In her second year as CEO of Fondaction, Geneviève Morin has all the good reasons to celebrate New Year’s Eve. As we saw last week, Fondaction recorded a return of 6.5% during its first semester and obtained a return of 17% over one year, which is very respectable for a labor-sponsored fund that has taken the gamble of investing in the positive transformation of the Quebec economy. “We want to develop a more equitable, more inclusive, greener and more efficient economy,” recalls the CEO.
First, remind us of the highlights of your latest financial results, which for the second year in a row have shown good progress.
We ended the first half of our 2021-2022 fiscal year with a return of 6.5% and 17% over the last 12 months. But more importantly, we are now accumulating a return of 9% over 5 years and 5.9% over 10 years, without taking into account the tax credit offered to investors.
Over the past year, we have recorded an increase of 14,000 new investors, bringing the number of our shareholders to 195,000. Our assets crossed the 3 billion mark from 2.9 billion to 3.3 billion. Finally, we invested in 15 new businesses, bringing the number of our direct investments in Quebec businesses to 188.
You invest in companies, but also in venture capital funds. How important are each of the categories?
We mainly invest in venture capital, either directly in companies or through specialized funds. In total, we invested in 87 funds and 188 companies, and this investment portfolio generated a return of 10.4% in the first half of the year, while our investments in financial markets returned 4.9%.
Historically, Fondaction was not recognized for its particularly strong returns. How do you explain the good results that you manage to generate with your direct investments?
Last year, we made a 22.7% return for 2020 as a whole and we took advantage of the good performance of the stock markets. But there is something going on. We have an increasingly solid portfolio and we have an economic context which shows that when we take into account environmental, social and governance risks, we are in winning sectors and we manage to do our best.
This is the expertise that we have created over the years. We invest with a view to transforming the economy, without compromising returns. We have created a great climate change portfolio that is performing well. Our job as a financier is to invest in the future. We are in a period of economic transformation, and we are in the midst of it.
You come to reinforce the thesis of several governments which push the investment in the economic transition, that it is the way of the recovery. Do you testify that it works?
I was fortunate enough to attend the Glasgow conference and saw the importance this transformation brings. I attended a finance day where there were $ 130 trillion in investments that wanted to become carbon neutral. This understanding has become extremely strong with financiers. The concept that I prefer to have renewable energies in my portfolio than oil, everyone understood that.
In this regard, it’s been several years since Fondaction took this turn, right?
Absolutely, since 2009 we have completely excluded fossil fuels from our portfolio of investments in the markets and since 2016 in direct investments in companies. Today, our carbon footprint is 22.6 million tonnes per million assets under management, compared to 72.7 million tonnes per million for the TSX index.
You have participated in the launch of funds specializing in initiatives specifically devoted to environmental protection. Does it work ?
We invested 30 million in the launch with the firm Econoler of SOFIAC, the Energy Efficiency Funding and Support Company. This is a fund that allows companies to reduce their carbon footprint and increase their energy efficiency, and which is financed from the energy cost savings it allows.
It is a unifying project and one that works to the point where the Federal Bank of Infrastructure has decided to invest 100 million and Fiera infrastructure, to inject 60 million.
More recently, you launched a new circular economy fund. What exactly does it consist of?
We launched the fund last spring by working in collaboration with RECYC-Québec and the City of Montreal to use the by-products of mature food companies to enhance them, such as soy okara or beer spent grain, which are thrown away when they are full of protein. We are going to finance companies that want to add value to these by-products.
Let’s come back to your investment plans. What is the limit on public subscriptions that the government has imposed on you this year?
We had no limit this year. Last year, Quebec had capped subscriptions at 275 million, but this year, we were not set a limit. However, it was decided to limit the new capital to 350 million. We also stopped accepting new subscriptions in December because we are going to achieve our objectives with withholding taxes.
Do you foresee that the next year will be as prolific as the last two?
In good financial terms, I will tell you that I cannot answer this question. Yearly returns are something, but what matters is duration over time. We are very satisfied with the returns of 9% over 5 years and 5.9% over 10 years. I think our investment thesis can allow us to replicate such returns.