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avril 2021

What is the Investment Readiness Program?

Par | News, Policy and Advocacy

At Tapestry, we speak with many non-profit organizations on a weekly basis. With Budget 2021 announcements, the Investment Readiness Program (IRP) has been a common thread of conversation. When we bring up IRP, we tend to get a variety of responses ranging from excitement to confusion. What is the Investment Readiness Program? How can it benefit non-profit organizations? What does investment readiness even mean?

The idea of private capital being invested in the nonprofit sector is a new sort of conversation in Canada. In past blog posts, we’ve discussed the investment continuum and where community bonds sit in reference to traditional philanthropic tools. IRP is another piece in this financing conversation.

In this blog post, we’ll seek to:

  • Provide clarity about the program
  • Give some insight into the idea of investment readiness
  • Point you in the right direction for learning more about the program

Social Finance Fund

With the release of Budget 2021, the federal government confirmed the establishment of a $755 million Social Finance Fund, and plans to disperse up to $220 million in the next two year. The objective of the Fund is to provide social purpose organizations (which include charities, non-profits, co-ops and social enterprises, both non-profit and for-profit) with access to capital to carry out activities which will have a positive social or environmental impact. The Fund was first announced in the 2018 Fall Economic Statement and the federal government re-affirmed its commitment to the Fund in the 2019 Federal Budget.

In recognition of the fact that private investments and social finance are new concepts for many social purpose organizations, Budget 2021 also proposes to renew the Investment Readiness Program for $50 million over two years.  This program aims to assist these organizations with building capacity to allow them to participate in Canada’s social finance market, and to prepare them to participate in the Social Investment Fund.

Investment Readiness Program

The Investment Readiness Program will be administered through several readiness support partners. A full list of partners can be found here.

Starting this year, these readiness support partners will put a call out to social purpose organizations (both for profit and not for profit), that are interested in becoming investment ready.

In practice, investment readiness refers to an organizations ability to successfully participate in the social finance market. This means generating revenue through a new social enterprise, or scaling existing social enterprise activities. The capital earned through investment will allow organizations to increase their social impact, and being “investment ready” means the organizations will have the capacity to repay that investment.

There are different financial vehicles that allow organizations to accept financing, including community bonds. What is common amongst these social finance vehicles, is the expectation of a financial return in addition to a social or environmental return.

How can Non-profit Organizations benefit from the program?

For not for profit organizations that have only ever relied on grants and fundraising, the Investment Readiness Program presents an amazing opportunity to think differently about financing. In leveraging this opportunity to establish a social enterprise, or grow existing revenue generating activities, organizations can both position themselves for social investment, and create long-term sustainability that could come in the form of:

  • Investing in social purpose real estate
  • Addressing food insecurity and clean energy generation
  • Providing equitable jobs and training opportunities
Argonaut Rowing Club President - Investment Readiness Post

The Argonaut Rowing Club leveraged community bonds to raise $1.2 Million for their club revitalization project.

 

Organizations that we have worked with, like the Argonaut Rowing Club (ARC), are a great example of how private capital can enable a greater social impact. By leveraging community bonds, ARC was able to increase their clubs membership capacity, make the club accessible, and make essential improvements to the revenue generating events space. To learn more about how the Argonaut Rowing Club leveraged social finance, click here.

What’s Next?

We are still waiting on further information on the Investment Readiness Program. As we learn about funds being released through the different Investment Readiness Partners, we’ll be sure to let you know through the Tapestry Community Capital newsletter, on our Twitter account, or through LinkedIn.

How do I know if Community Bonds will work for my project?

Par | Education

At Tapestry, this is one of the most common questions we are asked. Organizations are often first introduced to the concept of community bonds by seeing them in action, coming to learn about them as an investor, or because they have been searching for alternative forms of financing. When they approach us, they are curious to learn how bonds can work for their unique set of circumstances. 

While every organization and project is unique, there are five main criteria that typically apply across the board. We always begin by walking organizations through a simple checklist to see if their team and board should invest the time to explore this opportunity in greater detail. In this article, we will walk you through the checklist below, step by step.

The organization is a non-profit, charity or co-operative

Community Bonds are a social finance tool that allow organizations to raise capital from their community of supporters. Just like a regular bond you might purchase – say a Canada Savings Bond – these bonds are repayable, and have a fixed term and a set interest rate. 

There are two main features that differentiate community bonds and traditional bonds. The first is that in addition to a financial return, community bonds generate an environmental and/or social return. The second, is that community bonds can only be issued by non-profits, charities and co-operatives (both for-profit and non-profit).

In Canada, the sale of bonds is regulated at the provincial level by the provincial securities commissions, and at the federal level by the Canada Revenue Agency. These agencies have strict requirements for private companies that want to sell securities to the public, and the process is complex and expensive. 

Charities and non-profits, however, are exempt from these requirements under National Instrument 45-106 s. 2.38, and are able to issue community bonds so long as they can guarantee:

  • They are a non-profit organized exclusively for education, benevolent, fraternal, charitable, religious and recreational purposes
  • No commission or other remuneration will paid in connection with the sale of the security

Co-operatives go through a slightly modified process under the Co-operative Corporation Act, and their regulations vary among provinces. The process, however, remains straightforward and much less onerous than that of a private company.

In order to safeguard the interests of community bond investors, our documentation and process for issuing community bonds always meets the requirements set for co-operatives, regardless of whether we are working with a charity or non-profit. 

The organization is seeking to raise financing for the purchase or renovation of an asset

Technically speaking, there is no legal document stating that community bonds must be used towards the purchase of an asset. However, in our experience of managing over $70 million in community bonds, we have found that having these securities backed by an asset increases investor confidence, and hence the success of the campaign. This is particularly true for organizations that are issuing bonds for the first time and have not built a reputation and rapport with their investor base. 

Asset backed projects are also typically easier to build an inspirational story around. We’ve come to understand that investors like having a brick and mortar outcome – a tangible and physical project that resulted from their investment. While operational expenses are critical, they are rarely inspirational, and do not excite investors in the same way.

In some circumstances, if an organization has run several asset backed campaigns, and proved their ability to meet repayment schedules, they have gone on to raise capital for operational expenses.

CSI Community Bond Campaign History

The organization has a revenue model that allows them to repay their investors over time

While community bonds offer a social and/or environmental outcome, they are also a financial product, and issuers must have the capacity to repay the principal investment and pay out interest on schedule. 

For some organizations, income is generated through the operation of a social enterprise, for example by selling tickets, renting spaces or operating a shop. Others, and particularly those who are purchasing an asset to be used for office and administrative purposes, are able to redirect capital previously earmarked for rent payments. 

In almost all cases, community bonds will be only one piece of a larger financing puzzle. They are often used in tandem with donations, grants, interest free loans and traditional bank financing.

One appealing aspect of community bonds is that the issuer has the ability to set their bond terms in a way that will match their cash flow situation. For example, some organizations may prefer to have a longer term in order to pay off the principal investment or may decide to delay interest payments for a year or two while they get their project off the ground. 

We always work with our clients to find terms that work for their investors and their balance sheet.

The organization has a champion

What is a community champion? They are the natural leader of the project, pushing at every stage to make it come to fruition.

Tonya Surman

Tonya Surman, Founder and CEO of the Centre for Social Innovation (CSI)

In some cases there will be two champions, an internal lead who drives the project management, and a public face of the campaign, who will engage the media and publicly represent the organization.

In either case, a champion is critical to campaign success. Investors want to see a responsible and charismatic face behind their investments. They want to see someone who is passionate about the potential of the project and determined to see it come to life. This excitement is what inspires people to take the next step in learning about the project and investing their money.

The project is meaningful to your community of supporters

Of course, this probably goes without saying. If you want your community to invest, they will need to feel one of two things, or both. 

1) They are doing something positive and productive with their money. They are making a meaningful contribution to society while also making a fair financial return. 

2) They will personally benefit from seeing the project come to life. For example, they will benefit from improved access to services and spaces that meet their needs.  

In order to target the first group, the project needs to have a strong social impact and/or a positive impact on the environment. In order to target the second group, there must be a sizable group of people that stand to see their community (be it geographical or values based) benefit from the project’s development. 

This last criteria is the one that organizations tend to struggle to answer. That’s why we always help organizations interested in this model to dig deeper on this topic and begin to assess who their community truly is and understand what their appetite for investment might be. 

Once an organization has been through this checklist and feels comfortable that they fit within these criteria, the next step in assessing a community bond campaign is to participate in a community bond workshop hosted by Tapestry. 

During the 3-hour, online workshop, you will have the chance to bring together your team and board to learn more about community bonds, see how community bonds have worked for other organizations, understand how investors make decisions, and understand what a campaign budget and resource plan might look like. Upon completion of the workshop, Tapestry provides a readiness assessment to help your team and board make a decision about whether or not community bonds are an appropriate financing tool for your project. 

If you think your organization might have a project that fits these criteria, get in touch with us at info@tapestry.captial.ca

Community Bonds as a pathway to Community Ownership

Par | Education, Policy and Advocacy

Our community spaces are vital – whether they are sports facilities, schools or community centres, these places sit at the heart of our neighbourhoods. They provide physical space for services and are places that unite us.

We know that across the country, community spaces are being lost, and with the impact of the pandemic, this trend is only likely to worsen. We see places that were once vibrant hubs of community activity ending up in the hands of private developers, being pushed out of gentrifying neighbourhoods, or worse, left derelict.

“Too often, outside corporate interests come in and change a neighbourhood and it doesn’t reflect the needs of the community,” says Ryan Collins-Swartz, Co-Executive Director of Tapestry, “the story is all too familiar – the place of worship with low attendance sold to a developer, storefronts in rural communities left empty, a beloved historic theatre being demolished – the list could go on.”

“The amazing thing is that this problem actually presents a huge opportunity,” shares Ryan. “We have the potential to empower communities, redefine public services and reinvigorate local economies through community ownership.”

What is community ownership?

There are many accepted definitions of what community ownership means, but for us at Tapestry, it means a community organization (a co-operative, charity or non-profit) taking legal possession of an asset. These community assets are diverse and represent a wide range of uses from community solar farms to land trusts. The asset may be held for the benefit of the organization itself (ex. Office and program space) or for the wider community (ex. Affordable housing).

We know that community ownership can be a powerful catalyst for social action. Taking control of an asset means that a community organizations can:

  • Protect key services and facilities from being pushed out of neighbourhoods
  • Make major alterations to assets to fit their needs
  • Reverse economic decline of an area and attract investment
  • Instil a renewed sense of pride and confidence in the community
  • Increase future participation through membership, volunteering, attendance, etc.
  • Build credibility with funders, and leverage future financing to grow
  • Encourage, through their success, further innovation within the community

At Tapestry, we have seen the power of community ownership firsthand. The very first project we were involved in began back in 2002, when a group of community members came together with the vision to build a community owned wind project in downtown Toronto. 

Windshare community owned wind project

It was to be the first urban wind turbine in all of North America. “At the time, this was no small feat,” shares Ryan, “our lawyer often jokes that it would have been easier to build a nuclear power station in the city than that turbine.”

But the community was focused and determined, and the sense of pride and ownership was immense. By bringing together almost 600 members, WindShare became a model not only for sustainable energy but for community ownership across Canada.

In the years since, we have seen amazing historic buildings rescued and repurposed for community needs, expanded and revitalized sport facilities, community arts spaces anchored within gentrifying neighbourhoods, and communities shaping their own needs for education. The common thread? The purchases of these assets were all made possible, in part, by engaging community members as investors.

“Community finance is a natural fit for community ownership,” explains Ryan, “when a community member invests, they feel they are taking a meaningful stake in the future development of the place in which they live and/or work.”

Community investment not only mobilizes financial capital, but also social capital within a community. “Once a community member is an investor, they really feel they are part of the project. We see them wanting to volunteer, participate and talk about the work of the organization they have invested in. They get really excited!” says Ryan. 

What’s more, there is a significant public appetite for making these types of impact investments. 

What are Community Bonds?

All too often, communities have a great idea but they don’t have the money they need to bring their visions to life. Community bonds can help complete the financing puzzle for these projects, alongside other important types of financing such as grants, mortgages, and donations. 

Community bonds are a social finance tool, similar in many ways to a traditional bond. They are an interest bearing loan from an investor, which has a set rate of return and a fixed term. The major difference is that in addition to offering a financial return, they also offer a social or environmental return.

What are community bonds

What makes community bonds so unique is that they allow capital to flow back into the local economy, rather than to a bank. Investors get a double benefit – the financial return and a stake in shaping their own community. 

“We believe that communities should control their own destiny. And community bonds are a financial tool that give communities the agency to decide what develops and how their community transforms,” says Ryan. 

Economic Inclusion

Community organizations issuing bonds have the ability to customize the terms of their investment offering so that they fit the needs of their project and their community. “We have seen community bonds priced for as low as $250 to be as inclusive as possible,” says Ryan, “still, in disadvantaged communities, organizations often have to extend their notion of community beyond the physical boundaries of their neighbourhood.” 

Community bonds have been very popular among community foundations who have earmarked funds for impact investing and local businesses looking to make a social impact, and there is a growing community of impact investors across Canada that want to make a return while also doing good. 

The future of Community Investment and Community Ownership Community Investment Kingston

We need to be learning from past successes and supporting innovative financing in order for this model to flourish.  Local governments can play a huge role in helping communities to regenerate their areas by supporting community ownership.

We are encouraged by the steps that some municipalities have been taking to this end, particularly with covid recovery at the top of the agenda. The City of Kingston, for example, recently launched an initiative to explore how community investment might contribute to initiatives that support vital community needs

We invite local governments, community leaders and community organizations to engage with us on community ownership as a model for post-COVID recovery. If you are interested in learning more or have a project in mind, please get in touch at info@tapestrycapital.ca

covid volunteers

Raising Community Bonds amid Pandemic Restrictions

Par | Education

To say this past year has been tough would be a massive understatement. We’ve all been stretched to our limits balancing childcare, social isolation and economic challenges, just to name a few. 

But we are a resilient bunch. Across Canada, communities and social purpose organizations have been rallying together to provide critical social services. Non-profits and charities, in particular, have worked tirelessly to fill the void by providing food, mental health support, housing, and so much more. 

covid volunteers

At Tapestry, we are always on the hunt for good news, and now that we’re a full year into the pandemic, we feel we are all well overdue for some.

So what’s been the silver lining of the pandemic?

The pandemic, as difficult as it has been, has undeniably prompted a dramatic shift towards collectivism. Movements to support local and community initiatives have triggered the attention of the masses. We’ve all seen the hashtags to #supportlocal, had an old friend ring up out of the blue, or offered to collect groceries for a neighbour. These are all signs that despite social distancing, social cohesion appears stronger than it has in recent years. 

The same has been true in the world of finance. Now, more than ever, we are seeing that investors aren’t just interested in a financial return. They also want a tangible social outcome, and a positive impact that’s visible in their own community.  

Even amid lockdowns and widespread restrictions, the past year was a great success in community financing. In 2020 alone, Tapestry supported raising $18.3 million in community investment for Canadian non-profits, co-ops, and charities. This investment is creating spaces for marginalized youth, producing clean energy, and supporting the growth of social purpose organizations.

Now that’s not to say that COVID hasn’t created new hurdles for Tapestry and our clients. It has. But like everyone, we are learning to adapt, and in the process becoming more productive and efficient. 

We thought we would take this opportunity, on the anniversary of the pandemic, to share some of the lessons we’ve learned from a year of lockdowns and restrictions.

A chance to redefine community

As a result of the pandemic, we’ve all been forced online like never before. Our clients, in particular, have had to double-down on their digital tactics. Where in-person events used to be the modus operandi for meeting potential investors and selling community bonds, Zoom calls are the new norm. 

We are lucky to be working in a sector that is nimble and flexible. Our clients were quick to adapt, and made the move online seamlessly. And in doing so, they found some unexpected benefits. 

Going digital, has meant much greater reach. Events no longer have geographic restrictions and can be accessed by potential investors all across Canada. This has hugely increased the pool of impact investors for our clients. 

Online events are also more accessible. There is no longer the need to arrange transportation or child-care. Anyone can join in so long as they have an internet connection and a few minutes to listen. The other plus? Putting together an online event is much more time efficient, and there is the added benefit that content can be recorded and repurposed.

SKETCH Working Arts just completed their bond sales campaign, raising $1.4 million – all during the pandemic. “Interestingly, 80% of their investors were new to the organization,” shares Satyameet (Sattu) Singh, one of Tapestry’s Campaign Managers. “Pushing digital strategies can really help non-profits expand their presence to new supporters.”

This has made us, and our clients, think more deeply about who our communities truly are. Are they a group of individuals living in the same region? Or is it a much broader community of beliefs? With digital connectivity tools abound, the opportunity exists to bring online and offline communities together as never before.

Take advantage of the amazing tools at hand

We have had to pivot in the way we work with our clients, and the ways in which our clients interact with their potential bond investors. One major change has been an even greater shift to making use of online tools. And there are so many great ones! 

With team members working from home, team management platforms have become ever more important. We are big fans of Trello, which allows our clients’ teams to follow along on their campaign progress, interact, and respond to other teammates all on one interface. “It’s highly interactive and keeps everyone on that same page. It also reduces the need for a lot of back and forth on email – saving all of us time,” says Sattu

With investor leads coming in from a multitude of digital streams, the importance of tracking incoming traffic is also critical. We train our clients to use a great customer relationship management (CRM) tool called Pipedrive. “We help our clients to integrate Pipedrive with as many entry points as possible, so that no potential investor lead is lost,” says Sattu. “Once a lead is in Pipedrive, we work with our clients to make sure that they are providing the necessary content and touch points to move that lead along to becoming an investor in their project.”

Our clients are also all set up to sell community bonds directly to investors online. We provide our clients with a clean and streamlined campaign website, which gives investors access to a simple investment platform to make their purchase quick and easy. 

“All of these tools mean that campaigns can be optimized quickly, and can reduce resource requirements significantly,” says Sattu. “Nowadays we can have a campaign up and running in about 2 months, and we are working really hard to reduce costs and make community financing available to a wider array of organizations.”

We can’t meet in person but we can still make meaningful connections

It’s true that we live in an age where we can easily connect online, but that doesn’t necessarily mean that the connections we make over the internet are the same as in-person meetings. “We need to be very aware of this,” say Sattu “being online, we need to take extra care to read the room, gauge interest and build trust.” 

“This may mean adding in additional touch points for potential investors, to ensure that they feel informed” shares Sattu. “We encourage our clients not to just rely on email but to pick up the phone.”

“We also suggest that our clients ask their potential investors what form of communication they prefer,” says Sattu, “we want potential investors to feel comfortable.”

Let’s rebuild this post-pandemic economy to be more sustainable

We know that Covid-19 is changing society in complex ways. We also know that there will be winners and losers in this pandemic, and that those who are most adversely impacted are also those with the fewest resources to cope. 

As we focus on the post-pandemic recovery, we should all be thinking hard about the economy we want to see on the other side. Is it the old norm that concentrates wealth in the hands of a few? Or are we interested in creating a more inclusive and sustainable system?

If you are interested in the greater conversation on this ‘Next Economy’, check out our friends at the Centre for Social Innovation (CSI), who are doing amazing work on intentionally building a more equitable system. CSI Next Economy

We know that innovative forms of financing will be integral to building the next economy. We envision financing that 1) involves and rewards communities, 2) funds meaningful and quantifiable impact, and 3) creates financial sustainability and power for non-profits and charities that provide such critical services to society. 

“We promote this idea at both the government level but also on a grassroots level,” says Sattu thoughtfully, “we encourage non-profits where appropriate and possible, to consider seeking investment from their own community, to feed wealth back into that community, and to change the cycle of grant dependence.”

If you are a non-profit, charity or co-operative interested in financing a project with the support of your community, reach out to us at info@tapestrycapital.ca.

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