and foundations can begin to incorporate impact investing into their Investment Policy Statement (IPS). Developing an impact investing strategy will depend on the motivations and objectives of the family or foundation.

It may begin with an allocation or carve out to SRI/ESG specific funds, or ensuring investment managers consider SRI/ESG factors when analyzing companies such as being proactive on factors like climate change, economic inequality, human rights, executive pay, supply chain management, or resource scarcity. Or it might include an allocation to direct social impact investments through funds or private debt or equity. It is anticipated that formal policies on impact investing will take shape in the not too distant future, if not already.

Social Impact Investing for Families

For families, including social impact investing as part of the family wealth vision can allow for healthy discussion and wealth transition among family members, particularly with the millennial generation.

Most millennials today believe that social impact is key to making investment decisions (US Trust 2016). In a recent Deloitte study, Millennials rank “improve society” as a number one priority for business. A survey by Merrill Lynch Private Banking suggests for millennials that a values-based approach is important and that environmental concerns are often a top priority.

For millennials, seeking achievement of social objectives alongside financial return is of great importance. My own introduction to social impact investing was through a former younger colleague of mine, Andrew Nobrega. Andrew was instrumental in my initial learning as he shared his passion for innovative social structure and strong business models that promoted aligned interests between business, investors, local communities, and the environment. He went on to pursue his passion by working for Pur Projet, a firm that promotes the livelihood and regeneration of global ecosystems.

For families considering the transition of a family business, this alignment of millennial aspirations of making a difference by way of social impact can play an important role in the future of the family business.

Social Impact Investing for Foundations

“Should a foundation be more than a private investment company that uses some of its excess cash flow for charitable purposes?” – F.B. Heron Foundation

For foundations, aligning goals of making society a better place with investments makes intuitive sense given their existence to leverage social change. Foundations are a natural fit given their focus on social issues. More and more foundations are rethinking their funding models in support of their philanthropic missions and increasing impact in their communities.

In addition to grant making, many foundations are allocating up to 10% of their endowed funds to social impact or mission related investing (MRI), with some foundations taking a significant lead like the Inspirit Foundation in Canada which has committed to achieving a “100% impact portfolio to help create a more inclusive and pluralist society”, and the F.B. Heron Foundation in the USA which is moving towards being fully invested in impact investments that address job creation.

MRI may be defined as using the endowment capital of the foundation to invest in companies, funds, or direct investments that generate both positive social or environmental impact as well as financial returns. The Canadian Task Force on Social Finance recommended that foundations should invest at least 10% of their assets in mission-related investments by 2020. This recommendation has been endorsed by both the Community Foundations of Canada (CFC) and the Philanthropic Foundations of Canada (PFC).

Social Impact Investing in Canada

In Canada, most impact investment capital is focused on the housing/real estate sector, and the clean technology sector (RIA Trends Report 2016) but impact investing also happens across a number of sectors including energy and resource efficiency, education, healthcare, Aboriginal, housing and community facilities, food and agriculture, environment and water, not for profit, and social enterprise.

Investments can be done through:

  • Community Economic Development Investment Funds
  • Community Loan Funds
  • GICs
  • Bonds and loans through financial institutions
  • Social enterprise loans
  • Social housing development
  • Direct impact investments
  • Private equity funds
  • Venture funds
  • Investment co-ops
  • Labour sponsored funds
  • Public equity funds

Interestingly, Ontario recently issued its first Social Impact Bond (SIB) in collaboration with the Heart and Stroke Foundation, The Public Health Agency of Canada, and the MaRS Centre for Impact Investing. A SIB, or ‘pay for success’ model, is not like a traditional bond – repayment depends on measured social outcomes. If objectives are not achieved, investors may not receive their money. The government repays investors with interest if the program meets its outcome targets. Pay for success is modelled on the belief that attaching payment to outcomes will drive better program design and execution.

Of course, social impact investing is not without its challenges – performance metrics and assessing net social benefits are not easily measured. There may be legal/CRA/regulatory issues to consider, specifically for foundations. Leadership and organizational development, business model execution and management, insufficient coverage, small deal sizes, transaction costs, lack of established track record, and fragmentation of the social impact investing universe can all present issues.

However, as knowledge and deal size grows, as track records are built, as methodologies for measuring social returns are defined, and as financial performance is realized, the space will continue to flourish. Improvements in the space are well underway as various companies and not-for-profit organizations such as IRIS, B Corporation, and Sustainalytics are establishing performance metrics, and platforms such as the Social Venture Connection (SVX) are developing for impact investments.

In Canada, we have a number of tremendous resources in regards to impact investing:

  • The MaRS Centre for Impact Investing in Toronto: Works to unlock the power of private capital to tackle our toughest social challenges. MaRS works with governments, investors, service providers, and ventures to create funding solutions for projects that deliver real change.
  • The Social Venture Connection (SVX): A private investment platform built to connect impact ventures, funds, and investors was developed under the leadership of MaRS in collaboration with the TMX Group. The SVX platform helps catalyze new debt and equity investment capital for ventures that have demonstrable social and/or environmental impact and the potential for financial return.
  • The Responsible Investment Association (RIA): Canada’s membership association for Responsible Investment (RI). Members include mutual fund companies, financial institutions, asset management firms, advisors, consultants, investment research firms, asset owners, individual investors, and others interested in RI. RIA members believe that the integration of environmental, social, and governance (ESG) factors into the selection and management of investments can provide superior risk adjusted returns and positive societal impact.

On a global basis, as referred to earlier, Principles of Responsible Investment now has over 1600 signatories committed to six responsible investment principles. Global assets under management represented by the signatories of PRI is over $62 trillion. The Global Impact Investment Network (GIIN) and Impact Assets also both provide an excellent resource of information.

Commitment to create real sustained change requires collaborative action amongst all stakeholders. We all play a role in creating a more sustainable environment through our own actions and the investment decisions we make.

As our collective knowledge and experience expands, it is expected that social impact investing will grow in Canada. As suggested by the Canadian Task Force on Social Finance, mobilizing private capital to generate social and economic value represents an effective opportunity to address the capital requirements to advance solutions for Canada’s complex social and environmental challenges.

And on a global basis, impact investing will play a unique role in achieving the UN’s Sustainable Development Goals and building a sustainable future.

“There can be no Plan B because there is no Planet B.” – UN secretary General Ban Ki-moon

A Transformation in the Investment Management Industry

As the momentum and awareness underlying Social Impact Investing continues to grow, it adds a dimension to the future development of investment strategies and policy that is both exciting and challenging.

New investment architectural competencies will be needed to assist both families and foundations in navigating this increasing interest and alignment between investment goals and social contribution. The ever evolving opportunities and options, as touched on in this article, will require the development of well-defined and focused competencies and capabilities to provide the requisite support crossing all the disciplines of goals definition, strategic policy design, due diligence, and ongoing over-sight.

The response to these challenges will serve the continued transformation of the investment management industry to true goals-based and purpose-driven investing.


  1. RIA 2016 Canadian Impact Investment Trends Report, October 2016
  2. Principles for Responsible Investment 2016 Report
  3. Farthing-Nichol, D., and Jagelewsi, A., Pioneering pay-for-success in Canada, MaRS October 2016
  4. Impact Investing, Frameworks for Families, The Impact, January 2016
  5. State of the Nation: Impact Investing in Canada, MaRS Centre for Impact Investing and Purpose Capital
  6. Investor Manual, SVX Invest for Impact, Registered Dealer with the OSC
  7. Unleashing the Potential of US Foundation Endowments: Using Responsible Investment to Strengthen Endowment Oversight and Enhance Impact, US SIF Foundation
  8. Impact Investment: The Invisible Heart of Markets, Social Impact Investment Taskforce Established under the UK’s Presidency of the G8, September 2014
  9. Financing Social Good: A Primer on Impact Investing in Canada, an RBC Social Finance White Paper, June 2014
  10. From the Margins to the Mainstream, Assessment of the Impact Investment Sector and Opportunities to Engage Mainstream Investors, World Economic Forum, September 2013
  11. Impact Investing, A Framework for Policy Design and Analysis, Insight at Pacific Community Ventures & The Initiative for Responsible Investment at Harvard University, Sponsored by the Rockefeller Foundation, January 2011
  12. Mobilizing Private Capital for Public Good, Canadian Task Force on Social Finance, December 2010
  13. The State of Community/Mission Investment of Canadian Foundations, A Report of Community Foundations of Canada and Philanthropic Foundations Canada, by Coro Strandberg, April 2010
  14. Mission Investing for Foundations: The Legal Considerations, A Report of Community Foundations of Canada and Philanthropic Foundations Canada, Hunter, Manwaring, & Mason, November 2010, revised by Morin, July 2012
  15. Bugg-Levine, A. and Emerson, J. 2011 Impact Investing, Wiley Press, San Francisco
  16. Porter, M. and Kramer, M., Creating Shared Value, Harvard Business Review, January 2011