Feb 18, 2021
Project Reconciliation advances launch of $1B wealth fund while keeping eye on Trans Mountain
National Coalition of Chiefs' president on the state of the Trans Mountain pipeline
As negotiations with the federal government continue toward potentially acquiring an equity stake in the Trans Mountain pipeline and its expansion, the Indigenous-led Project Reconciliation is fast-tracking another initiative.
Stephen Mason, managing director with Project Reconciliation, said it will soon launch an up to $1-billion sovereign wealth fund that would see First Nations communities partner with Corporate Canada to invest in energy transition projects.
In 2019, Project Reconciliation announced its idea for a sovereign wealth fund, which was directly tied to its goal of potentially acquiring Trans Mountain. It envisioned proceeds from the pipeline flowing into the fund, which would be used to invest in other infrastructure projects, in turn creating a growing wealth base for future Indigenous generations.
However, Mason said his team is now planning to launch the fund early – in March – to meet growing demand from potential partners.
“We’ve had significant interest from a number of social impact funds; Environmental, Social and Governance (ESG) funds, and interest from the Vatican’s North American social impact fund,” he said in an interview.
Mason said some Canadian corporations are reaching out because they see being involved with the fund as mutually beneficial – not only for First Nations communities, but to meet their own ESG targets. He noted that the appeal of the sovereign wealth fund is two-fold: it’s an investment vehicle for green infrastructure and technology, and it creates opportunities for Indigenous involvement.
“The best way to address the social impacts is to partner with First Nations,” said Mason. “And I underline the word ‘partner.’ This is not about some basis of promised jobs and maybe a little bit of a royalty. This is about having an equity interest, a material equity interest in these projects.”
Mason said subscriptions into the fund are expected to reach a minimum of $750 million and up to $1 billion when it is launched. The money is coming from Indigenous contributions and fund of funds investments, such as from other social impact ESG funds.
Mason said an asset management team including what he described as "successful Indigenous entrepreneurs" will oversee the money, but the governance is still being finalized ahead of the formal launch.
"I think there’s a pretty good chance it’s going to be over-subscribed and that we’ll probably not take anything more than a billion,” he said. “Because it’s all about being able to put the money to work in a timely fashion. “
And Project Reconciliation already has its eye on two projects to start.
One is a $475-million ethanol plant called Project Wheatland in the City of Calgary. Project Reconciliation is partnering with two First Nations to invest up to $100 million in the project being developed by Carbon Clean Energy. The facility would produce 5,500 barrels a day of ethanol, nitrogen fertilizer, and what Mason called “a fairly significant quantity” of renewable natural gas (RNG). He added that the project should be net carbon negative. Construction is expected to start this summer.
Project Reconciliation has also partnered with a First Nation to allocate about $200 million of the fund into carbon capture sequestration technology.
Mason said the idea of investing in greener infrastructure projects is more palatable to some First Nations that want to be involved in large-scale infrastructure investments, but not necessarily fully invested in an oil pipeline.
However, the Trans Mountain pipeline remains a focus. Project Reconciliation is one of a number of First Nations groups vying to purchase a stake in the project from the federal government.
Project Reconciliation’s original proposal to Ottawa in July 2019 would have seen the group take ownership of the pipeline and its expansion, with proceeds to be shared among 340 Indigenous communities in British Columbia, Alberta and Saskatchewan. The communities closest to the route would have received the biggest stakes.
But now that proposal has evolved. Mason said his team is looking instead at a staggered approach where Project Reconciliation would aim to initially purchase a 30 per cent stake that would be allocated to 129 First Nation communities. Then, when the pipeline expansion is built and the government divests, Mason said Project Reconciliation would look to buy a bigger stake, bringing in more First Nations.
"The government does not intend to be the long-term owner of Trans Mountain Corporation," said a finance department official in a statement provided to BNN Bloomberg. "It intends to launch a divestment process after the expansion project is further de-risked and after engagement with Indigenous groups has concluded. The government is committed to investing every dollar earned in clean energy projects."
The spokesperson added that the government is in the second phase of the engagement process with Indigenous groups, announced in February of last year, and has been in contact with the 129 Indigenous groups most affected by the pipeline route.
If Project Reconciliation is ultimately successful in its purchase of a stake in Trans Mountain, Mason said the initial sovereign wealth fund would then be rolled up into a much larger one. That one, in turn, would see proceeds from all the various projects continuously reinvested and paid out to First Nations communities.
“The pipeline is just the means to the end. It’s where revenue will flow out of,” said Mason. “You’re taking that rightful share, not tokenism, from the ownership of the pipeline and reinvesting it in a greener world with less carbon. And now you’ve got the money to do it.”