Skip to main content
Monthly Archives

November 2022

Charity Bonds take off in the United Kingdom

By Learning from Abroad

Charity bonds, the UK equivalent of community bonds, have taken off rapidly in recent years. From 2012-2020, the charity bond market grew by a remarkable 62x! The size of the market is now estimated to be around £337 million – an astronomical leap from the mere £5.4 million in 2012. More than 30 organizations have seized the opportunity to issue charity bonds and raise capital from their communities of supporters. 

In this article, we explore the immense growth of charity bonds in the UK and what this could mean for community bonds in Canada. 

Let’s start off by understanding the similarities and differences between charity bonds in the UK and community bonds in Canada. 

  • Interest-bearing loans, with a fixed interest rate and a fixed term
  • Used to finance socially and/or environmentally impactful projects
  • Organization issuing the bond must have a source of revenue that will enable them to repay investors
  • More flexible than bank financing because terms are set by issuers and funds are raised from supporters 
  • Engage a variety of investors (individuals, foundations, trusts, etc.) 
  • Can be held in tax-advantaged accounts 

The table below highlights key differences between charity bonds and community bonds: 

Charity Bonds Community Bonds 
Issued by charities and social enterprises  Issued by non-profits, charities, and co-operatives 
Usually unsecured loans (no asset to back investment) Usually secured loans (asset to back investment)
Tradable on the London Stock Exchange  Not tradable 
Typically unrestricted funds  Typically restricted funds 


A market to trade charity bonds

In 2014, the first charity bond was publicly listed on the London Stock Exchange, and many have since followed suit. Being able to list on a public market has provided charities and social enterprises with access to a bigger market, allowing them to reach their investment target more efficiently.

Organizations do not issue their charity bonds directly on the stock exchange. Rather, they go through a “special purpose vehicle” called the Retail Charity Bonds Plc. (RCB). RCB is governed by an independent board of directors who reviews applications from charities and social enterprises. Upon approval, RCB issues the charity bonds on the London Stock Exchange, and then investors can buy and trade the bonds in the secondary market just like any other bond or stock. Fun fact: most organizations can raise their required financing within 1-2 weeks after they launch an offer! 

Community bonds are not yet tradable in Canada, however, as the market continues to grow rapidly, we are hopeful of such initiatives. Based on the UK experience, it’s clearly a win-win for investors and social purpose organizations.

Building confidence has been critical

In 2014, Big Society Capital launched the Charity Bond Support Fund, in collaboration with Rathbones. The purpose of the fund was to co-invest in campaigns alongside retail and institutional investors when campaigns were not fully subscribed. This had a dual purpose – to give confidence to issuers that they would reach their targeted investment goal, but also to give confidence to investors. The initial fund was £30 million, but has since grown to £163 million with a diverse array of investors engaged.

The emergence of sales platforms has helped the community investment market to grow

Many community investment platforms have been developed in the UK to a) encourage organizations to use social finance tools and b) encourage individuals to invest in social finance tools. For example, Ethex is a non-profit community investment platform that connects social purpose organizations with investors. In 2020, Ethex and Energise Africa raised a total of £100 million of people-powered finance to benefit over 200 community-oriented projects. 

Such sales platforms have brought charity bonds into the mainstream by making the investment process simple yet professional. It is now easier than ever to invest with impact in the UK.

By learning from partners, both near and far, we at Tapestry continue to foster community bonds as a mainstream form of financing and an avenue to invest in society.

About this Blog Series

Hi, my name is Jasleen Bahia, and I was once an Intern at Tapestry Community Capital. I am now completing my degree in business with a focus on social finance, and I’m currently doing a semester abroad in Europe. While here, I am Tapestry’s Ambassador to the UK. This blog series documents my adventure abroad learning about the social finance ecosystem in the UK and connecting it to our growing community investment marketplace in Canada. I am eager to find out what we can learn, replicate and share!

Financing Affordable Housing: Propolis Cooperative Housing Society

By Affordable Housing

Propolis is a non-profit co-operative based in Kamloops, B.C. that is creating a community of environmentally conscious individuals, brought together by a shared vision of affordable and sustainable housing.

We had the pleasure of meeting Lindsay Harris, the co-founder and president of the Propolis Cooperative Housing Society, and learning more about their ambitions for the co-ops’ first project. Lindsay, who works with Kamloops Food Policy Council, has long had a focus on community economic development. “I have always taken a systems approach to food insecurity, and for me, that also encompasses housing,” she shares. 

Propolis has partnered with local Kamloops resident, Miles Pruden, who owns a sustainable real estate development company, to bring the project to life. Miles’ company, Nexbuild Construction, built what has been dubbed as Kamloops’ most sustainable multi-family home (which can be viewed below). With Miles’ expertise, the co-op hopes to construct housing that is not only better for the environment but also reduces ongoing energy and maintenance expenses for tenants. 

Lindsay got in touch with Tapestry Community Capital because she sees Community Bonds as a flexible tool that could work in tandem with financing that they are hoping to secure from the Canadian Housing and Mortgage Corporation (CMHC). Over the last year, Lindsay has conducted her own research on the community financing landscape in British Columbia, making use of a BC-based toolkit for starting a community investment cooperative. “I wear a lot of hats and have many projects on the go, and I decided I ultimately didn’t have the capacity to also start up a community investment co-operative, and that’s why I was so excited to learn that Tapestry already has the needed infrastructure in place to raise community investment.”

“One of the things that has become very evident from our conversations with our network and with the community is that there are a number of people that are very interested in substantively supporting this work but we need a platform for them to be able to invest,” Lindsay shares. Lindsay came prepared with a list of questions about Community Bonds, all of which are very familiar to the Tapestry Team. 


Are we better to have a smaller group of high-net-worth investors, or a wider group of community members contributing smaller investments?

This is a common question, and the simple answer is – it depends. Community bonds offer an incredible pathway to engage your community and create lasting relationships. On the flip side, we understand that organizations need capital to bring their projects to life. “We think there can be a happy medium and that’s why we often design a Community Bond campaign with multiple investment options,” shares Ryan Collins-Swartz, Tapestry’s Co-Executive Director.  “For example, there may be one bond that offers a lower entry point and perhaps a shorter duration, and this would allow for more widespread engagement, and then another that might have a higher entry point, longer duration and slightly higher interest rate that is better suited to higher net worth individuals.”


Is it possible for institutions to invest in Community Bonds, such as foundations?

“Definitely!” shares Ryan. “We see huge interest from foundations because many have earmarked specific funds for impact investment, and they are always on the lookout for investable projects with social and environmental impact. We have also seen companies, both big and small, being very interested in investing.”


How are interest rates set?

This is a key step in the Tapestry process. We want to make sure that Community Bond issuers are going to the market with an investment opportunity that fits their financial needs, but also an offering that is exciting and attractive to their community. “It’s a multi-step process, but financial modelling of an organization’s financial capacity and projects, along with community consultations, is really key,” shares Ryan. 


Can community bonds offer patient capital?

“The beautiful thing about Community Bonds is that they put the control in the hands of the issuer. If you wanted to issue a bond with a 15-year term, we could certainly explore your community’s appetite to make a longer-term investment,” says Ryan. 


Lindsay shared that prior to meeting Tapestry they had a perception that raising community investment was a complex process, and they had felt fearful to take it on alone. “Kamloops is an incredibly community-minded place, and I have no doubt that there would be widespread support and involvement in a campaign like this.”

The Co-op is currently looking at properties for their first project and are advocating to the City of Kamloops to sell a piece of city-owned property. Lindsay shares that this has been a slow process, but that moving on private properties comes with its own set of challenges. “We are definitely facing hurdles in terms of being able to move quickly on a property – we are hoping Community Bonds can be part of the solution.”

Financing Affordable Housing: Mainstay Housing

By Affordable Housing

In the Spring of 2021, Mainstay Housing and Houselink Community Homes merged to form Houselink & Mainstay. Together this new organization is the largest supportive housing and non-profit housing provider in Canada. They have a portfolio of about 60 buildings across the City of Toronto, and manage another 300 units through partnerships with private landlords. They also provide support services, beyond housing, to more than 900 individuals.

“This merger really made sense for a number of reasons,” explains Gautam Mukherjee, Houselink & Mainstay Executive Director, “for one, it meant that we could leverage a larger balance sheet to fund new developments.” The organization’s strategic plan has a strong focus on accessibility and scale with the development of purpose built, mixed-income housing. 

“About half our portfolio are rooming houses, with people sharing bathrooms and kitchens, and we know that for some populations of people receiving our support services, it’s just not the right housing setting,” says Gautam. Part of the organization’s strategy is to raise capital through the sale of these rooming houses, in order to fund new builds that better fit their clients needs.

“We are actively in the land market, and had an offer signed back recently – I think this could be a great demonstration project for community investment,” says Gautam. He explains that underwriting has become very challenging in recent months, with interest rates and building costs up. “What originally looked like $6.5 million needed in owner equity could now be upwards of $20 million and we will have a gap to fill,” he explains. 

The organization recently incorporated a non-profit subsidiary to take on the development on behalf of Houselink & Mainstay. This subsidiary has a clear mandate for the development of mixed income housing. The parent organization will then deploy rent supplements to ensure that a percentage of the units are supportive, and provide support services to tenants. 

The conversation shifts away from Houselink & Mainstay for a moment as Gautam gives the Tapestry team a quick 101 on the affordable housing policy framework in Ontario. He explains that the model has shifted over the years away from supportive housing grant funding to the provision of rent supplements. In the case of the Ontario Ministry of Health, they are providing rent subsidies directly to community agencies, who then decide how to use them. “In some cases an agency will lease one unit, or a few units, and in others they might lease an entire building.” 

“Essentially, we are a conduit for providing equity, in the form of rent subsidies,” explains Gautam, “and most of these subsidies end up in the hands of private landlords – so we are really just transferring equity to them.”

When Houselink & Mainstay sell their rooming houses their operating funding will convert to rent supplements, which they will be allowed to transfer to other properties.  “These rent subsidies cover 100% of average market rent (AMR) and we intend to redeploy them into our own newly built units.” 

Gautam is of the opinion that things can only get better from here. “We haven’t seen indications of increasing grant amounts to offset rate increases, or make stress tests easier. And there is no provincial participation, so that can only improve.” Gautam believes we may also see the City of Toronto wave development charges for non-profit projects where a certain proportion of units are affordable. 

“I think the land economics are the same for everybody – private or non-profit,” says Gautam, “and if we want to compete, we need to get into the land market and be willing to take some risks.” He’s of the view that if these projects, in the worst case, can work as market developments, then non-profits should be initiating projects. “We need to give the government projects to invest into because they’re not coming to the table proactively.” 

Gautam sees the benefits of allowing community members to invest in these projects too. “Getting community buy-in for what we are doing is very appealing, and there’s obviously the need to bring in new capital.” Gautam also shares that their Board has been considering different ways to grow the community profile of the organization.

“When we do talk publicly about what we are doing, we are getting traction. But historically, we haven’t used that momentum for fundraising, and we don’t have a way to do what you are doing,” says Gautam with a smile, “of course, that’s why you are doing it!” 

“I’ve long been supportive of community funding for housing development  – I think it’s brilliant!” Gautam wraps up, “we just need to know what to do and where to go.” 

About this Blog Series

In October 2021, Tapestry was selected to take part in a Canadian Mortgage and Housing Corporation (CMHC) program called the Housing Supply Challenge. This innovative competition encourages residents, interested parties, and experts from across the country to propose creative solutions to housing. The goal: to help meet Canada’s pressing need for safe and affordable homes by breaking down barriers to the creation of new supply.

Tapestry participated in Round 2 of the program, Getting Started, which seeks to find solutions to pre-development challenges, such as community resistance and obtaining financing. The program granted incubation funding to the 29 organizations selected to allow them to further develop and test their solution proposals.

Through six months of research and consultation, we had the opportunity to speak with over 40 interested parties in the affordable housing sector, from housing providers, to development consultants, to funders and lenders. Each and every individual and organization consulted helped to co-design our solution proposal.

The “Financing Affordable Housing with the Power of Community” blog series shares the lessons learnt and stories heard from some of the amazing organizations that we have partnered with.