Accelerating Impact 2020 - 2017 Plan

Make Good Money (TM) is a trademark of Vancouver City Savings Credit Union. Table of Contents

The opportunity is growing ...... 1 Growth with impact...... 3 Transforming the way we work...... 8 How we measure success...... 10 Financing growth with impact...... 15 Assumption testing ...... 16 Final thoughts ...... 16 annual increases in real GDP . This has coincided with debt The opportunity is growing load increases to historical highs and limited relative income growth resulting in stretched household balance sheets . In 2015, a group of Vancity staff gathered to form our first Within this context, financial institutions face a challenging “Trendwatchers” group – dedicated to gathering, and sharing, environment both provincially and nationally . Challenges insight from members and communities about how the include an increasing regulatory burden, reduced government changing dynamics of society, economy and climate were support (e g. . reduced CMHC insurance), reduced revenues affecting them . As noted in their report at the time, the from low interest rates, and disruption due to technology power of community has increased within and across borders innovations within the industry and to the broader real and has become a catalyst for driving change . “Citizens and economy . This highlights the risks as well as the opportunities consumers are challenging closed systems and changing the we have in this environment . How we respond to the face of governance and public decision-making . The rise in increasing needs of our members and their communities will social activism, particularly challenging governments, suggests require careful planning and agility . the beginning of a shift from gaining power to using power” (p . 38) . As we reflect back on that report today, the words of our Trendwatching staff seem prescient . What are we seeing and hearing on the ground? Vancouver continues to be a city that people want to live The socioeconomics of our country and our region are in, despite the fact that it is an expensive place to live and changing . And this change is occurring within the context of work . In many cases, the only option is to move further into an increasingly uncertain world . The increasing mobility of our the suburbs and pay the price of a longer commute and less population, the growing diversity of cultures and languages, time for family and community . Therefore, whether it be the emergence of multigenerational communities and the Millennials looking to purchase their first home or seniors disruption created by a declining resource-based economy looking for housing that meets their needs and keeps them and an emerging digital economy are placing increased connected to community, the demand for affordable pressure on established social, political and economic solutions is not slowing . systems .

The call to action is louder than it’s ever been . . .and Small business owners are also feeling the effects of therefore the magnitude of the challenge and the size of affordability issues . Despite these challenges, this is a growing the opportunity are growing even faster . segment of the BC economy, attracting Millennials and others who are choosing to open local businesses rather than work for global corporations . It is also attracting entrepreneurs A macroeconomic view – the big picture who see the opportunity to leverage emerging technologies Our view has been that the real economy should be rooted to create new, and potentially scalable business models with in jobs and sustainable consumption of goods and services . limited capital investment . In our ideal real economy, it has sustainable debt levels, diversified employment with living wages, and affordable Metro Vancouver, the Fraser Valley and Southern Vancouver housing . However, what we are observing is growing Island now accommodate nearly 60 per cent of all British community needs . This is evidenced by a continued widening Columbians . With increasing pressure on infrastructure, of the wealth divide, housing unaffordability, increasing the demand for alternative sustainable solutions can only household debt, increasing cost of living, demographic shifts, intensify over time . and by fundamental changes in the nature of work as well as The majority of immigrants choosing to settle in BC come to the composition of the workforce . the Lower Mainland, but because their skills and qualifications The financial economy (which should work in service of the may not be recognized, many remain under-employed . In real economy) has expanded as a result of central bank’s response, our research has shown that immigrants are 30 per monetary policies following the 2008 Great Recession (e .g . cent more likely to start a business than non-immigrants1 . low to 0% interest rates) . The real economy, however, has We know that immigrants tend to strengthen the economy not responded sufficiently relative to these extraordinary in their new communities . For example, Syrian refugees are central bank policies . We are observing a mediocre growth expected to boost our provincial economy by more than half in the real economy as measured by the 2 per cent average a billion dollars over the next 20 years .

1 Vancity, From Crisis to Community: Syrian Refugees and the BC Economy, December 2015 . 2 Deloitte Millennial Survey 2017

1 We are also seeing a growing interest in impact investing And increasingly, these expectations must be met at a lower among institutional and high net worth investors . The same cost or free of charge . “In branch advice” was always free . is true of Millennials who cite social impact as one of the The online/mobile transactional space is increasingly “free” most important roles of business 2. A recent report showed – supported by advertisers and those who choose premium that more than half (59%) of British Columbians say they are packages . All of this is occurring in a local environment that interested in socially responsible investing (SRI) but have yet continues to become less affordable for our members . to participate in this market3, which totaled $9 .2 BN assets There has always been a diversity of members service needs under management (AUM) in Canada in 2015, an increase of at Vancity . Those who used ATMs and the call centre versus over 70 per cent from 2013 . those who came into the branch, for example . However, since This is not an exhaustive list, but it highlights the fact that the introduction of mobile phones and tablets ten years ago, the opportunity for impact is not diminishing despite global the pace of change – and hence the pace at which the needs uncertainty . In fact, opportunity for impact is growing and are diverging – is widening . our members are asking us to do even more in terms of social How will we keep pace with the expectations of our “online” justice, financial inclusion and environmental sustainability . members without leaving our “in-person” members behind? How do we attract new members who are interested in Our membership is diverse – and becoming investing locally with impact in a way that is efficient and more so convenient – even at small dollar amounts? How do we As a community-based co-operative serving a young and serve small business online in a way that save them time and growing region, Vancity’s membership has always been money, but still provides them with customized advice and diverse . Diverse in terms of age, gender, cultural background links them to the community partners they need? and socioeconomic status . We have built an enviable There is no single strategy that will get us where we need reputation through successfully and empathetically serving to go . We need a portfolio approach – one that recognizes our diverse membership in personal and local ways . This has the complexity of working to deliver impact in a networked earned us many “Best of” awards, and countless member world that is connected 24/7 . accolades and references . The result has been a loyal and stable membership . To do this well, we need to change the way we work . We will Our recent financial system conversion has shown us many need to become even more open and transparent around things, but one of the most significant has been the diversity what we are doing and the way we are doing it . We will need of the means through which our members choose to interact to get more comfortable with experimentation and testing . with us . While nearly three-quarters of Canadians now do We will need to listen more deeply and look for ways to make most of their transacting digitally, using online and mobile things work even when they fall outside our ‘normal’ way of services4; we see that approximately 250,000 members – doing things . almost half of our entire membership – only interact with Our members want more from us . The call for social justice, us online or via mobile and these members are asking for financial inclusion and environmental sustainability is growing more mobile and digital functionality through additions such louder and the co-operative values that drive how we do as e-signatures, online loan applications, consolidated Visa what we do are more important than ever . and account and transaction views, “click to chat” call centre response, video options and online wealth advice and service . Our conclusion - the world needs more Vancity . More connection, more convening, and more partnering with We also have a percentage of our membership who deal with members and communities to find sustainable solutions for us precisely because we don’t force them to be online – as the benefit of all citizens . We need to be deeply connected evidenced by our decision in BAR to preserve passbooks . This to the many systems that are operating in community and is something no other Canadian financial institution did when how they work together to create impact . implementing T24 . These members value the face-to-face relationships built with our staff and the trust, confidence Our 2020-2017 Business Plan outlines what we see as the next and independence that this way of doing business gives them steps in our transformational journey to 2020 and beyond . as a result .

3 Vancity, Majority of British Columbians interested, but not yet participating in socially responsible investing, January 2017 . 4 Canadian Bankers’ Association, How Canadians Bank, March 2017 .

2 practices . For example, we learned that including alternative Growth with impact factors such as social capital and environmental sustainability in the adjudication process supported a shift in our lenders from a transactional mindset to a relationship mindset . Setting the stage for growth with impact In the 2020-2016 Business Plan, we described 2016 as a Additionally, our focus on establishing leadership in the small transitional year for Vancity – one that would set the stage and medium-sized enterprise market in Surrey continued, for growth with impact over the next five years . achieving our three year target of $400MM in impact lending at the end of year two . Since that time, we have made some good progress on our core strategies . 2016 was also a year full of rapid prototyping as we prepared for the post-BAR world by exploring partnership 1 . Redesigning the way we work opportunities in the fintech space . Applying the minimal viable product (MVP) approach1, our online Fair & Fast loan We made structural changes to support our redesign with the application will be the first digital solution enabled by our API goal of becoming a two-speed organization – one that allows gateway2 – an important step towards eliminating members’ us to continue meeting our members where they are today dependence on high-cost, predatory lenders, while testing while also exploring, designing and testing out innovative our ability to deliver this value to members in a convenient solutions to deliver sustainable impact in the future . As and efficient way via mobile . part of this work, we made changes at the executive and senior leadership levels to facilitate the level of integration and collaboration as well as the speed of decision making The risk of business as usual needed to accelerate our work . We also activated our From this starting point, we looked at our current core Explorer Network and with it over 200 employees have been operations to understand what continuing our business as mobilized thus far, strengthening our ability to gain on-the- usual would provide in the short, medium and long term . In ground insights into the emerging drivers of impact within this scenario we hypothesize the outcomes of maintaining the context of our members’ diverse needs . business as usual . We would continue our current line of business trajectories, implement the approved National 2 . Implementing our financial system (BAR) . Community Investment Initiative but otherwise take a We implemented our financial system (BAR) as planned . While responsive, incremental approach . “Business as usual” assumes there were certainly learnings from this work regarding member slower growth, reflecting macroeconomic forecasts, and experience, staff needs and change management, we now aligning technology updates only with Central 1’s roadmap as have a modern financial system that will allow us to add more opposed to innovating . We see increased expenses and by digital and technological functionality to support convenience, being a market-follower, our product offering would likely access, analytics and communication for our members . narrow from our members’ point of view .

3 . Enhancing our Differentiated Member Experience (DME) with a focus on leadership, talent and credit Our third core strategy focused on delivering our differentiated member experience with significant investments in leadership development; another 30 participants joined our Leadership DME program which provides individualized development planning, mentoring and coaching to staff . Our work on the Talent DME saw an increase in the movement of people across the organization as part of our focus on building a stronger talent development culture . Finally, as part of our Credit DME work, we piloted a credit worthiness prototype through which we gained valuable insights into how we can apply more inclusive lending

3 As you can see in the graphs below, “business as usual” does not provide a financially sustainable future and we fall short of our goals for 2020 .

Yield and efficiency ratio

100 1.95 Business as usual – ER 1.90 95 Yield 1.85 90 1.80

85 1.75

1.70 80 % Yield

1.65 Efficiency ratio % ratio Efficiency 75 1.60

70 1.55 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

ROME

9 Targeted ROME: 7-10% 8

ROME % ROME 3

0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

The financial results of the “business as usual” scenario show a high level of risk to ROME due to increased market disruption in the digital arena and resulting pressure on yield . Our assumptions show that our annual pace of earnings decline in later years accelerates in excess of 15% . This is corroborated by external findings . According to outlooks by the multinational DBS Group, changes to the digital financial services landscape will result in significant impact to Net Interest Margins (NIMs) by 2020 . “While it is still too early to quantify exactly the impact of such initiatives on the NIMs of financial institutions, we estimate that digitally savvy financial institutions can at least sustain their NIMs versus a 15% drop in NIMs for non-digital financial institutions.”3

There is a clear call to action to transform our growth with impact, and our strategic portfolio was built for that purpose .

3 Digital Banking, DBS Group Research, September 2016

4 Building our Strategic Portfolio licensing, and procurement requirements . In addition, hiring and retaining employees is often challenging for business Last year we also introduced the idea of adopting a portfolio owners who are spending the majority of their time simply approach to accelerating our growth with impact . managing day-to-day operations . These challenges are We developed the Quarterly Strategic Portfolio Report exacerbated among those who lack the knowledge and skills to provide greater visibility into the strategy work of the to access and fully leverage digital technologies that could organization including areas for exploration, accelerator provide greater capacity and new growth opportunities . projects, prototyping activities and strategies in development We are also seeing an increase in the prevalence of as well as supporting organizational priorities needed to solopreneurs - individual operators by choice or by necessity ensure we have the capability and capacity to deliver . who are dealing with a growing gig economy and a decline The goal of our strategic portfolio is to identify the right in the number of full-time, permanent jobs . According to blend of investments that will allow us to make the highest Stats Canada, the number of workers with permanent jobs and best use of our resources in service of our 2020 goals . declined from 90 per cent in 1997 to 86 per cent in 2013 . Like other investment portfolios, we do not assume that Of the 390,000 “businesses” in the province in 2016, the BC every single investment we make will generate increases in Business Council report that half are one-person operations . member well-being, TBLAA , membership growth, ROME and The nature of the employment contract is changing and with capital . Our objective is to have a diversified portfolio that it, the inclusive infrastructure needed to support solopreneurs is driven by member need and is able to produce sustainable and help them thrive such as employer-supported health yield and earnings consistent with our 2020 goals . As such, benefits and insurance is at risk . our portfolio holds a broad collection of opportunities that The opportunity. We have a significant opportunity to grow are expected to deliver in different ways . with impact by delivering a more comprehensive suite of Based on the needs and opportunities we have identified solutions to meet the needs of small business owners and thus far, we see our strategic portfolio delivering growth with solopreneurs . impact in three ways: 1 . Solopreneurs – Our Explorer Network noted that while 1 . Doing more business with our existing membership by solopreneurs value the flexibility, autonomy and creativity offering a broader suite of solutions to meet their wealth of self-employment, there are distinct pain points: lack management and small business needs, of income and job stability, absence of benefits (e .g . health, pensions, maternity leave, sick time), difficulty 2 . Acquiring ready-made impact by leveraging our bank accessing credit (e .g . “There is an institutional bias against charter to meet the needs of the social enterprise sector non T4 workers”), lack of back-end business supports, and in underserved communities beyond BC starting in the isolation . We see an opportunity to address some of these Greater Toronto Areas, and pain points through pooled health benefits and insurance 3 . Increasing our impact by meeting the needs of our offerings as well as referrals to vetted professional existing members who choose to do their transacting services sourced from within our membership base such online or through mobile and empowering underserved as bookkeeping and accounting, legal services and advice, members who are part of the growing digital divide . and billing and administration support .

More detail on our strategic portfolio investments is 2 . Small business owners – By delivering a more personalized provided below . experience that goes beyond lending and basic services for business members we can provide more holistic business Strategic Portfolio Investments management services that will make their lives easier while also supporting the growth of sustainable small businesses . Community business opportunity (CBO) Impact investing The need. Our business members are feeling the effects of affordability issues in the Lower Mainland and Southern The need. As already reported, the impact investing market Vancouver Island; it’s expensive to live here and it’s also is growing . High net worth individuals as well as socially expensive to run a small business . Many small business conscious Millennials are looking for investment options that owners understand the importance of accessing new markets deliver a social or environmental return as well as a financial to grow but they do not know how to do it . Access to the one . This has generated increased demand for publicly traded capital they need can be difficult and they often lack the solutions as well as growing interest in alternative impact capacity to address complex reporting, training, inspection, investment vehicles .

5 Major fund companies see the opportunity and are looking fragmented and underdeveloped . The result is that we see for ways to capture this emerging market . In an effort to organizations that Vancity cannot reach that are looking at move into this space, a growing number have signed on to issues differently, but lacking in the capacity, capability and Principles for Responsible Investment (PRI), an independent, partners to help them grow and become sustainable . not-for-profit organization advocating for an economically efficient, sustainable global financial system for long-term The opportunity. We have an opportunity to leverage and value creation . Others are looking to increase their ability to extend what we do at Vancity through our bank charter respond to this demand but don’t have the capacity to build – to connect those who want to invest in impact to the a diversified impact portfolio quickly . As a result, demand for organizations that can deliver it . impact investing opportunities is outpacing supply . Digital services The opportunity. Vancity has a significant portfolio of The need. Digital technologies are advancing at an impactful debt assets in our Community Real Estate and unprecedented pace and contributing to the widening Community Business & Investment portfolios that could economic and social divide among members and their be leveraged (e g. . Green Buildings and Affordable Housing) . communities . Some members are benefiting from the We are also the only credit union in Western Canada that move to digital, but many are underserved; they either lack has an investment team of portfolio managers providing access to digital services due to cost or technology or the discretionary investment management services and sub- knowledge and skills needed to leverage the information and advisory services to individuals, foundations, trusts, unions tools available through digital technology . In either case, the and other organizations . Our team is an industry leader in result is a potential loss of opportunity, access to services and socially responsible investing, known throughout Canada for income . This divide is further exacerbated by the operating their analysis and expertise . models underlying the majority of digital platforms out there today which are designed as closed systems in which the Given all of the above, we have identified the following terms and conditions of participation are tightly controlled . opportunities, both of which focus on increasing our Triple Bottom Line Assets under Administration: The opportunity. We see a significant opportunity to take what we do today and what we do well, and translate it into 1 . Pooled Funds5 – We see an opportunity to do more in the the digital environment . form of pooled funds . Through VCIM we can manufacture Responsible Investment (RI) pooled funds (both retail There are many new entrants into the digital financial services and institutional), RI exchange-traded funds, RI separately space . Members have a whole host of choices on how to managed account solutions and other innovative solutions manage their money, access capital, share expenses – and invest all of which could be offered to both members and non- in things . Equally, there are many new digital offerings in the members . social impact space whether they are to help groups volunteer, 2 . Impact Income Funds – We also see the potential purchase things together or support a cause . However, as for significant growth in our impact assets (TBLAA) McKinsey’s research on market need confirmed, in Canada by providing a full suite of investment private market there is no one who has put these things together to link social solutions that drive impact . By structuring our loan finance to what people care about . This is our opportunity . portfolio to become debt securities that others can We envision a digital DME platform that takes the elements purchase, we can attract investors who are looking for of our co-operative and allows us to deliver financial services alternative impact investment options . The development while also supporting a wide range of connections, including of an impact income fund could also encourage members member to member, business member to retail member, to move their investable assets currently held elsewhere member to community, community to Vancity and more . Our back to Vancity as well as offer an income source for success will be measured against three criteria: members who are not high net worth but looking to leverage their assets to fund their retirement . • It must be able to bring in new members and new sources National Community Investment Initiative of revenue in order to pay for the necessary investment (Vancity Community Investment Bank) and help to sustain Vancity . • It must enable member-led innovation and our The need. There are communities beyond BC where differentiated member experience . healthy community growth is constrained due to a lack of partners willing to invest in impact . This is due to the fact • It must create capacity in terms of talent, time and that the impact investing market in Canada is still emerging, financial resources .

6 This means building a Minimum Viable Product (MVP) that will enable us to build out some core functions of the platform, test them with members and others, and then iterate based on their feedback . This will be development based on existing member needs and applied in our current geographic market, although digital has no border, so it is possible others will be interested and we can then capitalize on that interest . In fact, we think that if we build something that is interesting, connecting members to their money in a meaningful way, something that is simple and frictionless, this will be a natural member growth engine that will deliver on our business model at a much lower efficiency rate .

Assumptions/Principles guiding this work • Any digital strategy we pursue must be consistent with our vision of redefining wealth and must make significant advances toward our goal of healthy communities . It must be values-based and inclusive . • We need to recognize that our membership is diverse when it comes to confidence and ability to access us digitally . Our strategy must address this diversity (no ‘one’ left behind) but also no ‘one’ left out . • Our staff capabilities are diverse when it comes to confidence in using digital to serve and advise members . Our strategy must address this diversity and be able to leverage the key digital skills we have now in some, while building the capability for working in a digital way with others . • While time is of the essence, we will move more boldly into the digital space in an evolutionary rather than revolutionary way . Our path forward will allow us to transition without having to lay off staff nor reduce member services (e .g . close branches) to pay for it . • We will remain a locally-focused financial co-operative, headquartered in Vancouver

1 Minimum Viable Product (MVP) approach refers to developing a product with just enough features to satisfy early adopters, and gathering feedback for future development . 2 API Gateway refers to an application program interface that allows two or more software programs to communicate with each other . API Gateways streamline the management, deployment, development and operation of APIs . 3 Digital Banking, DBS Group Research, September 2016 4 Triple Bottom Line Assets under Administration 5 Previously referred to as VCIM Plus 6 A digital platform is a technology platform on which businesses or organizations are able to build new business models and extend their reach into new or emerging markets in the digital space . Examples include Facebook, LinkedIn, and Spotify .

7 our members . As we engage with our members in different Transforming the way we work ways going forward, branches will remain the focal point of convening and servicing, but it is more likely that they While our transformation is externally driven by the needs of will look different in size, location and design to serve the our members, it must be achieved by working from the inside evolving and diverse needs of our membership . out and by changing the way we work . The priorities described (4) Moving to digital - In 2017, we will be looking to pilot a in this section of the plan represent the levers through which new way of interacting with members in all areas (on the we will transform the way we work and ultimately future-proof phone, text, email, video, etc .) as part of the digital DME the organization so that we remain relevant and responsive to platform with a potential full roll out in 2018 . This will the evolving needs of members and their communities . allow members to move seamlessly from one mode of communication with us to the next based solely on their More detail on our organizational priorities is provided below . preference (e .g . a loan application that begins online and Retail operations initiative finishes with a call to the Contact Centre) . Our differentiated member experience calls us to deliver Sustaining our financial system empowering, consistent and convenient service to our We will continue to focus on BAR stabilization in 2017, moving members – those who want to continue using traditional into sustainment in 2018 . We are defining stabilization in financial services as well as those choosing to transact online terms of three broad categories of outcomes: technology, or through mobile . In the retail landscape, this involves members and staff . Overall stabilization is defined as a phase ensuring no members are left behind . where members are able to conveniently conduct daily (1) Investment in our member-facing employees - We will transactions, experience confidence in the system, in their be looking to focus on foundational work in order to statements and online transactions, and we have become prepare our retail operations for a more digitally-enabled confident in using the system for our work . environment . This is work that was largely put on hold Data framework for the past two years due largely to BAR . Our priorities include optimizing the utilization of our new CRM system A key area of focus in 2017 will be to improve our data in order to ensure consistent conversations with members governance . This will include the development of a data regardless of the staff member contacted, continuous strategy for how we manage and govern data and what process simplification (e .g . reducing the number of policies policies and processes need to be developed or revised . For or approvals) and training . Getting this right will improve example, we need to ensure we update and build proper the consistency and quality of service at each interaction consent mechanisms into all our data collection points to as members’ move from one touchpoint to another . It will protect members’ privacy; we need to ensure we maintain also ensure that our employees have the knowledge, the accurate inventory of what data we have and how it can confidence and the capacity to deliver our DME . be used, etc . The data framework will allow us to properly collect, access and use all our data . We expect to have a Data (2) Mobile Account Managers - Our members tell us they are Governance Council in place in Q4 . not always able to access the branch, either because they have mobility challenges or are working long hours and A second area of focus is strengthening our advanced are unable to make it into the branch during regular hours . analytics capability comprising three parallel work streams: In 2017, we will be piloting a mobile Account Manager (1) The development of data dashboards to support timely, role focused on advancing our differentiated member informed decision-making, experience by offering personalized services outside of traditional branch hours . The initial focus for this work will (2) The rollout of self-serve business intelligence functionality so that staff can access information they need to support be seniors (e .g . meeting them at community centres) and the DME with members and, working professionals (e .g . meeting them at a location of their choice or videoconferencing) . This work pairs with (3) The development of predictive models that will allow some employees’ desires to work more flexible hours or us to anticipate the emerging and future needs of our at different work sites in order to manage the competing membership . For example, we are currently working on needs of work and family . a predictive model that will allow us to determine the optimal payment schedule for borrowers to support (3) Branch insights - With the above work underway, we will turn successful loan repayment . our attention to optimizing our physical presence starting with understanding branch performance and identifying We will also begin work on enhancing our central repository where and how we show up in “bricks and mortar” to serve of information and insights to give employees across the

8 organization greater access to information and insights, including Embedding reconciliation as a core value for example, all the work of the Explorer Network to date . In November 2015, the Board approved the addition of Talent plan ‘meaningful reconciliation’ as a core value of Vancity . “We believe to truly engage and realize the possibilities Vancity’s vision requires that we continue to learn and grow with Indigenous partners and communities, a personal with our members . The purpose of Vancity’s talent plan is understanding and connection is necessary ”. 1 to do just that . While redefining wealth is not something that we can do alone, it is also not something others can do Six core principles will guide this work: on our behalf . We need a passionate, committed workforce that has the skills and knowledge to bring our differentiated 1 . We will embrace the request of Indigenous people: member experience to life on the ground . “Nothing for us, without us ”. 2 . We will see authentic dialogue . In 2017, the key priorities of our talent plan are threefold: 3 . We will be intentional . (1) Mobilizing employees around our differentiated member 4 . We will strive to engage with kindness and in a non- experience – While we have a variety of mechanisms judgmental way . in place to mobilize employees (e .g . Explorer Network, Branch prototype, Surrey Community prototype, Process 5 . We recognize that not everyone will be at the same Simplicity, Rapid Prototyping, and Accelerators), the place in their experiences or thinking about meaningful connection between these mechanisms and activating reconciliation . new ways of working in the organization is not clear to 6 . Our work will be ongoing; truth and meaningful many employees . In many cases, employees are viewing reconciliation will be explored, nurtured and practiced these experiences as something outside of their daily over time . work rather than opportunities to develop skills that can be applied to how they approach their work everyday . Embedding reconciliation in our employee base is not an In 2017 we will use the findings of the external employee easy thing to do, but we believe it is inextricably linked to engagement survey administered in Q2 to gain a generating opportunities for growth with impact in the deeper understanding of how we can accelerate our communities we serve . We began this work earlier this year internal transformation . This will form the basis for the and have a plan in place for 2017 that will engage employees development of a comprehensive organizational learning on the need for meaningful reconciliation and why it matters . strategy focusing on the redesign of people practices and policies to support a culture of continuous learning and Summary innovation . Everything we do is in service of achieving our 2020 goals, not (2) Developing strong people managers – An engaged just what sits in our strategic portfolio . The priorities outlined workforce requires strong people managers that are able here describe how we will increase the effectiveness of the to build trust, set context, manage diversity and develop organization in addition to what we have already put in place highly engaged teams . Some foundational pieces were through our redesign earlier this year . They will be funded activated earlier this year and will be completed by the through existing operations . Over time, we expect to see our end of Q3 . The focus thus far has been on building the efficiency ratio slowly start improving as the Retail Operations collective clarity of our people managers around their initiative and BAR sustainment priorities create increased role in redesigning the way we work . Again, taking the lead capacity to deliver our differentiated member experience . At from the findings of the employee engagement survey, the same time, our investments in data and people will enable we will be looking to supplement this work in the latter us to mobilize resources quickly so we can achieve the scale half of 2017 and into 2018 with a more intentional focus on we need . management development through some combination of Our organizational priorities will contribute to improving the training, mentoring and experience . efficiency ratio of our core operations to 75 per cent or lower (3) Extending the depth and breadth of our leadership by 2020 . These improvements will be accelerated further by pipeline – We need to grow our leadership pipeline so our strategic portfolio investments and our Digital services in that we have the talent we need to deliver on our 2020 particular . goals and beyond .

1 ELT Memo, November 23, 2016, page 1 .

9 2020-2017 Organizational Dashboard How we measure success The strategies included in this plan focus on meeting the needs of existing members and supporting those who want For 2016, we presented a new business plan to the Board – a to transition to digital with an eye to the future potential of plan based on the size of the opportunity Vancity has to activating a DME digital platform . Our plan focuses on leaning accelerate impact and meet the evolving needs of the real further into the communities we serve today while extending economy: our differentiation into the digital space to meet the needs of those who are underserved as well as the growing number of $40 billion with 50 per cent of total assets members choosing to manage their money online or through allocated to impact by 2020 and Vancity’s mobile channels . membership growing to 600,000 in the same The organizational dashboard summarizes what we will period. achieve over the next three years as a result of making these investments . We see the size of the opportunity Vancity has We used $40 BN as a way to translate the magnitude of to accelerate impact at scale growing and therefore our 2020 unmet needs we see emerging into a goal that makes sense goals remain unchanged . Our 2017 goals summarize what we to the organization . We used assets or TBLAA as a way to expect to achieve over the next six months . We have also translate those unmet needs into the parts of the community included a view into what we expect to achieve by December landscape that we can affect as a financial institution . 2018 following the launch of a broader suite of solutions to Having said that, we recognize that our vision for redefining meet our members’ wealth management and small business wealth is about more than the redistribution of assets; it is needs, the acquisition of impact through the Vancity about creating a more inclusive, sustainable society . If we are Community Investment Bank, the launch of our Digital DME successful, Vancity will play a greater role as an agent of social platform & services, and our continuing focus on redesigning change by finding innovative ways to apply our toolkit to the way we work . support building healthy communities, whether in the analog Impact (the positive difference we create because of our or digital space . vision and values)

2020-2017 Organizational Dashboard

2020 Redesigned 2018 2017

Impact

Member Well-Being Index 75-80 75-80 75-80

Triple Bottom Line Assets Under Administration 50 .0% 26 .3% 23 7%.

Contribution to Well-Being 28% - 35% 26% - 33% 26% - 33%

Confidence

Size of Membership 600,000 560,000 535,000

Return on Members’ Equity 7-10% 5 .3% 5 4%. (net calculation after Shared Success)

Capital Adequacy Ratio 13% 13% 13%

Net Growth Funding Ratio 80% 80% 80%

Integrity

Employee Engagement Goal TBD Goal TBD Goal TBD

10 Enhanced Member Well-Being Contribution to Well-Being We need to be able to demonstrate that what we are doing In 2016, the Board added ‘Contribution to Well-Being’ to our is creating the impact that our vision promises, not only the top-of-the-house metrics . This indicator looks at the degree financial impacts of our work but the non-financial . This is to which a member believes that Vancity has had a positive the genesis of our Enhanced Member Well-Being index that impact on his/her well-being . As part of this survey, a sample was first presented to the Board in 2012 and has continued to of Vancouver residents are asked the same question as it evolve since that time . relates to their primary financial institution .

As presented in our 2020-2016 Business Plan, the annual Results for Contribution to Well-Being for Vancity members range for Enhanced Member Well-Being for 2020 remains ranged from 23 per cent to 32 per cent in 2016 . We ended the unchanged . Our theory of change also remains the same . year at 28 per cent . In all but the second quarter, members If we deliver on our business model, we will successfully rated Vancity higher than those whose primary financial contribute to building healthier communities and our institution was not Vancity . While this metric does not members’ personal well-being will increase over time . The provide insight into potential underlying drivers that might better we get at connecting what we do to what is important explain the difference, it nonetheless represents an important to our members, individually and collectively, the more test of our business model which assumes that members member well-being will improve . choose Vancity because our vision and values align with what is important to them . However, as outlined earlier, the current social and economic infrastructure is falling short, placing increasing stress and We have limited baseline data on Contribution to Well- pressure on members and their ability to meet basic needs Being . However, in 2017, we expect the trend of 2016 to such as housing and employment . Given this environment, continue – a greater proportion of Vancity members will we do not expect to see a significant upward trend in the rate Vancity as having had a positive impact on their well- short term . However, we will continue to closely monitor the being compared to Vancouver residents who access their underlying dimensions of this index to identify emerging pain financial services elsewhere . We ended 2016 at 28 per cent points and potential opportunities to accelerate impact . of members but given our focus on more actively engaging members in identifying needs, mapping member journeys Triple Bottom Line Assets under Administration (TBLAA) and testing solutions, we expect to see an increase in 2017 Triple Bottom Line Assets under Administration is a as our connectivity to our members grows . By 2020, we composite measure of the percentage of on and off balance expect to see further improvement as our suite of offerings sheet assets invested in impact . The calculation of this metric grows and more members experience the benefits of digital is based on seven asset categories: Treasury, Business Lending, empowerment . Consumer Loans, Residential Mortgages, Premises, Other Confidence (the evidence that what we are doing is good for Balance Sheet Assets and Assets under Management . business) The theory of change underlying this metric is that if 100 per cent of our assets are invested in building healthy Size of Membership communities consistent with our guiding principles, the world The opportunity for impact is growing . By partnering with will be a better place . As already noted, the opportunity members and communities to find sustainable solutions for for impact is growing and our members are asking us to do the benefit of all, we expect our diverse membership will even more in terms of social justice, financial inclusion and grow, attracting a greater share of Millennials and values- environmental sustainability . Whether it be support for aligned partners who want to invest their money in things small business owners looking to create scalable businesses, that create local social and environmental impact . members looking for alternative impact investment opportunities, the needs of newcomers choosing to grow We will be applying impact to more of what we are doing as a their families in BC, or increasing pressures on our social result of the strategies and initiatives included in our 2020- infrastructure, the magnitude of the challenge and the size of 2017 Business Plan . Our Community business opportunity, the opportunity we have to accelerate impact is significant . Impact investing and Retail operations initiative will enable us to provide enhanced service and advice to meet members’ As we look to grow our TBLAA to 50 per cent by 2020, it diverse needs . Moreover, by meeting members where they requires that we focus not only on growing our impact assets are, whether that be in the digital space or outside the branch over time, but also replenishing those assets that naturally (e g. . mobile Account Managers and Business Advisors), we will mature . deliver more inclusive, just-in-time advice and support .

11 We are also getting better at explaining what we do as June and will be shared with the Board; we would like to we activate member-led innovation more fully across the use the results as a baseline against which to set employee organization . Following the introduction of our new integrated engagement goals for 2018 and 2020 . At the same time, we structure earlier this year and the focus on activating a two- will continue to work on developing a talent dashboard as speed organization, we are engaging with more members part of our Talent plan . more of the time . We are moving away from a product-based approach to a needs-based approach in which the voice of For consideration: rethinking our the member is embedded in everything we do . organizational dashboard We have made good progress in redesigning the way we 2016 was a year of transition – one that provided some work and expect that as a result of these changes, we are important learnings . The first is member engagement . As we better positioned to deliver a truly differentiated member learned through the BAR Program, this needs to be a bigger experience that will translate into more members choosing part of what we do going forward . Vancity as their primary financial services relationship over Member engagement is a key part of activating member- the next three years . led innovation . Our members help us build a network of Return on Members’ Equity (ROME) knowledge and insights about what makes communities healthy . If our members do not understand or like what Our goal is to maintain a sustainable level of ROME . We we are doing, the likelihood of engaging them in activating are not looking to optimize returns, but to ensure that we member-led innovation will be very small . will meet our capital and liquidity requirements to support sustainable growth with impact . The same is true when it comes to community engagement . Partnering and prototyping are central to most of what is We currently have sustainable growth that is producing solid included in our portfolio, but if community and business earnings . Expenses relative to core operations are stable but partners do not understand what we’re doing or don’t believe the investments in our strategic portfolio will put downward that what Vancity says is true, we will not be able to build the pressure on ROME . Careful management of core and strategic network of partners we need to accelerate impact at scale . portfolio investments will be required to maintain ROME at five per cent so that we are able to make the investments We also learned that we have not done a good enough needed to achieve seven to 10 per cent ROME by 2020 . job bringing our employees along the journey . They do not understand the redesign nor what their role is in the Capital Adequacy future . In many cases, the things we are talking about, such Our capital plan is based on maintaining a 13 1. per cent as TBLAA, do not resonate . Is there an opportunity to use a capital adequacy ratio . As highlighted in our 2016 Capital more inclusive definition of impact – one that would more Plan roadmap, Vancity has a number of options available to fully reflect the activities of the credit union in service of optimize its capital position in the shorter term as well as the building healthy communities as well as strengthening the link longer term . between our employees and our vision?

Net Growth Funding Ratio All this to say, we have identified some gaps in what we are According to our fiscal framework, we are committed to doing as well as some opportunities . So why wouldn’t we fund at least 80 per cent of new member loans with new include them on our organizational dashboard? member deposits . While we are not required to do this from a regulatory perspective, our funding ratio is what makes Vancity different . Our source of capital is the community because we lend to meet the needs of the real economy . Not only does this ensure the member engagement and connectivity we need to build healthy communities, it gives us the autonomy we need to fund our impact ambitions .

Integrity (how we deliver impact and demonstrate confidence based on trust)

In May of this year, we launched an employee engagement survey in order to get a more fulsome view of how the organization is doing . The results will not be available until

12 By the end of 2018, our dashboard could look something like the following:

2020-2017 Organizational Dashboard 2020-2018 Organizational Dashboard

Impact Impact

Contribution to Member Well-Being Contribution to Member Well-Being

Member Well-Being Index Contribution to Community Well-Being (NEW)

Triple Bottom Line Assets Under Administration Triple Bottom Line Actions (MODIFIED)

Confidence Confidence

Size of Membership Size of Membership

Return on Members’ Equity Return on Members’ Equity1

Capital Adequacy Capital Adequacy Ratio

Net Growth Funding Ratio

Integrity Integrity

Employee Engagement Employee Engagement

Community Engagement (NEW)

Member Engagement (NEW)

Impact past year, we see the value in the underlying 10 dimensions as a means of identifying potential pain points that we would We see an opportunity to enhance our Contribution to want to explore more fully . That said, we see it as a better fit Well-Being indicator by not only asking members if we have with our other management indicators . had a positive impact on their well-being, but asking whether or not we have had a positive impact on the well-being of Confidence their communities as well . If we deliver a truly differentiated member experience, we expect that our members understand This section of the dashboard would remain essentially the community impact that our relationship with them unchanged with the exception of the Net Funding Ratio creates . This addition would provide a more fulsome test of which we would continue to use as a management indicator the impact we are creating . to monitor our funding activities .

Triple Bottom Line Actions would be an expanded indicator Integrity including not only the percentage of on and off balance As explained above, given the integral role of employees, sheet assets invested in impact, but the percentage of all the members and communities in achieving our vision, we see actions undertaken by Vancity consistent with our ethical these indicators as important additions to our dashboard . principles and in service of building healthy communities . They give us the opportunity to test whether or not our This includes assets, people, capital, advocacy, procurement, business model is working . If we are not actively engaging our sponsorships, grants, income, liabilities, and all we do around employees, members and communities, we are not delivering community engagement . An expanded indicator such as our differentiated member experience . And if we are not this would move us closer to capturing the full diversity of delivering our DME, we will not be able to accelerate impact the impact toolkit we have in place today . We also believe it at the scale our vision requires . would resonate more with our employees many of whom are actively engaged in impact but not directly involved in the These indicators will give us greater insights into how the key distribution of assets . levers of our business model are or are not working together to activate member-led innovation and build healthy The Enhanced Member Well-Being is not included in this communities . version of our dashboard . Based on data collected over the

13 Including expanded impact measures and member and staff engagement indicators will keep us accountable to really leaning into our differentiation . These changes capture the essence of Vancity and will help to galvanize our employees in the work they already do by providing clarity and focus as our transformation journey continues to accelerate .

We look forward to further discussion with the Board on how these changes could enhance our current organizational dashboard .

Summary Our definition of success has not changed .

What has changed is our clarity and confidence in the size of the opportunity we have . Our members need more of what we do and we believe we are well-positioned to deliver more and do so in a way that we will allow us to grow and learn with our members as their needs continue to evolve and change .

1 This is a net calculation, after Shared Success .

14 future outlook for small business in BC as well as growing Financing growth with impact opportunities for impact . On the retail side, the retail impact mortgage market is expected to be similar to 2016 levels . We Our plan is to serve the current and future needs of our anticipate growth in impact investment strategies will lead existing membership while testing out the potential to the acceleration of our overall Assets under Management longer term opportunity to meet member needs and (AUM) over the next three years as we gain momentum in achieve sustainable growth with impact by delivering our this space . differentiation on a digital platform . 2017 – 2018 Budget We want to follow our members wherever they go . This Our 2017 – 2018 budget will set a member funding target includes members who want to continue to transact through where 80 per cent of member loans are funded by member traditional analogue channels, underserved members who are deposits . In recent years, Vancity’s business model has experiencing the consequences of a growing digital divide, performed well in this respect as members’ confidence in and those choosing to manage their money digitally . In order Vancity has resulted in a strong increase in member deposit to do so, we need a strong operational base that allows us to growth . For 2017 and going into 2018, we expect deposits continue to deliver our DME today while we start to make to be our primary funding source with modest returns . This investments that will allow us to grow with our members and will also mean a review of some deposit products to ensure deliver our differentiation in the digital space . we continue to meet the evolving needs of members for Our 2020-2017 Financial Plan shows that we can anticipate deposits . Vancity will also be advancing its impact investing incremental growth with impact in the short term, but strategy that taps funding from savings from members who without continuing investment in technology, the relevance wish to invest in impact . This will incrementally support of our offering will decline and the cost associated with growth and impact into 2018 . As a result of this plan, Vancity continuing to meet members’ needs will go up . will continue to meet savings needs of existing members, while also stepping into other sources of funding that meet Our strategy is to allow enough revenue to smooth the the needs of our new members . transition over time so we can meet members’ existing needs while moving members who want to transact digitally . We Conclusion want to find the right balance so we can preserve existing members while attracting new revenue streams to cover A portfolio-based approach to growth with impact requires infrastructure costs . balancing the tension between running today’s business efficiently and profitably while promoting a culture of Through our core growth and strategic investments, a larger member-led innovation that will help create a sustainable membership base allows us to provide more impact, more business for tomorrow . The 2020-2017 Financial Plan gets us growth and increased earnings to enable the sustainability closer to our 2020 goals in the short term, but with an eye to over time of the impact we provide . The projected higher future investments that will ensure we are able to meet the membership and lending growth in this plan leads to future needs of existing members and the future needs of moderate increases in net earnings, return on members’ new members . equity and operating efficiency . Our investment strategies focus on impact and assist in improving our triple bottom line This plan ensures that we do not get ahead of ourselves, but assets under administration (TBLAA) year over year . have the benefit of learning to walk before we run . It allows us to test and learn in the short term so we can diversify Our initial investment in Digital services allows us to our revenue base in the long term, meeting the needs of continue to move forward in a space where we expect to our existing members while creating the opportunity to see disruption to our traditional models . Over the next 18 accelerate impact at scale . months we will continue to assess the need, opportunity and sustainability of digitization and propose strategies and business cases that we believe will allow us to meet not only future needs of our members, but also future needs of future members .

As we look to grow our TBLAA, we will need to replenish those impact assets that naturally mature . We anticipate accelerated growth in our business lending given the positive

15 Assumption testing Final thoughts

It is clear that we have a tremendous opportunity to In past plans, we would identify a fixed number of strategic accelerate impact for our members and communities . With priorities and the financial plan needed to support their this opportunity comes challenge, recognizing that we execution throughout the year . This plan is different . We have made good progress in a number of different areas in have identified a portfolio of initiatives some of which are 2016 and early 2017 . However, we need to continue to press smaller experiments focused on longer term opportunities forward and remain relevant to members . At the same time, (e g. . DME platform and services initiative) and others which we need to be prepared for challenges – some that are are shorter term opportunities that we believe can deliver outside of our control while others that we can mitigate with growth with impact in the near term (e .g . Impact investing appropriate insights and actions . and Community business opportunity) .

Overall, there is risk in the business plan – that is the outcome Over the course of the next three years, we expect the of strategic innovation and should be expected . Our desire composition of our portfolio will change as members’ and focus is to capture, harness, and leverage the upside of needs and those of their communities continue to evolve the strategic innovation we want to achieve, while mitigating and change . Not every experiment in our portfolio will the potential downside risks . So, the downside risks are really show results although every experiment will deepen two distinct and separate forces . In one scenario, we are our understanding of the drivers of impact . Rather than successful in getting where we need to be, but we are off on committing to a long term investment upfront, we will the assumption of what members want . We build something use prototyping to test and learn so we can quickly adjust no one wants and we do not achieve the scale we need based on results achieved and member insights gained . to succeed . The other scenario is the exact opposite - the As our redesign work is more fully embedded across the member need/market is there, but we do not succeed in organization via investments in talent, data and technology, delivering . We either fail to execute on our transformation or our capacity to innovate for impact will grow and as it does, we do it at a speed that is slower than the rest of the market . so too will our capacity and capability to attract values- aligned members . Our assumption testing has highlighted some areas we need to focus on – things we need to be aware of to mitigate the The 2020-2017 Business Plan is bold and balanced . It downside risks of our current plan . Talent, market, member recognizes the size of the opportunity we have to needs, and operations are areas that we believe require achieve transformational growth with impact through special attention . the development of a digital DME platform, while also recognizing that we do not want to leave members behind . This is where we sit – at a crossroad of trying to capture the There is more we can do to meet our members’ needs today opportunity for strategic innovation and adjust our business by investing in our core operations (e g. . Retail operations plan in light of the shift we see coming in the financial initiative) and extending our suite of offerings for small services industry . At the same time, we need to manage business and wealth management while also supporting their and mitigate the downside risk that comes with this type of transition to digital . innovation . Last year, we talked about the confidence we had in our 2020 goals . We talked about confidence coming from our members and the communities we serve who see Vancity as an important partner and advocate for healthy communities . This has not changed . Our members supported us through our BAR journey and continue to believe in the credit union . Their message to us at the AGM was to bring them along the journey . Our 2020-2017 Business Plan does just that .