PIIN Insights: Capital Allocation Decisions

Foundations and First Nations Trusts are among a number of types of organizations that have begun to introduce responsible investment (RI) strategies into their investment decision processes. Nonetheless, there are still organizations within these categories whose investment decisions directly conflict with their core values. This misalignment of values with investment decisions begs the question of whether responsible investment strategies can play a role in investment decisions.

This report aims to understand how Foundations and First Nations Trusts allocate their capital and how they consider their values in those decisions. The methodology consisted of a comprehensive literature review to understand basic organizational structures and processes, followed by secondary research to analyze the core barriers and challenges that investors face when making impact investments. These barriers were narrowed down to three main categories, from which hypotheses were drawn: Structure, Adoption and Product. Our hypotheses were tested by conducting interviews with Foundations and First Nations Trust managers, concluding that the main challenges faced by each type of organization are as follows:

First Nations Trusts:

  1. Investment Managers are not adopting or offering responsible investment opportunities

  2. A lack of awareness of the negative impact of investments by the beneficiaries

  3. A lack of awareness of responsible investment by the beneficiaries

Foundations:

1. Investment Managers are not adopting or offering responsible investment opportunities (depending on the size of the Foundation)

The report concludes with 3 broad recommendations aimed to improve the alignment of Foundations’ and First Nations Trusts’ investment decisions with their core values. The recommendations were developed by first creating 3 general organizational profiles to identify the main challenges in each that should be targeted. The recommendations should be applied on a case-by-case basis depending on the situation and profile of each organization.

Read the report