The role of corporations in addressing reconciliation with Indigenous Peoples in Canada has been a focal point since 2015. This is when the Truth and Reconciliation Commission (TRC) issued its report, which included 94 Calls to Action. While most of the recommendations were aimed at the Government, Call to Action #92 was specifically aimed at improving corporate practices, calling on corporations:
“to adopt the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) as a reconciliation framework and to apply its principles, norms, and standards to corporate policy and core operational activities involving Indigenous peoples and their lands and resources.”
One of the ways to embrace this call to action is to develop a Reconciliation Action Plan (RAP). In essence, such a plan outlines an organization’s intentions relating to reconciliation as well as actionable steps to fulfill that intention. There are many examples in Canada that we have seen since 2015, including TC Energy, Enbridge and some large financial institutions.
Despite this call to action 10 years ago, it would appear that progress has stalled in the corporate world, according to Indigenous Watchdog. In a report by PwC, as of December 2022, only 38% of the largest 250 companies in Canada disclosed Indigenous relations policies, while an even smaller number (19%) had disclosed an Indigenous RAP.
Why is this material for investors?
An essential point to underscore is that Indigenous Peoples’ rights are recognized and protected by the Canadian Constitution. Therefore, when we speak of Indigenous communities and the relationship with the corporate world, this needs to be the starting point. Corporations and investors should understand and appreciate that this is not simply a public affairs or corporate social responsibility matter.
Indigenous rights impact companies in different ways, as they have varying levels of materiality. For resource industries in Canada, this can mean the difference between having a license to operate or not. For others, it may result in reputational and/or legal risk that can last for several years. Financial institutions are not immune, as they have faced criticism over the years for financing projects where Indigenous communities have been impacted.
Regardless of the business model, every company would benefit from assessing the materiality of Indigenous rights. Given the composition of the S&P/TSX Composite, the main sectors of energy, materials and financials are likely to have some level of material exposure.
Indigenous relations have evolved in recent years from a consultative approach to one of true partnership based on free, prior and informed consent (FPIC) as specified in the UNDRIP. This requires a sophisticated approach with deep cultural understanding and appreciation. In the resource sector, reconciliation is beginning to take the form of equity ownership in projects such as those announced recently by Enbridge Inc. In this case, an Indigenous alliance will buy 12.5% of the company’s Westcoast pipeline, supported by an Indigenous loan guarantee.
Taking the shareholder perspective.
Despite the recognition that Indigenous rights are material, investors still hold mixed views on the topic, using shareholder proposals as an indicator of investor perspectives. A shareholder proposal at J.P. Morgan in 2024 asking for a report on the bank’s efforts to respect Indigenous rights received 30% support. Similar proposals at Citigroup Inc. and Wells Fargo received 26% and 23%, respectively.
In Canada, the results are in line with the U.S., as illustrated by a shareholder proposal that went to a vote in 2023 at Royal Bank of Canada and received over 26% support. This proposal specifically asked the bank to amend its Human Rights Statement by incorporating FPIC in its financing activities.
One of the first proposals to be filed in Canada on the subject was at TMX Group in 2021. The shareholder proponent, Shareholder Association for Research & Education (SHARE), was able to reach an agreement with company management, which then recommended shareholders vote in favour, resulting in a 98% support level.
This shows that investors are happy to follow management’s recommendation, but that they are more critical when it comes to shareholder proposals related to Indigenous rights. While shareholder proposals have not breached the 30% mark yet, these vote results are a signal of an emerging trend that is likely to remain in corporate Canada.
Given our strong resource sector and leading financial institutions, Canadian companies have an opportunity to take a leadership role. With the legal and policy context clearly upholding reconciliation with Indigenous Peoples, companies and shareholders would benefit from further education on this topic. Reconciliation and Call to Action #92 are likely to remain top of mind, especially with a new Federal Government focused on nation-building projects. If Canada succeeds in becoming the strongest economy in the G7, reconciliation can play a central role in accomplishing this ambitious goal, benefiting generations to come.
Jennifer Coulson is Vice President, ESG, Public Markets, at BCI.