Canada’s model of charitable giving is a “dinosaur of the economy,” said Joel Solomon, and it's ripe for disruptive innovation.
Solomon – co-author of the Clean Money Revolution, a call to action to move trillions of dollars from damaging to regenerative use – visited UBC Sauder last week to speak with students about the flaws of Canada’s charitable framework and how to fix them. He's a leading figure in Canada’s fast-growing responsible investment industry, which in 2015 represented 38 per cent of overall investments at a value of around $1-trillion.
“This model was probably created for two reasons," said Solomon. "Tax and estate planning, and the idea that you can hold a family together with philanthropy.”
Charitable work is done by family foundations and staff charities, but neither model is as effective at driving change as it could be, according to Solomon. Family foundations can be successful, he said, but they're often popular for tax and estate planning purposes – and changing family dynamics can make them unstable.
Staff charities, on the other hand, are more professionalized change-focused institutions. But in Canada, few are large enough to be managed by professionals with professional standards and their impact is hamstrung by redundancies and a lack of clarity and flexibility in Canadian law, said Solomon. Canada’s charitable tax law framework is still based on British Common Law from the 1400s.
Endowments are also a problem, according to Solomon. In Canada and the U.S., almost a trillion dollars is locked up in these financial structures. Their funds are typically invested in mainstream, conventional, global market industries – but almost never back into the organization’s actual geographic location.
“This is an emperor has no clothes situation,” said Solomon. “We’re giving away this little bit of money from endowments to solve major societal problems, but we’re still investing their principles in creating those problems in the first place.”
Solomon lauded UBC’s recent decision to allocate $10-million of its $1.46-billion endowment for a fossil-fuel-free fund, though the school voted no to overall divestment for now. Divestment is one part of the fix, but Solomon also pointed to the need for more education and a public policy overhaul.
Bachelor of Commerce student Sakiko Toriya said Solomon’s presentation inspired her to look further into responsible investing as future career. Kenny Leung, a fellow BCom in attendance, said Solomon opened his eyes to the importance of young business leaders taking initiative to lead social change in their communities.
“My career has been massively enabled by opportunities created by organizations Joel has supported,” said Christie Stephenson, director of UBC Sauder’s Peter P. Dhillon Centre for Business Ethics. “It’s such a privilege to have a global leader in social finance like Joel come speak to us at UBC.”
Solomon is the chair of Renewal Funds, Canada's largest mission venture capital firm with $98-million in assets under management. He’s a senior advisor with RSF Social Finance, a nonprofit financial services organization dedicated to transforming the way the world works with money. He’s a founding member of the Social Venture Network, Business for Social Responsibility, and the Tides Canada Foundation – all of which support leaders leveraging business to serve the greater good in different ways.
Solomon’s visit was part of the UBC Sauder Philanthropy Program speaker series.