Parliament Teepees / Photawa

This article appears in the Oct. 2022 issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.

As the country prepares to mark the second National Day for Truth and Reconciliation, Indigenous communities are calling on Canada’s capital markets to support the rebuilding of Indigenous economies.

In June, more than 20 Indigenous organizations released the National Indigenous Economic Strategy, which contains immediate actions industry, governments and institutions can take to support Indigenous prosperity.

“Any company looking at how to meaningfully contribute to reconciliation needs to read it,” said John McKenzie, CEO of TMX Group Ltd. in Toronto.

Actions specific to the financial services industry include mandating the disclosure of Indigenous procurement and requiring that publicly traded companies report on Indigenous employment and contracting.

The strategy argues that Indigenous prosperity is tied to Canada’s prosperity, citing 2016 research from the National Indigenous Economic Development Board that found economic marginalization of Indigenous peoples costs the economy $27.7 billion each year, or 1.5% of GDP.

This strategy, along with the ongoing confirmation of unmarked graves at former residential school sites that began in May 2021, has renewed calls for corporate Canada to act in support of economic reconciliation.

“Indigenous people were intentionally excluded from the economy in Canada,” said Tabatha Bull, president and CEO of the Canadian Council for Aboriginal Business (CCAB). Because that exclusion took place over centuries, remedying the situation “is going to take more than decades, and we can’t wait any longer,” she added. The CCAB was part of the core group that developed the economic strategy.

Mark Sevestre, founding member and senior advisor to the National Aboriginal Trust Officers Association (NATOA), said institutional investors — Indigenous and non-Indigenous alike — also are demanding that companies improve their relationships with Indigenous communities. NATOA advised on the Indigenous economic strategy.

“It’s not just a moral or ethical situation,” Sevestre said. “More people are starting to become aware that if you don’t move toward [better Indigenous relations] by yourself, you’ll be pushed toward it through legislation.”

In June 2021, a bill stating that all Canadian law must be consistent with the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) received royal assent. The law requires an action plan to be developed within two years of the bill’s passage.

Bull said she’s seen several examples of business collaboration in the past year.

Since November 2021, Bull has sat on the Indigenous advisory council to Toronto-based Canadian National Railway Co. “To me, it’s an opportunity for transformational change because you’re bringing Indigenous leaders into your boardroom,” she said.

Bull and Sevestre also pointed to TMX Group, which supported a shareholder resolution that passed in May 2021 asking the exchange to set Indigenous inclusion policies and to review procurement from Indigenous-owned businesses.

McKenzie said the TMX Group is in the “very early days” of that work. “We’ve got the procurement team actively engaged in the process of identifying companies that we can support,” he said.

TMX Group also may adapt its capital pool company program, which helps companies go public on the TSX Venture Exchange, for Indigenous businesses. McKenzie said the TMX’s capital formation team is investigating how to create a share structure that would allow Indigenous business owners to raise public money and scale up while still retaining control and remaining an Indigenous business.

McKenzie said TMX Group wanted to support reconciliation beyond procurement and inclusion policies because “those are things every company can do.”

“How is [5%] of the Canadian population, the fastest-growing part of the population, with one of the highest level of entrepreneurial-ism, not [adequately] reflected in the marketplaces where we operate?” he asked. “It’s core to our business and the overall marketplace that we ensure what we do is equally useful for Indigenous businesses — and if it’s not, we adapt it.”

In addition to adoption of the National Indigenous Economic Strategy, Bull said she would like growing Indigenous businesses and established non-Indigenous businesses to partner more often on projects and bids. Working together would facilitate mutual learning, she said, and allow those Indigenous businesses to later bid solo on larger projects.

While no major retail investment product yet exists to invest in Indigenous businesses, TMX Group publishes a list of public companies that have committed to better Indigenous relations.

The list, which is available on TMX Money, currently includes the 12 public companies that have committed to or been certified by the CCAB’s Progressive Aboriginal Relations (PAR) certification program.

The intention of the list “was to build more investor awareness,” McKenzie said. “Before you can create any retail product, there needs to be retail interest and demand for it.”

The PAR program launched in 2001 and has certified almost 200 companies, including the 12 public ones. “Organizations that take on the PAR journey are making a commitment to put resources behind their relationships with Indigenous communities and businesses,” Bull said.

McKenzie said the TMX list is scalable. The exchange now has the data set, so if retail interest grows, TMX Group can build a PAR-committed and PAR-certified benchmark: “There isn’t a business plan to do that at this stage, but we’re building the foundation to be able to do that.”

As more Indigenous businesses raise capital, he added, “you can also foresee the ability to build an Indigenous business index, benchmark and ETF product.”

Companies in the financials sector on the TMX list are CIBC, Sun Life Financial Inc. and TMX Group Ltd. itself.

In the PAR program, a company must begin in the “committed” phase. Independent verifiers and a jury decide whether a company has met enough criteria to go from “committed” to “certified,” and not all companies make it through, Bull said.

Including Indigenous voices in climate reporting standards

Indigenous groups globally are collaborating to urge financial standard-setters to include their perspectives.

Kate Finn, executive director of First Peoples Worldwide, a non-profit housed within the University of Colorado Boulder, said many frameworks for ESG reporting were developed without input from Indigenous peoples. “There’s a real gap in understanding climate-related impact if you’re not gathering knowledge from those who have been stewarding the land for centuries,” she said.

First Peoples Worldwide led a response from a group of 120 social, environment and Indigenous rights organizations to the U.S. Securities and Exchange Commission’s consultation on proposed corporate disclosure of climate-related risk. The consultation closed June 17.

The SEC has proposed basing its rules on the Task Force for Climate-Related Financial Disclosure, which the group’s submission stated does not mention Indigenous peoples. Other reporting standards explicitly reference the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) and the concept of free, prior and informed consent (FPIC). This allows Indigenous communities to give or withhold consent to a project that may affect them or their territories.

Among other recommendations, the group asked the SEC to explicitly reference Indigenous peoples and the UNDRIP in its rules.

In general, Finn would like to see Indigenous rights risk as a mandatory disclosure in securities filings. “Indigenous issues and respect for Indigenous peoples’ rights are, in fact, material to corporations,” she said, noting that several high-profile energy projects, such as the Dakota Access Pipeline, have been stalled or cancelled due to failure to consult with local Indigenous peoples.

“We know FPIC is most often used to defend territories from development that isn’t aligned with Indigenous priorities,” Finn said. “But the purpose is to create equity in relationships and to ensure that Indigenous leaders can participate equally in all investments and decisions.”