Impact investing at Vancity Community Foundation exemplifies trend toward more innovation among community foundations
Though a recent report about innovative community foundations focuses primarily on the U.S., its findings ring true for some Canadian community foundations also doing pioneering work in their field. Vancouver-based Vancity Community Foundation is one of these.
Released in November, the “A New Anchor for a New Century” report details how a group of 30 innovative community foundations of varying sizes and stages of development are exploring how they could do better at building community wealth.
In some cases, these foundations are looking to catalyze economic development in new and exciting ways — by assuming a leadership or catalytic role in an initiative, for instance, rather than simply disbursing grants.
Others are experimenting with impact investing — investments that seek both financial return and social impact.
The Vancity Community Foundation is engaged in a range of different strategies, working toward the development of a more integrated and balanced portfolio of investments and capital allocation that includes impact as well as appropriate financial returns. The capital allocated also has to match the expectations of its various donors and contributors, or other co-investment partners. “This can create new opportunities and also sometimes additional limitations on how we invest,” executive director Derek Gent says.
The foundation has worked to tie its investment strategies more specifically to its program support, looking at a longer time horizon, appropriate development paths and good collaboration.
“We have been excited by the momentum we have gathered, adding new investments and becoming more sophisticated at sourcing and then understanding the opportunities that are out there,” Derek says.
“It has also raised additional questions about how we define, measure and support ‘impact,’ and an enhanced understanding of risk management within our organization.”
On the impact investing front, the foundation has been actively using a portion of its unrestricted or specifically designated endowment assets for making direct investments that create positive impacts in local communities while still earning a reasonable financial return for decades.
Just recently the foundation has been working to expand that portion of assets for this investment.
In 2014, it continued to increase its total allocation to now approximately $12 million directly invested in impact, representing over 20 per cent of its total unrestricted assets.
Examples of its impact investments from last year include a commitment of $1 million to the New Markets Fund for a new, pooled investment product focused on non-profit owned rental housing projects.
The foundation also invested $250,000 in a coastal conservation land swap on Quadra Island involving pre-purchased carbon credits from Vancity. And it supported leasehold improvements through a $225,000 letter of credit for a new, non-profit co-location initiative for the BC Electric Building in Vancouver’s Downtown Eastside.
The foundation also recently renewed its repayable bridge financing facility for Kuterra Salmon, BC’s first on-land, environmentally sustainable completely closed-containment fishery owned by the Namgis First Nation and supported by Tides Canada and Save our Salmon Society.
Impact investing offers an exciting opportunity to allocate much more financial capital to organizations than was ever possible just using grants and program dollars, Derek points out.
“I’m particularly excited about the potential to attract new capital, through donations, partnerships and collaboration, as well as leveraged investment from other sources,” he says.
That said, the work is not without challenges, and as a pioneer the foundation has gained a bit of wisdom along the way.
For example, it’s important not to underestimate the value of social capital and trust in this work.
Also, a strong and inherent bias against impact investment does still exist, with many automatically assuming a subsidy or additional risk whenever they hear the term.
Derek points out that there is a difference between the foundation’s intention to help expand the capital market available to those organizations generating impact and who may not have access to investment dollars and its intention to allocate a larger portion of its own capital into investments that have positive impact.
Looking ahead the “best that could happen” includes the availability of more investment dollars seeking opportunities and more opportunities available that are seeking investment dollars.
There is also a need for a more robust understanding of the different forms of impact investment and how they fit together, Derek says.
Community foundations have the potential to play a tremendous “anchor institution” role, much the same as non-profit or public universities and hospitals, Democracy Collaborative executive director Ted Howard writes in the introduction to the New Anchor for a New Mission report.
“Focused geographically in their giving, governed by boards of local civic leaders, endowed by contributions from local donors, community foundations are as firmly rooted in place as any institution,” the director writes.
“Community foundations embody the essence of what it means to be an anchor institution… . and could be a tremendous force for community economic revitalization.”