Impact investing can go very wrong. Here are the three biggest pitfalls the social finance fund should avoid
Why It Matters
The social finance world loves to talk about the โwin-winโ of social and financial returns. Failures, however, get much less airtime. As the governmentโs Investment Readiness Programs helps organizations prepare for social finance, understanding potential pitfalls could prove vital to maximizing positive social and environmental impacts โ and avoiding some negative ones, too.
In Winnipegโs North End, an Indigenous-owned grocer, restaurant and gallery opened its doors in 2013 to revitalize the low-income neighbourhood. The social enterprise, called Neechi Commons, secured a 50,000-square-foot building with a large mortgage.ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย ย
Five years later, however, the Commons was forced to close after struggling to stay afloat financially and falling behind on interest payments. When the social enterprise shut its doors, it owed $3.9 million to its primary lender, Assiniboine Credit Union.
In the world of social finance, nearly all of the stories you hear about are successes: achieving a positive social impact, good returns for investors or even both. Cases like Neechi Commons, however, show that it does not always go to plan.
As the feder
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