A decade ago, Lori Hewson, Suncor’s director of community investment and social innovation, noticed a worrying pattern. The Suncor Energy Foundation (SEF) was donating sizable amounts to social and environmental charities in Alberta’s booming Fort McMurray region, but the assistance wasn’t easing the community’s challenges. “Our presence as a company was drawing more people [to job opportunities], and the community couldn’t support them all,” Hewson says. So SEF shifted away from responding to grant requests to building ongoing partnerships with local organizations in hopes of developing longer-term solutions. For example, as the cost of office space soared, the foundation teamed up with the city and the local United Way to establish facilities where charities could share space and services.
When COVID-19 hit the region, already beset by a protracted downturn, SEF’s approach paid off. The foundation’s ties with charities serving hard-hit communities, including Indigenous and low-income populations, enabled it to better direct its giving. If specific programs could no longer proceed or more urgent needs emerged, SEF allowed the charities to reallocate funds. “We had experience responding to humanitarian events in our backyard, including flooding and fires, so we knew how to activate,” says Hewson.
The unprecedented scale of the pandemic crisis has cast a spotlight on what corporate citizenship really means today. In recent years, the concept of corporate social responsibility (CSR) – which covers employee volunteering and community philanthropy but doesn’t necessarily reflect how a company conducts business – has been augmented by broader measures of a corporation’s environmental, social, and corporate governance (ESG) impact. In a recent speech, former Bank of Canada and Bank of England governor Mark Carney, who now leads Brookfield Asset Management’s ESG investment strategy, described an ESG focus as trying to both “do well and do good.”
Global institutional investors are increasingly looking for ESG credentials in the companies they include in their portfolios. Indeed, the past year saw a significant surge in demand for stocks and funds with high ESG ratings, many of which outperformed indices like the S&P 500, according to some analysts. Carney, who is also the United Nations Special Envoy on Climate Action and Finance, recently revealed that 160 banks, insurers, and fund managers representing US$70 trillion in combined assets are prepared to wield their clout to push climate-focused investment. The reasons go beyond optics: numerous studies have linked ESG with better long-term business performance, greater resilience, and lower risk – provided these factors genuinely guide how companies operate, not simply greenwash their practices for PR purposes.
As a result, corporate philanthropy is increasingly linked to ESG priorities. “The idea is to look at how we can use all the assets of the bank to have more impact,” says Andrea Barrack, TD Bank Group’s global head of sustainability and corporate citizenship. While the bank’s giving arm contributed $130 million to charities last year, TD’s supply chain is almost 50 times that size (including TD’s responsible sourcing program), Barrack points out. “Companies that look only to their philanthropy are missing a big opportunity.”
The past year has tested whether corporate Canada is putting its money where its mouth is. The good news is that, at a time when many charities’ non-governmental revenue dried up and volunteering largely stopped, the corporate response has been widespread and generous. While no Canadian-specific data is available, a global report by Charities Aid Foundation (CAF) America found that almost three-quarters of corporations surveyed increased their donation budgets in the first few months of the pandemic compared to the same period in 2019.
“Companies that had the means stepped up and helped to bridge the gap with those that were more affected,” says Dan Clement, CEO of United Way Centraide Canada. Corporations changed not only how much they gave but also how they gave: at record speeds, with fewer strings attached, and in more collaborative ways. However, the pandemic also highlighted shortcomings in how national companies address local needs. “COVID-19 has been a global crisis at a local scale,” Clement says. “It signalled that the current funding models don’t work.”
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TD launched its Ready Commitment strategy in 2018, pledging to donate $1 billion by 2030 to support environmental sustainability, financial security, inclusion, and health. “It was based on the theory that you can’t just focus on one thing; all four are connected,” Barrack says. “When COVID hit, it was a real-life demonstration of this theory.”
Mobilizing a response was first and foremost about speed. A recent Imagine Canada report on corporate community investment cites studies indicating that between 26% and 67% of companies simplified or reduced their application requirements last year to get funds into charities’ hands more quickly. “In a typical year, we would have one to two months from application to awarding of funds, and we had to close that window fast,” says Marco Di Buono, who leads Canadian Tire Jumpstart Charities, a stand-alone foundation. Some foundations sidestepped their usual channels and reached out to grassroots organizations directly to offer help. Rogers chief communications officer Sevaun Palvetzian, who oversees the company’s CSR programs, recalls calling Neil Hetherington, CEO of the Daily Food Bank, in the early months of the pandemic to ask how things were going. “We have 14 to 15 days of food left on the shelves,” he told her. In response, Rogers funded TV ads urging people to donate food.
Hospitals, overwhelmed by supply shortages and worker fatigue, found themselves struggling to raise money as individual donations dwindled. Given that corporations tend to support organizations with national footprints, 150 hospitals across the country formed the Frontline Fund, a body that brought hospital foundations together to solicit and coordinate corporate donations and allocate resources to personal protective equipment (PPE), frontline workers, and research. “We disbursed the funds based on the most urgent needs and could track the impact in each of those buckets and at each hospital,” says Caroline Riseboro, president and CEO of Trillium Health Partners Foundation in Toronto. “We raised over $12 million that would never have been raised through individual hospitals.”
Many corporate foundations also loosened constraints around their funds, given that numerous charities were struggling just to keep the lights on. Roughly half the corporate respondents cited in the Imagine Canada report provided charities with unrestricted grants to help bridge operational gaps, hire staff to administer programs safely, or address other urgent needs. Barrack notes that while TD closely tracks what programs its funds support and how many lives they enhance, the COVID crisis shifted its foundation’s focus to simply stabilizing the non-profit sector. “We said, ‘We know you will need these funds even if the programs can’t go ahead.’ The idea was to look long-term.”
For some corporate donors, the loosening of strings during the pandemic extended a change already underway. “Our corporate partners shifted from targeted, directed giving to flexible giving,” Clement reports. Companies might say they wanted the money to go to every community in which they operate, he says, but they allowed United Way to identify the greatest needs in different communities.
In-kind contributions have also played a role. Rogers leveraged “our unique pantry of assets,” Palvetzian says, donating devices and cellphone plans to women experiencing domestic violence during lockdowns, for example. The company also turned the Rogers Centre stadium into “the world’s biggest grocery-stuffing entity,” in a collaboration with Food Banks Canada.
Other corporate funders extended their efforts to activities that may have been tangential to their mandates before. Canadian Tire’s Jumpstart foundation, which supports sports and recreation non-profits, focused on helping kids, especially in marginalized communities, continue to stay active, creating an online library of activity instructions. “Some partner organizations couldn’t put content on their own sites, so we asked them to do simple phone recordings and used our infrastructure to post them,” Di Buono says. Since then, the initiative has morphed into an online sports and recreation portal featuring material provided by partners such as Participaction and Canada’s National Ballet School. “I’ve never seen this much inclination to collaborate,” Di Buono says.
Jumpstart’s corporate parent made some pandemic-specific donations, but the foundation remained focused on supporting sports charities, many of which had shuttered because of lockdowns and lack of funds. While some provinces have announced much-needed support for arts organizations, “most of the sports ecosystem has not seen any relief,” Di Buono says. A national survey by Jumpstart indicates that a third of community sports clubs are either in or on the verge of bankruptcy, and more than half have closed indefinitely. “Close to 90% of parents tell us that they want their kids active once it’s safe, but we will have a supply issue because these organizations won’t be able to open in the near future,” Di Buono says. And unlike major cultural and educational institutions that in time will be able to hold galas and fundraisers to try to stabilize their finances, sports clubs are largely reliant on local community and corporate support.
Sports charities weren’t the only groups affected by the sharp redirecting of corporate funding toward pandemic-related causes. “Arts and environment charities have had a really difficult year, partly because you can’t get people together [for events],” says Frontline Fund’s Riseboro. “Hospitals have done well in fundraising, and I see that warm glow for hospitals continuing into the future, but it will be more difficult for arts [organizations] because they’re not top of mind.” For that reason, some companies have made a point of maintaining their arts and culture funding. TD, for example, continued its donations to Pride organizations even though most festivals were cancelled or held online. “These organizations are dependent on [corporate] revenue to stay alive,” says Barrack. “We will need them when we recover.”
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Sustainability, equity, inclusivity: these mainstays of corporate ESG reports increasingly shape how firms set their philanthropic priorities. Donations to children’s literacy may be a response to school closures – but they also speak to a focus on inclusion of marginalized communities and bolstering diverse future talent. Gifts to nature conservation non-profits help give lockdown-weary populations access to the outdoors – while highlighting companies’ concern for the environment. Knowing that investors, customers, employees, and regulators have been watching their responses to the crisis, companies are also making a strong show of creating a positive impact – preferably stronger than their competitors.
Rogers, for example, defines its corporate purpose as connecting Canadians. “We want to move the needle, and you can’t do that unless you push all the levers you have available,” says Palvetzian. Unlike pure CSR, which tends to be reactive, ESG is about proactive efforts: seeking out arenas where a company’s unique capabilities can make a difference. “That goes well beyond the chequebook,” Palvetzian says. Hence, Rogers has provided phones to those in need and used its media channels to promote inclusion. Similarly, when TD committed to net-zero emissions by 2050 and doubling the number of Black executives by 2025, it reinforced those pledges through community donations, such as funding cleantech start-up accelerator TD Sustainable Future Lab and organizations such as the CEE Centre for Young Black Professionals in Toronto.
Companies in the oil patch have long experienced intense scrutiny of their environmental records; ESG is just the latest manifestation of this external pressure. Suncor’s Hewson says sustainability has been a central SEF priority throughout the 17 years she’s worked at Suncor. “We look for funding opportunities that have a balance between environmental and social aspects and fit into Suncor’s ESG framework,” she says. In its 2020 sustainability report, the company points to SEF donations to energy transition projects, expanding land reclamation activities, and its growing use of Indigenous suppliers as evidence of its social and environmental sustainability efforts.
Corporations’ desire to demonstrate their ESG bona fides creates an opportunity for charities whose missions align with those priorities. But the shift, reinforced by the pandemic, toward corporate foundations supporting non-profits’ broader work rather than individual programs turns on developing relationships over the course of progressively deeper partnerships. Much of SEF’s funding has gone to collaborative initiatives involving multiple non-profits, and those projects can spawn others. “We take the time to get to know partners, and we make large, multi-year donations in ideas that are quite cutting-edge,” Hewson says. For example, Suncor’s funding of Energy Futures Lab, which researches the future of Alberta’s energy sector, introduced the company to Iron & Earth, a project that encourages oil sands workers to support renewable energy. “Because so much of the work we do is in the transformational space, relationships are really important,” Hewson says. “We’ve learned particularly from our Indigenous partners the importance of close relations to have the greatest impact.”
Jeff Cyr, CEO of Raven Indigenous Capital Partners in Ottawa, increasingly sees this mindset in his work promoting corporate investment in Indigenous enterprises. “Many companies realize they need an Indigenous social licence to operate, and more of their philanthropic entities are taking a longer-term view to building those relationships.” One way to do that, he says, is to be less prescriptive about how donations are used. For example, the Indigenous Peoples Resilience Fund, established and run by Indigenous communities, was formed to pool and allocate donations flowing from corporations and individuals to address the impact of COVID-19. To Cyr, who sits on the fund’s finance committee, the organization illustrates the importance of enabling marginalized communities to help themselves. “If you want better outcomes in the Indigenous space, then fund Indigenous-owned organizations and let them do the work,” he says.
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It remains to be seen whether the changes in corporate–charity relationships will last beyond the pandemic. When Imagine Canada asked the country’s largest companies in 2018 about how they approached community investment, only 4% said they prioritized “funding organizations that are collaborating to solve large systemic problems.” Yet the crisis has highlighted the importance of agile grassroots organizations that understand local needs better than corporate funding groups do. The pandemic has also underscored the value of larger intermediaries, such as the United Way or the Frontline Fund, to help funnel funds to where they are most needed.
Streamlined processes are another welcome change. In a recent report on the philanthropic sector’s response to COVID-19, McKinsey & Company suggests that foundations look at the university admissions process as inspiration for a common application process for grant seekers. “There could be a central clearinghouse with data-collection tools that non-profits could use to share information with any donor, thus eliminating the burden of bespoke application forms and different data-reporting requirements,” the authors propose. But charities shouldn’t expect that loosened reporting requirements are here to stay. “As charities, we owe our donors accountability,” says Riseboro. “I would hate to see us as a sector use the emergency as a way to move away from that accountability.”
Dan Clement, at United Way, hopes that corporations’ reduced funding constraints will become the new norm. “What COVID-19 revealed is that if you’re going to address a rapidly changing environment, you can’t strategically target your solutions,” he says. “A question for all of us is: how do we hold on to mission-based funding?” It requires companies to develop a symbiotic relationship with communities and local non-profits. “It can’t be insular,” he adds. “We need to find that connection between corporate purpose and strategy, and the understanding of communities’ lived experience.”
When that connection is made, everyone benefits. “We saw that play out with our relief fund last fall,” says Di Buono. “We got so much anecdotal response, it brought tears to my eyes.” A few months later, Canadian Tire’s CEO opened an investor call with a story about the foundation’s work. Says Di Buono, “It was the proudest moment in my five years at Jumpstart.”
Foundation investing with an ESG lens
In a report titled The Value of Environmental, Social and Governance Factors for Foundation Investments, author Sam Collin, a charity adviser at UK’s EIRIS Foundation, concluded, “The crisis highlighted the significance of accountability, transparency, and the consideration of ‘extra-financial’ research in long-term investing.” The fact that the crisis in question is not COVID-19 but rather the 2008 global financial meltdown highlights how long ESG issues have been on the radar of foundation portfolio managers. Yet, anecdotally, that awareness has not translated into widespread adoption of ESG metrics. “Foundations in Canada are only now pivoting to divesting big oil,” says Jeff Cyr, CEO of Raven Indigenous Capital Partners, which directs investments to Indigenous enterprises. “Many don’t have hard targets” for what they expect from ESG.
Nevertheless, non-profit foundations’ interest in applying an ESG lens to investments – both to benefit from better long-term performance and ensure that assets align with their guiding philosophies – has risen dramatically. “The focus on ESG is increasing every year almost exponentially,” says Mike Baker, portfolio manager at Leith Wheeler Investment Counsel, which helps foundations manage investments. “It’s asked about in almost every prospective-client presentation.” However, what ESG is and how it’s measured remains vaguely understood by all but the most sophisticated foundations, Baker adds. “It’s often this broad-strokes question, so we help foundations define it for themselves so they understand better what they’re asking for.”
Investing based on ESG factors may involve negative screening (such as faith-based organizations avoiding so-called sin stocks like tobacco) or a proactive focus on investing in companies with high ESG ratings, based on metrics such as the number of women on boards, environmental footprint, or worker safety. Foundations can also turn to impact investing: putting money into assets that support foundations’ goals, such as municipal green bonds.
But measuring ESG is difficult for all investors. “There is no consistent reporting of ESG information because it’s not mandated,” says Rosemary McGuire, director of external reporting and capital markets at CPA Canada, the national accounting association. “It’s possible for issuers to be selective in their reporting, but investors want consistent, comparable, period-over-period information.” While organizations such as MSCI and Bloomberg provide third-party ESG ratings, how and what they measure is inconsistent. “Investors have expressed concerns about the credibility and comparability of the ESG data reported by these third parties and would prefer to obtain the information directly from the company,” McGuire says. Additionally, these agencies don’t go deep enough on measuring impact, Cyr argues. “We’re trying to think about environmental impact three generations down the road, and the agencies don’t look at this longer-term impact.”
Of the three ESG components, environmental metrics are the most developed. CPA’s research suggests investors want two broad types of disclosure: qualitative information around how a company manages and reports climate-related risks, and the financial impact of regulations such as carbon pricing. “Historically, a lot of the disclosure in this space has been boilerplate, and we’re seeing more focus on specificity and financial data,” says McGuire. Additionally, investors want to see expertise on the board to manage emerging climate-related risks.
A recent report by CPA Canada found that investors are not satisfied with the quality of climate-related information companies provide. While almost 80% of firms are now making climate-related disclosures, the nature and extent of this reporting varies, making it difficult to compare across or even within industries. What’s more, the majority of climate-related disclosures do not include any financial metrics or targets.
On corporate governance, leadership diversity is the primary focus. “There is a lot of disclosure around the composition of boards and an increased emphasis on governance specific to how environmental or social issues are addressed by boards of directors,” says Shannon Rohan, chief strategy officer at Shareholder Association for Research and Education (SHARE). The tracking extends to talent pipelines, such as the share of female and minority employees on the management track. But investors want firm targets. “They don’t want to hear ‘Oh, we’re going to try our best,’ but ‘We’re targeting 30%-plus representation by a given year,” says Rohan.
The pandemic has brought particular attention to the social part of ESG, but this category is the broadest, least understood, and hardest to measure, experts say. “There has been a huge recognition of the workforce side, such as improving occupational health and safety, and how that affects company resilience,” Rohan says. Investors are watching whether companies increased worker wages or offered pandemic pay rather than handing out executive bonuses, she adds. Racial, gender, and BIPOC representation have also gained higher visibility. “We will probably see increased emphasis on unpacking what social metrics should be,” says McGuire.
Until those measures are standardized, investors rely on rating agencies to compare ESG performance among companies. However, Baker points out that how the agencies measure or report that data also lacks consistency. “The overall score depends on how the agency has weighted individual factors.”
The emergence of global ESG reporting standards, such as those governing sustainability recently proposed by the International Financial Reporting Standards (IFRS) Foundation, is heartening. “The response was pretty unanimous from the investor community that this is overdue and much needed,” McGuire says. Until such standards are fully embraced, however, foundations have to rely on portfolio managers with ESG-investing experience to guide them through the alphabet soup of frameworks and standards. “Smaller companies may not be disclosing as much because they don’t know to do it,” Baker says. “A portfolio manager needs to be able to draw out that information.”