BC’s $500M fund: Province shares mandate, roadmap for InBC

The government "not seeking the conventional quick returns and exits of venture capital, for example, 15-20% returns and a 4-7 year exit;" instead, wants to provide patient capital.

“InBC is a gamechanger,” said Ravi Kahlon, Minister of Jobs, Economic Recovery and Innovation, earlier today, as the government announced details on InBC Investment Corp., the organization that’s been setup as a $500 million Strategic Investment Fund. Minister Kahlon also formally introduced legislation that will convert the InBC Investment Corp. into a statutory Crown corporation, essentially providing it with the legal foundation and authority to function.

In addition to the legislation, a roadmap for InBC’s operations was provided which includes:

  • The appointment of the Board of Directors

  • The hiring of the Chief Executive Officer, Chief Investment Officer, and other employees

  • The development of a Mandate Letter and Investment Policy Statement; and

  • Being fully operational and ready to invest by fall 2021

InBC was announced last year on September 17, 2020 as part of StrongerBC, the Province’s Economic Recovery Plan. It’s part of the government’s plan for economic growth focused on “innovation, sustainability, and inclusiveness,” according to government documents.

The province says InBC will have a “triple bottom line” investment mandate, aiming to:

  • establish B.C. as a globally competitive low-carbon jurisdiction;

  • promote values that make life better for people in B.C., including job creation, advancing reconciliation with Indigenous peoples, promoting diversity and inclusion; and

  • achieve a financial return on investment.

The legislation announced today sets out the purposes of the corporation as follows: (1) to make investments that achieve a financial return, and (2) to make investments that support the social, economic and environmental policy objectives of the government.

In order to achieve its mandate, the government said InBC will be provided with the flexibility to invest up and down capital structure across every industry. In addition, InBC is not seeking the conventional quick returns and exits of the venture capital and private equity markets, for example, 15-20% returns and a 4-7 year exit; rather, the corporation is hoping for returns of 5% for its investments, according to the government, which says this target is necessary in order to find balance for all components of the corporation’s triple bottom line mandate.

Recognizing that 98% of businesses in BC are SMEs and “fail to scale up or are purchased by investors from outside the province,” InBC mandate’s is to provide a “source of patient capital” to high potential businesses to help them to scale and grow in BC.

In setting up InBC, the province said they canvassed the BC business community through over 200 engagements in order to help shape the corporation’s mandate.

InBC is modelled after strategic investment funds in other jurisdictions including the Ireland Strategic Investment Fund, Danish Investment Fund, and the Scottish National Investment Bank.

Additional key details announced in the legislation include: 

  • “Triple Bottom Line” Mandate

  • Authority for the independent Chief Investment Officer to make investment decisions

  • A 9 person Board of Directors

  • A Board-appointed Advisory forum, which can provide non-binding advice

  • Details surrounding annual and external reporting commitments (which is standard for Crown agencies and corporations)

The board composition is set up as follows:

  • Nine total members: two public servants and seven individuals from outside the public service, to be appointed by the cabinet. 

  • Appointed by the Cabinet.

In terms of the Board-appointed advisory forum, there will be up to 12 members, with half the members appointed by the Board, half appointed by Cabinet.

InBC is not the first time the BC government has moved to make investments in BC companies. Most recently, the previous BC Liberal government launched the $100 million BC Tech Fund, which is managed by Kensington Capital, which InBC will have no impact on.