Early last fall, the founder of the outdoor apparel giant Patagonia announced what, on its face, seemed like an act of unrivalled environmental munificence. Yvon Chouinard, who started the firm in the 1970s, revealed that he would be transferring the company’s assets into a non-profit trust, which would use the proceeds to fund environmental causes. A wealth advisor writing in Barron’s described the move as a “stunning act of philanthropy.” Others were skeptical. As Bloomberg reported, the move allowed Chouinard to dodge a $700-million tax bill.
In an age of heightened interest in ESG (environmental, social and corporate governance criteria), similar critiques have been directed at foundations and endowments that allow wealthy philanthropists to tax-shelter huge riches in exchange for doling out a trickle of income to worthy causes. In Canada, foundations have been required to disburse as little as 3.5% of assets, although the federal government this year bumped that number up to 5% – an improvement but still a fairly modest amount.
Environmental charities face a particularly challenging task in securing both foundation disbursements or direct donations. While the environment ranks as Canadians’ third-highest priority for giving among all charitable causes – about 36% – the actual amount donated is much smaller: in the range of 2 to 5%, according to data compiled by Charity Intelligence and CanadaHelps, or about $500 million of the $10.6 billion in giving in Canada in 2020. Much of the giving, including tax-exempt donations of land, goes to conservation organizations.
Against that not-so-green backdrop, the Toronto-based Ivey Foundation’s decision, made public in late November, to spend down its entire $100-million endowment on environmental and climate-related causes by 2027 is a big deal, with potentially seismic implications.
Ivey, Canada’s sixth-oldest private family foundation, has made strategic investments in non-profit organizations like the Transition Accelerator, the Institute for Sustainable Finance and Efficiency Canada, all of which are focused on boosting the green economy. “These organizations are having a significant impact and have some of the smartest people in the country now working for them,” says Ivey CEO Bruce Lourie. “For us, it’s a great opportunity to really double down and give them the support they need to really push us to the next level. What we’re doing really strategically is looking at where are the opportunities for Canada to succeed in a future low-carbon economy.”
Lourie says the target sectors include the electric vehicle supply chain, clean grids and hydrogen, as well as clean technologies such as heat pumps for space heating. Yet, as he notes, the transition won’t happen solely because emerging green technologies mature to the point of economic viability. They need a nudge, and that nudge often comes in the form of a regulatory barrier – a hard emission cap, for instance, or a mining application that was refused because the proponent didn’t have satisfactory remediation systems in place.
What we’re doing really strategically is looking at where are the opportunities for Canada to succeed in a future low-carbon economy.
Bruce Lourie, CEO of the Ivey Foundation
“My firm belief is that probably the largest driver of change is creating a policy environment that basically supports the kind of transition we’re talking about,” he says, citing the U.S. Clean Air Act and California’s fuel efficiency regulations as examples, both of which drove an immense amount of innovation. Incumbent industries, however, fight such regulations.
“Canada has among the most risk-averse businesses on the planet,” Lourie says. “In all the work that we’re doing, I would say the area that is the most difficult to develop in Canada is business leadership. In the absence of business leadership, we actually need regulations to move us at the pace that we need to move at.”
“You have to have alignment between policy and regulatory tools and financial tools.”
While there’s no shortage of problems to solve, Ivey’s big bet is that its nine-digit capital infusion packs enough of a punch to force Canada’s political and business leaders to, well, act.
