Hey Tim: WTF is a Community Bond?
Community bonds are one of my favourite things in sustainable finance, and I get a ton of questions about them, so let’s break it down.
First, let’s talk basics.
A bond is debt. When you buy a bond, you’re lending money to a government or corporation. In return, they pay you interest every year for a set term. When the bond “matures,” you get your original investment back. Simple.
Now, a community bond works the exact same way—except you’re lending money to a non-profit instead. In addition to the interest, we’re also earning some warm fuzzies by helping a cause that we care about.
The first community bond I bought was way back in 2010 from the Centre for Social Innovation (CSI), a non-profit co-working space here in Toronto. They used the money to purchase a building, and I received steady interest payments each year. That experience got me hooked.
Since then, the community bond space in Canada has grown steadily. According to Tapestry Community Capital, more than 59 projects have been financed through community bonds, raising more than $110 million for mission-driven organizations across the country.
Here’s what makes community bonds so special:
Low minimum investment amounts (usually between $500–$5,000)
You’re investing directly in your community
You can see the tangible impact of your money
That said, I don’t recommend putting a huge chunk of your portfolio into community bonds. They’re riskier than traditional bonds, and they’re a bit of a pain to hold inside registered accounts like your RRSP or TFSA. You buy them directly from the non-profit, so yes—you’ll pay tax on the interest.
So how do I treat them? As the cherry on top of an impact portfolio. They can be a beautiful addition to your pie—but they shouldn’t be the whole thing.
Want to explore more tools for financing a better future? Come join me at the upcoming Social Finance Forum, hosted by Future of Good. I’ll be there in person, and you can also join online from anywhere in the country. Plus, you can use the code IMPACTINSIDER for 30% off tickets.
If you can’t attend the whole conference, make sure you stop by the Good Investing Fair to learn more about community bonds. It’s free and open to the public on Tuesday, June 17, between 3 and 5 p.m. at MaRS in Toronto.
Let’s keep putting our money where our values are.
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