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Les Leyne: B.C.'s new $500M investment fund will be 'patient' and a bit secretive

The fund is explicitly barred from investing in narcotics, illegal substances or arms.
InBC Investment Corp. is B.C.'s newest Crown corporation with startup funding of $500 million.

B.C.’s newest Crown corporation, the 29th, opened for business last week, two years after the idea was hatched.

InBC, (short for Investment) is the newest model of the long-established concept of putting taxpayers’ money into promising business startups. It’s funded to the tune of $500 million, which will be disbursed subject to numerous ethical conditions.

All the usual standards that modern, socially conscious businesses are expected to meet are listed. They have to demonstrate a measurable impact in driving climate action, innovation, advancing reconciliation and elevating inclusive communities. “InBC will influence positive systemic change by incorporating diversity, equity and inclusion, as well as environmental, social and governance values into every investment decision,” said a company statement at the launch.

There is also a list of sectors that InBC will shun. The fund is explicitly barred from investing in narcotics, illegal substances or arms.

The door is also closed to companies going bankrupt, in distress, or that operate as tax shelters.

The no-go zone also includes any outfit where senior executives have been sentenced to prison, as well as companies that “may compromise the reputation of B.C.”

Companies involved in countries subject to sanctions or that are subject to claims by the province are also off-limits.

InBC has further listed things it will not do. It won’t issue grants or loan guarantees, invest in infrastructure or real estate or offer short-term financing.

Those rules are designed to head off a lot of scandals, but the long birth process for the outfit was not without controversy.

Information and Privacy Commissioner Mike McEvoy took issue last year when the legislation creating InBC excluded the public corporation from the freedom of information law.

He wrote an open letter saying that, with a half-billion in play, the corporation should be subject to transparency and accountability standards.

Jobs Minister Ravi Kahlon, who shepherded the creation of the fund, dismissed the idea, saying InBC will be reviewed independently — once every five years.

Around the same time, my nosy friend — Vancouver Sun columnist Vaughn Palmer — asked to see the business plan.

Request denied. It’s for cabinet eyes only.

Opposition parties were generally supportive of the concept during debate on the bill setting it up.

They rapped the secretiveness, were skeptical about the targeted returns and were dubious about the heavy NDP influence on the board of directors. But the bill passed unanimously.

Worries about political influence are partially offset by a unique section in the bill that explicitly instructs the chief investment officer to ignore everyone.

“The CIO is not subject to direction from anyone. … For certainty, the CIO is not subject to direction from any of the following: the government, a minister, the board, the CEO or any other public officer.”

Last week’s launch did include a business plan, in the form of a lengthy investment strategy.

And there was a glimmer of transparency regarding compensation.

The salary of CEO Jill Earthy, a tech sector veteran formerly with the Women’s Enterprise Centre, was divulged. She clocked $61,040 in the last fiscal year since signing on in mid-December, which puts her salary in the $250,000 range.

The job comes with performance-based incentives that can reach a maximum of 60 per cent of the base salary. The figures were divulged because it’s government-wide law, not a company requirement.

In all the various descriptions of the values, goals and intentions, one issue didn’t get the emphasis it gets at other venture capital startups: Is it going to make money, and if so, how much?

Earlier in the long birthing process there was mention of a five per cent return as the target, which is much lower than commercial standards for similar funds.

But officials at the launch did not confirm that, and it’s not apparent in the investment strategy posted outline.

The closest they got was: “Investments have high-growth potential to achieve a positive financial return for British Columbians over the long term. … The goal is to generate enough investment income to become financially self-sustaining.”

Officials said InBC will be a source of “patient capital,” meaning the investments are longer-term than usual, and returns will be lower than private firms expect.

So your money is going to be patient, and you should be, too.

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