MaRS Centre for Impact Investing is now seeking a Senior Associate, Capital Advisory Services! From persistent poverty to climate change, we face entrenched social and environmental problems. Fortunately, a growing number of charities, non-profits, co-ops and for-profit companies are building business models to tackle these problems. They are turning to investors for the financing to […]Read More ›
Insights from the Slow Money National Gathering – Part 2
Sharing insights from the recent Slow Money gathering in San Francisco, Adam Spence highlighted three key takeaways in Part 1 of this post. In particular, he noted the multitude of local impact investment opportunities in Ontario, and wrote about innovative impact investment models being used in the sector. In this post, he writes about getting foundations involved, and the growth of a ‘Slow Money’ coalition.
Local foundations should strategically blend grant and investment financing and partner with others to increase capital and lower investment risk. It was very interesting to see foundations identify themselves as actors in the Slow Money movement. They reported a number of previously highlighted lessons on mission-related investing (MRI) at the conference:
- There is a challenge in placing large sums of institutional capital from asset owners like foundations given low availability of large-scale impact investing deals;
- Debt makes up the lion’s share of mission-related investments (and impact investing in general); and
- Foundations need to outsource due diligence to reach scale.
Beyond these lessons, there were interesting new insights offered by participating foundations such as the Solidago Foundation and the Woodcock Foundation. Representatives recommended that foundations match their grants (described as foundation risk capital) with investment dollars in target sectors and ventures. In order to maximize the likelihood of success, speakers believed that technical assistance grants were best matched with a back-end commitment for investment if grant recipients met certain milestones. For example, a foundation could provide technical assistance grants to build a business plan for a nonprofit community food hub, then follow that grant with a loan to help finance the purchase of a building.
In addition, foundation representatives also recommended partnering with others to increase capital supply, lower risk, and reduce the resource burden of due diligence. For example, the Solidago Foundation became a partner in the creation of the Pioneer Valley (PV) Grows Loan Fund, working with other foundations, government, institutional investors, and community organizations to provide loans to food enterprises filling gaps in the local food system.
Local capital markets are emerging in many centres across the United States. I had the good fortune of participating in a lively discussion on local capital markets with representatives from Lancaster and Hawaii, facilitated by Amy Cortese, author of Locavesting. There were representatives from across the US interested in starting local capital markets, including Spokane, Phoenix, Washington, and Boise. The interest in the concept is catalyzing the creation of a coalition of similar initiatives across North America. The SVX, an initiative of MaRS in collaboration with the TMX Group Inc., will derive significant value by exchanging knowledge and resources and collaborating with partners with a similar mission and vision.
We would be wise to follow the trends and direction of the Slow Money movement, as it has valuable lessons for Canadians driving the social finance agenda. I look forward to following this movement as it continues to grow and plant roots across the continent.