‘Reconciliation economy’: Why Indigenous founders need more access to capital

Aaron Joe has been an entrepreneur on British Columbia’s Sunshine Coast for 25 years.

He got his start extracting minerals from the earth as a mining contractor, but roughly a decade and a half ago he started to change his perspective on the kind of impact he would like make.

“I wanted to do something a little more that aligned with our values as Indigenous people,” Joe tells Global News. “And I thought, ‘I can help make a change in forestry.’”

Today, Joe is the CEO of Salish Soils, a company operating out of the Sechelt First Nation that takes waste from the B.C. area and repurposes it into soils and compost for farmers and landscapers. He says he sees this as a way of “reclaiming our territory.”

Joe and his business partners have scaled the company up from four people to 36 employees over the past 14 years, all starting from a “shoestring budget.” He says it took a while to find Salish Soils’ first major investor, someone who believed in the company’s vision of “sustainability and economic reconciliation.”

Exclusion from traditional capital sources has been a historic challenge for First Nations, Inuit and Métis entrepreneurs — particularly those living on reserve — who are looking to start and scale up companies, according to Indigenous company founders and business leaders who spoke to Global News.

Indigenous founders say that improving access to capital for startup businesses and for communities looking to shape their own economic fates is critical to achieving meaningful reconciliation.

Many of the barriers facing Indigenous entrepreneurs date back to the Indian Act — historic legislation first enacted in 1876 that established the reserves system in Canada alongside other policies aimed at the assimilation of Indigenous peoples.

While many entrepreneurs looking to start a business can rely on financing from a bank if they have collateral like a property to put up against the loan, Joe notes that those living on reserves don’t own their property — marking a significant barrier to accessing capital.

“Usually when you start a business, you have an asset that you can leverage so that you could support a loan or some kind of financing. And being on reserve is going to be a challenge with that,” he says.

Access to capital for Indigenous startups was a major gap identified by Paul Lacerte, founder and chief impact officer of Raven Indigenous Capital Partners.

He tells Global News that institutional and race-based barriers to accessing capital like a lack of collateral are direct consequences of the Indian Act.

“Indigenous folks are ready, willing and able — and impatient — to be able to take their seat at that economic table,” Lacerte says. “But they need access to patient, flexible capital that’s culturally safe, to be able to scale in a way that makes sense and not sacrifice impact in favour of scale.”

Lacerte and his partners at Raven have taken it upon themselves to invest in Indigenous businesses like Salish Soils in Canada and the United States with an approach that shares the cultural values of the founders themselves.

He says the fund works with founders and partners who want a stake in the “reconciliation economy,” which he says can reframe historic relationships between the financial sector and Indigenous communities.

Rather than capital deployment being “extractive” and “harmful” to Indigenous communities, Lacerte says that by investing in businesses like Salish Soils, Raven can help to “level the playing field” and empower founders to shape their communities in a way more in keeping with their values.

The scale of environmental impact that’s possible by giving Indigenous entrepreneurs a seat at the table is not limited to B.C.’s Sunshine Coast.

Sharleen Gale is the chief councillor of the Fort Nelson First Nation in B.C. as well as the chair of the First Nations Major Projects Coalition.

The FNMPC acts as an advisor to 144 member communities in facilitating large capital-intensive projects on First Nations, Métis or Inuit territories. Since its founding in 2015, the coalition has so far provided support services such as securing access to financing and negotiating benefit-sharing agreements on 12 major projects with capital costs totalling $45 billion.

Gale says the coalition was formed in response to Indigenous communities wanting to secure a stake in a major project that would cross multiple territories, but were being offered financing at rates typical of credit cards, rather than viable business loans.

Gale tells Global News that economic opportunity — and access to financing underpinning those opportunities — allows Indigenous communities to take a more active role in environmental stewardship of their land.

Her own community of Fort Nelson was recently able to move forward on a project converting an oil and gas well to a geothermal facility, for example.

“We’re not just going to invest in a project that doesn’t meet our values and doesn’t leave things for future generations.”

Advocates who spoke to Global News say it’s critical that companies with projects that impact Indigenous territories, particularly those in oil and gas and pipeline sectors, bring Indigenous stakeholders into the fold.

Shannin Metatawabin is the CEO of the National Aboriginal Capital Corporations Association (NACCA), a network that oversees almost 60 Indigenous financial institutions and facilitates federal government funding programs.

Because Indigenous peoples were relegated to reserves, away from the major centres of commerce as Canada was being formed, Metatawabin says that reconciliation must be about integrating these communities into the country’s economic prosperity — particularly when that involves natural resources on Indigenous land.

He says it’s become a common refrain that major infrastructure projects are held up in Canada due to “Indigenous uncertainty” — a shorthand for protesters opposing projects that don’t have the consent of the community.

Bringing Indigenous stakeholders to the table and making sure they have access to reasonable financing to take equity and help shape their projects according to those values is the only viable path forward for many of these projects, Metatawabin argues. He adds that he believes international players are increasingly realizing the importance of baking meaningful consultation into their business plans.

“If we want to continue extracting, utilizing and creating major projects, we want to be part of this because this is our territory,” Metatawabin tells Global News. “And if it’s going to go through our traditional territory, then we need to be partners — fair and square partners.”

The NACCA administers the federal government’s Aboriginal Entrepreneurship Program (AEP), which provides loans and business support to startups. Metatawabin says that while the program has been successful since it launched more than three decades ago, there’s been a waning of contributions for the operational support elements of the AEP that allow Indigenous financial institutions to hire and plan for the future.

In order to “jumpstart” the Indigenous economy — particularly for growing Indigenous businesses hoping to scale up and reach the next level — he says the government needs to funding promises that “top up” the original contributions to the program that have been “recycled” over its history.

Gale and her team at FNMPC, meanwhile, have been advocating for the creation of a national Indigenous loan guarantee, similar to programs that exist provincially in Alberta, Saskatchewan and Ontario.

Such a program could see loans for Indigenous capital projects secured by the federal government, which reduces the risk for lenders financing a project and helps to lower interest rates. Ottawa already extends such guarantees to projects in various industries, such as homebuilding; just last week the federal government announced it would top up the Canada Mortgage Bonds program with an extra $20 billion to incentivize homebuilding in the country.

Global News reached out to Finance Canada to ask for a response to recent petitions for an Indigenous loan guarantee program.

“We know that access to capital financing is an essential part of economic reconciliation with Indigenous Peoples,” said spokesperson Katherine Cuplinskas in an email to Global News on Thursday.

She highlighted a stated $18-billion increase in funding to annual federal funding for Indigenous priorities since the Liberals took office in 2015. Among the initiatives highlighted by Cuplinskas was $8.7 million in spending this fiscal year to develop a national benefits-sharing framework to help Indigenous communities invest in major resource projects.

The statement did not include reference to a possible Indigenous loan guarantee program, but said the government would “continue to work with Indigenous communities to ensure their economic empowerment.”

Business leaders who spoke to Global News for this story said that while government support is critical to lifting up Indigenous peoples, reconciliation is not achieved just by funnelling capital into communities.

Metatawabin gives the example of the Clearwater Seafood deal as a model he’d like to see replicated for other Indigenous communities. He says the $1-billion deal that saw M’ikmaq First Nations partner with private industry to acquire the country’s largest seafood firm ensures the community will be able to create own-source revenue for generations — a path to self-dependence, not reliance on government support.

For Lacerte, the “reconciliation economy” cannot be underpinned by government grants and programs alone, which often come with conditions for how money is spent.

Instead, he says the more Indigenous businesses and communities are able to secure financing to dictate their own economic fates, the closer they can get to shaping a life that aligns with their own values.

“There’s a huge opportunity for a revitalized Indigenous economy to drive some really important change metrics in Indigenous communities,” Lacerte says.

— with files from Global News’ Nivrita Ganguly