It’s RRSP season here in Canada, but this isn’t a post about retirement planning nor is it about scrambling to meet the February 28th deadline for the 2016 tax year. There are plenty of other informative articles about strategic and prudent retirement planning like this one:
Instead, this is an opportunity to think about the portion of your investments and RRSPs that you’ve allocated to impact investing. Having spoken with many people over the past five years about impact investing, it became obvious to me that many wear their “investor hats” with RRSPs in mind. As an example, 21 people out of the 29 investors in Pique Fund made their investments via self-directed RRSP accounts from transfers from existing RRSPs as well as new contributions. If you’re thinking about shifting some of your investments towards an impact strategy, what are your options to do so through your RRSP?
By impact investing and impact investments, I mean financial products other than stocks and bonds traded on securities exchanges and public markets, where your investment dollars go towards businesses and activities that intend to generate positive social and/or environment impact in addition to financial returns. It’s true though that there still are not many impact investment products and options that are RRSP eligible and available to both accredited and non-accredited investors. But that’s changing. Here is an example of the RRSP/TFSA-eligible impact investing opportunities that have been developed over the past 7 years:
In 2017, CoPower will launch its RRSP/TFSA-eligible Green Bonds – bonds backed by secured loans to clean energy projects that are already operational and generating steady revenues.
Kindred Credit Union launched an RRSP/TFSA-eligible GIC, the Oikocredit Global Impact GIC, in 2015. The proceeds from the GICs are invested in Oikocredit, an international co-operative which promotes sustainable development in almost 70 developing countries by providing loans, capital, and technical support to microfinance institutions, cooperatives, fair trade organizations, and small to medium enterprises.
In 2014, Pique Ventures launched Pique Fund, an impact investing fund focused on leadership diversity. Investors subscribe to RRSP/TFSA-eligible equity shares in Pique Fund and in turn, the capital is used to invest in impactful BC-based private technology-enabled ventures, the majority of which are led by women founders and CEOs. Leaders diversity is present amongst the fund’s investors as well – 24 of Pique Fund’s investors are women, representing 80% of the fund’s capital. Pique Fund is an inclusive angel fund that presently has just over 50% accredited investors and a little less than 50% non-accredited investors.
SolarShare, founded in 2010, is a not-for-profit co-operative corporation that develops and installs solar power projects across Ontario. Investors have the opportunity to participate in SolarShare’s solar projects by investing in their RRSP/TFSA-eligible Community Solar Bonds.
How Do You Choose?
- Start With Why: This is where all decisions, including investment decisions, start. What are your motivations for investing? Are you being a leader with your investment dollars and seeking to empower and help others? Or perhaps you want to create financial security by building your nest egg, safety net, or retirement savings.
- Be Curious About Risk: Impact investments like the ones I describe above vary in risk and tend to be riskier than your typical stock or bond. They are private investments and typically are not traded on a public market which means you cannot easily sell them at any time. You might not get your original investment back. The type of return on investment varies in terms of risk as well. The Green Bonds, Global Impact GIC and Community Solar Bonds mentioned above are fixed income products that generate interest for their investors. Pique Fund is an equity product, that is very high risk as its returns are dependent upon the favourable sale of its own investments in its portfolio companies – events which are highly uncertain and long in time horizon. In deciding upon what type of impact investment, you should consider the risk characteristics and profile of the products and opportunities and decide what suits your risk appetite or tolerance given where you are in life and your readiness to invest in these types of investments.
- Impact Investing as a Relationship: In my book, Integrated Investing, I talk about the mindsets that help us be impact investors, as well as the ones that hinder us. Thinking about investing with a Relationship mindset helps you decide. Which organizations and people do you align with, want to connect with, and want to develop a relationship with? Investing is a long-term endeavour. Thinking about it as more than just a transaction and instead as a relationship with the people you’re investing in and with, helps guide your decision about who to work with.
I invite you to carefully consider what’s in your investment portfolio. Think about why you are investing, be curious about your risk tolerance and appetite, and think about impact investing as a relationship. We have plenty more resources and tools to help you shift your money towards investing as taking care of the village. I hope you return and read again!
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