The UK’s social investment ecosystem is proof of the immense growth potential of community bonds in Canada. Recently, I had the pleasure of speaking with Ashley Wang from Social Finance UK and Annie Constable from Good Finance to learn more about the UK’s social investment marketplace. Below are three lessons that we can learn from our UK counterparts.
1. Working with leaders in the social investment ecosystem will help non-profits, charities, and co-operatives address knowledge and capacity gaps
In the UK, Big Society Capital is the leading financial institution dedicated to social investment in the UK. Big Society Capital and Access – the Foundation for Social Investment created an organization called Good Finance to address a large knowledge gap they had observed in the social investment ecosystem. Good Finance’s website is home to jargon-busting tools, case studies, and a directory to connect organizations with investors.
Similarly, in Canada, Tapestry helps organizations to learn about the community bond model and determine whether it’s a good fit for their project. We provide organizations with the resources and tools to fill knowledge and capacity gaps. From understanding terminology, to launching your community bond campaign, we support you every step of the way in whatever capacity you need. Our goal is to ensure that the path to integrating community bonds into your organization is as seamless as possible.
2. Community investment provides a flexible source of financing
Increasingly, organizations are seeking creative sources of financing that give them the operational flexibility to do what they need to do to achieve their goals. Grants, while providing free capital, can often impose strict requirements that limit project dimensions, and ultimately the impact a project can have. They can also be tedious, time consuming, and unsustainable. For many organizations, terms set by banks and traditional funders won’t be favorable, and often this financing will only provide a portion of the needed capital for a project.
This is why many organizations in the UK have turned to social investment tools, such as charity bonds, as an alternative. Charity bonds can be seen as the UK equivalent of a community bond (read another blog on this ici). Social investment tools are a sustainable solution for organizations to raise the capital they need, and enable individuals to diversify their investment portfolio while creating impact in the community. The massive demand for flexible finance in the UK has brought many impactful investment opportunities to the market and this is sure to happen in Canada as well.
3. The government has played a critical role in catalyzing the adoption of social investment tools
In the early 2000s, the UK had a build up of dormant account assets – the result of forgotten assets in long-lost bank accounts and insurance policies. In 2008, Parliament passed the Dormant Bank and Building Society Accounts Act which directed a large portion of these assets to social investment. Big Society Capital (BSC), was launched with £400 million of dormant account funds. The UK government also offers the Social Investment Tax Relief which is a 30% tax break for individuals who invest in social enterprises, charities, or community businesses.
As of June 2022, the Bank of Canada announced that it is sitting on nearly $1.1 billion in dormant account assets. Right now, this money sits idle with the Bank of Canada for 30-100 years depending on how much is in the account. After that, the money is considered forfeited and is transferred back to the government’s spending accounts. Imagine if Canada implemented a similar act to the UK and directed even 10% of this capital to social investment (that’s $110 million)! Evidently, government initiatives, politicians’ support, and advocacy from organizations can help catalyze the adoption of social investment tools.
In recent years, the Government of Canada has signaled their support for the social impact market. The launch of the $755 million Fonds de financement social has been a major milestone. This capital is supporting social purpose organizations to become investment ready and bring investment products to the Canadian public. At Tapestry, we are supporting many organizations with funding provided through the Social Finance Fund Investment Readiness Program. To stay up to date on funding opportunities and application deadlines, visit the Community Foundations of Canada website ici.
À propos de cette série de blogs
Bonjour, je m'appelle Jasleen Bahia et j'ai été stagiaire à Tapestry Community Capital. Je suis en train de terminer mon diplôme en commerce avec un accent sur la finance sociale, et je suis actuellement en train de faire un semestre à l'étranger en Europe. Pendant mon séjour, je suis l'ambassadrice de Tapestry au Royaume-Uni. Cette série de blogues documente mon aventure à l'étranger en découvrant l'écosystème de la finance sociale au Royaume-Uni et en le reliant à notre marché de l'investissement communautaire en pleine croissance au Canada. Je suis impatiente de découvrir ce que nous pouvons apprendre, reproduire et partager !
Cover photo credit: Co-operative UK