Beyond donations: How two Canadian organizations are rebuilding community wealth post-COVID

Why It Matters

Since COVID-19 first hit Canada in March 2020, the gap between the rich and poor has grown wider in communities, with nearly 40 percent of Canadians reporting deteriorating finances over the last year. The organizations that typically help them, however, are also suffering, with more than two-thirds of Canadian charities reporting an average 30 percent revenue drop, over the last year. To rebuild after the pandemic, organizations will need to experiment with innovative new ways to mobilize social finance and build community wealth.

Photo: 10C

This story is in partnership with Ontario Trillium Foundation.

Six years ago, in Guelph, Ontario, 10C cofounder and executive director Julia Grady and her team were making plans to move their shared workspace from a small, leased space to their own property. A coworking space for changemakers, the 10C community had outgrown its space at 10 Carden Street and needed a more permanent home.

As a non-profit, however, 10C didn’t have the funds it needed to purchase property in downtown Guelph. 10C had a business model, partners and growing revenue streams, but a typical commercial mortgage would only provide about half of the funds needed for 10C to purchase their new space. 

As a solution, Grady and her team began exploring community bonds, which had already been successfully used to raise funds by other organizations in Canada, including the Centre for Social Innovation and ZooShare. With a community bond model, citizen investors are able to purchase bonds from a non-profit, or charity. The organization then has funds available for larger purchases like critical infrastructure, and investors are paid back, with interest, over a set amount of time. From the initial investment to the eventual interest payout, funds remain within the local community and go towards building better community outcomes.

“We used a community bond, first and foremost, as a way to attain capital, which can be challenging for a not-for-profit,” Grady says. “But we also wanted to engage our community in what is possible using different and more enterprising ways for not-for-profits to operate.”

After launching its community bonds in 2016, the 10C team raised $2.3 million from 140 investors across Ontario, with 87 percent of supporters local to Guelph. Wanting to keep the bonds accessible to the wider community, 10C set its investment minimums at just $1,000. Investors cut across all income bands, and when surveyed by 10C, ranked the bonds’ social impact, interest rate (2.5 to 5 percent over five years), and real-estate risk-backing all as highly ranked motivators for taking part.

It was the first time 10C had taken on external investment. The organization spread the word via email marketing, word of mouth, and tours of the construction site, and in the end, was able to raise $2.325 million across 140 investors. 

The community bond raise allowed 10C to buy and renovate a large building in downtown Guelph, directly across the street from Guelph’s City Hall. And today, the shared space is home to 200 member organizations and social purpose companies making a difference in the local community — from arts organizations and independent consultants to local immigration partnerships and environmental non-profits.


Using new approaches to rebuild community wealth

As demonstrated by 10C, community bonds are one powerful way organizations can mobilize their communities’ support for impact without relying on donations. Yet, despite successful community bond fundraising stories from organizations across the country, a 2018 review found that only 13 Canadian organizations had launched their own community bonds.

Grady understands other organizations’ trepidation. “There’s a challenge in building your enterprise at the same time as taking on community debt,” she says. “We’re already very beholden to our community, because we want to achieve all of our social outcomes and goals — but then we’re also financially responsible for making the model work. It can feel like there’s a tension there between money and impact.

For 10C, that tension came to the forefront during the pandemic: when COVID-19 closures first hit in March, 10C had to delay an interest payout to investors that was initially scheduled for April — and then establish other funding streams to cover the place-based funds lost due to COVID-19. Fortunately, 10C met its financial goals for the year, and April’s interest installment was paid out to investors in the following payout period. But during spring 2020, the 10C team “really felt the tension” between money and impact, Grady says.

However, the strain hasn’t put Grady off. In fact, the model has worked so well for 10C that the shared space is now launching several finance programs of its own, including the Harvest Impact Fund, a place-based community capital institution — which invests locally. Harvest Impact will be incorporated as a share capital co-op and will raise funds and invest $2-3 million in enterprises creating the circular food economy, as part of Guelph-Wellington’s Our Food Future Smart Cities project 

Smaller projects include a micro-loan program for early stage ideas. The program — a pilot launched in February 2020 through Nourish, 10C’s shared commercial kitchen — provides women and non-binary people in Guelph with microloans and enterprise support to help them launch food-related enterprises. The first round of microloans were funded by small donations and a grant from the Canadian Women’s Foundation, and funds paid back by borrowers will feed into the next round of microloans. Grady believes this structure allows for more flexible, entrepreneurial, and resilient communities, which will be paramount in sustainably rebuilding community wealth post-COVID.

Social entrepreneurs “need the opportunity to risk and fail,” Grady says, “which you don’t get in larger scale financing. With our micro-loans, entrepreneurs are beholden to the circle of the next investees, and they also have a circle of support if their project fails.”


Experimenting with new ways to mobilize social finance

Interest in local impact investments has also increased among investors. As social finance goes mainstream, investors have begun looking for ways to localize their impact. Or, at least, that’s been the experience for one social finance program in Canada. 

“We think people will be very receptive to having the ability to not only support local with their buying dollars, but with their investing dollars as well,” James Chan, manager of VERGE Capital, tells Future of Good.

VERGE Capital, based in London, Ontario (and an investor in Future of Good), has experience in the space: it’s been investing in local social enterprises since 2015, when it launched Southwestern Ontario’s first place-based, or locally-focused, fund. The fund was born after Pillar Nonprofit Network came together with Libro Credit Union, London Community Foundation, Sisters of St. Joseph, and SVX in 2013 to explore what a place-based fund would look like, inspired by the rise of social finance worldwide. 

Working together, the group completed an environmental scan and discovered that London was home to $40 billion in investable assets — assets that could be primarily going towards London’s own social impact organizations. So the team launched Social Finance London (now VERGE Capital), and eventually received funding from the government of Ontario and the Ursuline Sisters of Chatham to launch their first fund. 

Its Breakthrough Fund, launched in 2018, is one of only a handful in Canada that engages and enables purpose-driven organizations and individuals to invest in local impact. In the last six years, VERGE Capital has provided over $3.6 million in impact investments to social and environmental enterprises, community hubs, green energy projects, and affordable housing developments in Southwestern Ontario. 

Before the Breakthrough Fund, even if you were on board with this idea of impact investing — even if you wanted to support local and invest in your own backyard — there was no vehicle to do it,” Chan says. VERGE Capital is now envisioning what its next fund will look like.

“The challenge with the Breakthrough Fund was that it was set up to only be open to accredited investors, which limited the range of people who were able to participate,” Chan says. “It made sense at the time; it was our first time engaging investors and it was set up as a demonstration fund. But opening up access is something we’re focused on for our next fund as a major improvement to our model.”

Pillar Nonprofit Network has already tested — and seen success — in opening up investment opportunities to its local community. In 2015, they launched London’s first community bond to open their coworking space, Innovation Works, and raised $1 million from 47 investors. When they launched their second bond in late 2020, the number of local investors jumped to 77 — despite the economic hardships brought on by COVID-19.

“We were intentional in leading with the renewal of the community bond for Innovation Works, knowing that it was a test ahead of launching VERGE Capital’s next fund,” says Michelle Baldwin, previous executive director of Pillar Nonprofit Network. 

At the moment, the majority of impact investing opportunities — especially when place-based — are only available to accredited investors. To open up access, VERGE Capital will need to lower investment minimums, spread the word, and work on educating the larger community, as unaccredited investors usually don’t have financial advisors sitting at the table to guide them through the process. But education is part of the work that must be done by any social finance fund, and finding new ways to broaden VERGE’s audience is a welcome opportunity.


Using innovative approaches to bring about systems change

Pillar Nonprofit Network’s success in launching VERGE Capital has made its team think even more broadly about how to equitably increase local, place-based wealth. Baldwin, was working closely with a network of organizations to launch Inclusive Economy London & Region, which aims to boost London’s regional economy by tackling economic development, poverty reduction, and green initiatives.

A large part of Inclusive Economy London’s mission is to help local businesses transition to broad-based and community ownership models. The logic behind it: co-ops and community-based ownership structures often make for more resilient businesses, while boosting employees’ financial outcomes and stability. 

Whether through community ownership structures, local impact investing funds, or community bonds, however, Baldwin imparts one piece of advice to others in the space: keep your local community central to your efforts.

“When you put decision-making into the hands of your community, and give people the ability to contribute at that local place-based level, that’s where transformation really does happen,” Baldwin says. “That’s when people feel agency for their own community.”