Thursday
January 12
2012

Carmelina Macario

The View from Canada: Impact Investing 2.0 – Your Money, Your Way

When you start to think about investing your money to save for retirement or to grow your net worth, you are faced with a lot of questions:

How much do I put aside every month? Who do I trust with my money? I am a high- or low-risk investor? What do I want to invest in? Enter the financial advisor – they can help answer those questions, set up a portfolio for you and give you piece of mind. But what about when they can’t offer you something you want to invest in? What happens with even Socially Responsible Investment (SRI) funds don’t met your needs?

Enter impact investing. Of course it isn’t a new concept (NextBillion has covered it extensively) but it is a concept that is gaining popularity in the investment community. For the uninitated, impact investing is the act of investing your money into projects that will have a positive social or environmental impact and getting a return for it. Impact investing experts credit the gain in popularity to among other things: the instability of financial markets, the creation of a common framework for reporting on impact investments and to the shift of donors lending money to causes rather than giving money to causes.

Because it is fairly new in the more traditional financial circles your financial advisor may not be aware of impact investing opportunities or educated about them enough to present them to you as an option. They may also not be telling you about them because there is no incentive for them to do so, which leads to the question – what could an incentive structure for impact investing look like? I’ll let someone else blog about that one…

Venturing out on your own can lead to challenges. Until recently, the only way I knew how one could invest in organizations and companies they believed in was to be an accredited investor with at least $50,000 to invest. Fortunately, there are impact investing opportunities out there for the retail-sized customer, and some of them were showcased at the “Beans and Bonds” session at this year’s Social Finance Forum hosted by the MaRS Centre for Impact Investing last month in Toronto, Canada.

In that session participants (from social enterprises, social purpose business, foundations, investors, government and others) learned about opportunities like the Centre for Social Innovation’s (CSI) Community Bonds that have been oversubscribed. Give CSI $10,000 for a 5-year term and they’ll give you a 4 percent return annually and it is mortgaged backed. Your investment helps to create an affordable workspace for over 400 people and projects focused on creating impact like Not Far from the Tree – a group that works with Toronto homeowners to pick the fruit they wouldn’t have and split it three ways between the home owner, the volunteers and food banks.

Is $10,000 still too much? There is another option: Solar Bonds. Become a member of the TREC Renewable Energy Co-op (for $40) and invest $1,000 maximum (because that is the limit right now, due to the lack of a regulatory framework in Canada to support social enterprise, regulations the Canadian Task Force on Social Finance has called for in its 2010 report) for five years and you will receive 5 percent annually. Your money is invested in solar power projects that are backed by 20-year contracts with the Ontario Power Authority and they reduce greenhouse gas emissions and support local employment in Ontario.

Like any investment you make, you take a risk and like with any investment, you should do your homework and find out if investing in bonds or a co-op is the right fit for you. The daunting part is the lack of financial advisors who can help you make that decision and the lack of a structure that incentivizes them to want to do so as discussed earlier on.

To read more about what opportunities exist in Canada check out the Canadian Task Force on Social Finance Progess Report. While there isn’t exactly a slew of opportunities for retail investing, there are more and more people who are asking the question: How can we unlock new sources of capital from retail investment to ensure impact investment opportunities aren’t just for the wealthy?” as Logan Yonavjak asks in her recent post about the newly released “Impact Investing” book co-authored by Antony Bugg-Levine and Jed Emerson. Bugg-Levine was one of the speakers at the event, check out the Forbes interview below:

2011 Social Finance Forum: Investing in Good Deals from SiG @ MaRS on Vimeo.

So to all the small scale investors out there – and there are many of you – talk to your financial advisor, talk to your local representatives (provincial and federally) and tell them you want a structure in place that gives you great choice in who you invest in. It is after all your money.

Categories
Entrepreneurship
Tags
impact investing, investment fund