Canada’s Financial Landscape Through and Post-COVID
- There is a growing demand among consumers demanding their financial institutions invest more ethically and demonstrate a commitment to people and planet.
- Women make up 30% of all entrepreneurs and yet they access 3% of venture capital and approximately 15% of loans.
- Banks and financial institutions need to think about their carbon impact if Canada wants to honour the Paris Agreement.
Canadians and investors must be wise with where they put their money, which can determine the economy of tomorrow. Financial institutions, consumers and individuals must ensure that we are creating a cleaner, fairer economy that is more equitable and sustainable. This can be accomplished by consumer demand for transparency and through global investment networks.
What COVID-19 impacts has Vancity seen amongst clients and the economy at large? How do you assess the actions taken by the Canadian financial sector?
Like all financial institutions across Canada we had certainly built up reserve over the years and built a values-based business—so we were doing both—and when the pandemic hit that was really the time for us to put those reserves back where they could do the most good.
For us, that perspective was with everyday individuals and people in our community, small-and medium-sized enterprises, social enterprises, and not-for-profits. What we saw with our membership was really that the impacts were in the form of payment deferral requests, both for individuals and business owners. We saw this across sectors and across age groups, and we have seen that the pandemic is hitting different people across sectors in various ways.
We did respond with a variety of solutions and we continue to innovate. We cut credit card interest rates; we put together a community response fund; we deployed the Unity Term Deposit and relevant products. We are taking deposits from individuals here and putting them back into solutions that will help people get through COVID-19.
“We have seen impacts across all sectors and overall, financial institutions have responded fairly well.”
From the beginning, we have been really focused on promoting and supporting local business. We have been seeing more of that “support local”—for us that is Support Local BC. We also did a Vancity Loves Local campaign because we know that supporting local really helps to build community. We have seen impacts across all sectors and overall, financial institutions have responded fairly well. We certainly have tried to be very specific in our response to our community here and in solutions to get people through the pandemic.
What financial trends have emerged through COVID-19?
We have seen that most financial trends have continued through COVID-19, including open banking and the rise of fintechs and new innovations. Certainly, we have seen the role and disruption of technology during this time; we have seen the number of transactions in-branch go down and people using online and mobile banking more often.
Technology can certainly provide efficiencies and in certain situations they have been helpful to keep people socially distanced, but the other trend that we see is that it does not mean people do not want a human touch. We have seen a significant increase in calls to our call centre, and people still want what we would call a hybrid model—they do want the human connection. That is a pretty interesting trend to keep an eye on.
In addition to technology, the third trend is really a growing demand by consumers for their financial institution to think more ethically and to demonstrate a commitment to people and planet. You can see more in the media that people are asking for that, so I hope that that trend will continue to grow and then ideally impact our future economy to become one that is cleaner and fairer. We are seeing consumer demands change, and that those are the trends.
How would you characterize the rise of impact investing in Canada? How does it contribute to the overall sustainability, health and long-term resilience of Canada’s economy?
When I first joined Vancity some years ago it was to help build an impact investment fund, and we would talk to people about it and they did not know what it meant—impact what? Now, the language and the understanding of what that means has seen steady growth over the years.
There are various definitions of impact investing, but you can think about stakeholders more broadly than a single shareholder and about having a positive impact. That is the best way of thinking about it. From that perspective, there has been continued steady growth. To your previous question about the acceleration through COVID-19, we are seeing that pretty much every major investment firm is certainly starting to talk about it, and they are creating new funds. There are some recent announcements with quite prominent individuals taking on roles to build impact investments. I do not think that trend is going away, I think it will continue to grow.
“If you look at the social, environmental and financial impacts of a business, then you get the win-win.”
In terms of how that aligns with building a more resilient economy, the more you can think broadly about the effects of your business on every aspect—the environment, your own employees, suppliers, et cetera—you will see a better outcome, and it does help to build a resilient economy. If you look at the social, environmental and financial impacts of a business, then you get the win-win—it is good for your business because you are thinking about the long-term effects, and it is good for society. I am not sure that that will ever unwind, and I think we will see more and more of it.
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What is the Global Alliance for Banking on Values (GABV)and what does the network hope to achieve? Why is that important to the future economy?
The Global Alliance for Banking on Values is an independent network of banks that use finance to deliver sustainable economic, social and environmental changes.
Vancity has long worked to support those three pillars and we have been quite an active member in the GABV. It is really about putting the needs of people and planet at the centre of our thinking. Networks like these provide guidance and accountability to financial institutions that are looking to support these pillars while delivering steady financial returns. We know that as a financial institution in Canada we certainly cannot make change on our own and so that is why we see the value in the network.
One example of the work that that has brought forward has been what is called the Partnership for Carbon Accounting Financials (PCAF). It is an industry-led partnership that helps to facilitate transparency and accountability of the financial sector to the Paris Agreement.
Banks and financial institutions, we do represent most of the available capital globally and so how we lend and invest it makes a huge difference. Currently, there are still trillions of dollars that are being invested over the years and we are not thinking about their carbon impact, but we need to be if we are trying to reach some of these goals.
We are one of two Canadian members of PCAF, but larger institutions are now starting to join. It is showing again that there is a rise in understanding of impact investing and the need to get under the lending that is being done; to shift that attitude in terms of climate impact reporting. Bank of America and Morgan Stanley have joined that as well.
There are some other really interesting pieces of work and groups out there as well. The United Nations has their Environment Programme and the Finance Initiative, which is leading the Principles for Responsible Banking. It has a large number of signatories, and groups are interested in ensuring that we are thinking about transparency and reporting across the board.
“We know that the wider business community can do more with the everyday decisions they make with their money.”
For us, as an institution, we have always understood that your words and intentions are important but they really become useful and valuable when you can translate them into action, and that you back that up with the money that you lend out. We know that we can do more; we know that the wider business community can do more with the everyday decisions they make with their money—and we think that a lot of these networks, partnerships, and frameworks help us get to those outcomes.
Have Canadian FIs and corporate Canada experienced a paradigm shift?
There are certainly individual leaders and organizations from across government and the private sector in all areas that do understand impact investing and the opportunity it presents to more broadly think about doing business within society and that it can be good for business. We are seeing more and more of that, and I think some of that, which is great, comes from demand.
The more consumers are asking for transparency and what happens with the money and where it is going—whether that is consumer products from financial institutions or not—you do get a response from that demand. We need both leadership and demand from consumers to move it forward. I do think that we are seeing quite a shift and pressure is coming from both of those areas.
What supports are needed and from who for Canada to honour its commitments since the last G8, and more importantly, to empower women entrepreneurs and female-led businesses?
It is an area that I am quite passionate about. I am the chair of the Women’s Enterprise Centre here in BC, and I have written quite a bit about it. Having been a venture capitalist and as a woman, I have seen a lot of those trends firsthand.
To your point, we know that women entrepreneurs account for approximately 30% of entrepreneurs and yet they access 3% of the venture capital; 14% or 15% of loans. We also know that we are seeing some of the disproportionate effects on women during COVID-19 in terms of childcare and the extra layers they are working through while also trying to grow businesses.
“Women entrepreneurs account for approximately 30% of entrepreneurs and yet they access 3% of the venture capital.”
There are a lot of tremendous support organization for women entrepreneurs. Partially, it is about ensuring that that message can get out and that women know where to go, and sometimes that is not necessarily looking for different solutions, but it is really sort of additive. For example, we know that with some of the different government support programs women were not accessing it necessarily at the same rate, and it was not that there was a problem with the actual loan or program, but it is the way women approach it.
We tend to like to have more conversation, to have an understanding of why they should take something on, and what else they need from coaching to grow their business. Also, we know women can be more risk-averse when wanting to take on more debt. Having those broader conversations and a support around a product is really important for women.
We did work with Women’s Enterprise Centre on building that type of a program to get mentorship and coaching through other avenues while we could support them through a loan program. Those are the types of small innovations that you can do bottoms-up to help women entrepreneurs.
More broadly, structurally and systemically, is starts to become really about getting into the bias of our current systems. How do we think about investing and “successful growth” and does that resonate across both men and women? Or are there different ways to think about that? Those are harder pieces to change and they will take longer, but there are a lot of great people working on it. That is one aspect.
Then the other would be current state of the market—how do you help women? That is where these types of innovative programs are coming into place.
How closely tied are economic, social and environmental facets of our society and what can we do to advance them in parallel?
The pandemic has certainly reminded us that we both stand and fall as a society, and that the welfare of the poorest among us is integral to everyone’s welfare. That same type of perspective helps us understand the interconnection between those three areas that you talked about from social and environmental to economic.
“The pandemic has certainly reminded us that we both stand and fall as a society, and that the welfare of the poorest among us is integral to everyone’s welfare.”
COVID-19 has shown us the systemic inequalities in our current economic system. Of course, they were always there but they are in a sharper focus, and so we know that we have to get ahead of these types of things and that when the next climate crisis hits that we have to be thinking about how to contain that early on.
We know with climate as an example, we except that those who are seeing some of the inequality rise during the pandemic will feel it again with the climate crisis.
I think about this a lot, how do we move forward those three facets all together? What we have also learned is that we can. We must do something; we have been thinking about all of these pieces. We know that it is possible for government, business, investors, and civil society to come together pretty quickly with different solutions to put people first.
If the question is really around what is the trade-off—that is sometimes how it comes out—for economics versus environmental and social, I think it is important for us to really rethink that frame. Can you have a successful business if the society around it is not thriving? And perhaps not everyone has the same answer to that currently, but over the long term, certainly you need to have all of those in sync.
“Can you have a successful business if the society around it is not thriving?”
My perspective is it is not a trade-off, it is absolutely an interconnection that is required to get us to the society that we want to be and to the future economy that we need if we want to be cleaner and fairer, and overall create a more sustainable growth line.
What’s your pitch on how to improve the Canadian financial landscape who would you pitch?
I do not like the forced who would you pitch—I am not sure that there is one group because I think we need everyone to play their part.
The pitch would be broad to say we each play a part and each part is super important. We cannot just think, “I just have this one little piece here so why should I care?” If we all do not take those actions, we will not see change. That includes individuals and consumers who wear the hat of citizen and investor; they wear the hat of an individual who is baking, so what actions can you take day-to-day? How do you make a purchase? How do you make that decision? And this goes all the way to the heads of organizations, to our Prime Minister and our government.
There are many people who are understanding these frameworks and who are talking about how we can think differently about rebuilding for a cleaner, fairer economy that is more equitable and sustainable. My pitch is that everyone needs to do their part.
“How money is allocated really does influence the society of tomorrow, so my pitch is let us allocate it wisely.”
We have seen in COVID-19 that when everyone does their part, we can see some success and I think the same applies now as we rebuild. That would be my pitch. I think how money is allocated really does influence the society of tomorrow, so my pitch is let us allocate it wisely because we can do better and we really need to—we must.