I had the opportunity to attend the Social Investment Organization Conference in June and a few things struck me about the traditional investment industry’s potential relationship with co-operatives.

In my role with the Ontario Co-operative Association (On Co-op) as a co-op developer, I am always looking for ways to help specific co-ops I am working with access more and more suitable sources of capital to drive their enterprises, as well as opportunities for the sector more generally. Conferences like this can be an important window into what’s happening in the larger economy around capital and investment trends and what that means for the climate in which co-ops operate.

There was a theme at the conference related to the role of advisors and financial institutions in identifying and advertising socially responsible investments, and how innovation and social innovation in particular are driving socially responsible investment. I have a few reflections on how these roles of facilitating social investment and access to capital may impact the co-op sector, and I have had a few observations on the role of advisors in generating investment for co-ops.

At their core, all co-operatives are member-owned enterprises – they are organized to meet some member need or provide a service to those members. This means that by their nature, and traditionally, they can be quite insular and focused exclusively on meeting those member needs. Therefore, the flow of dollars stays within the membership base and doesn’t necessary have impacts on the markets in the same way as other firm activity.

Many high capital co-ops are organized in traditional sectors, like agriculture or finance. Many of the large agricultural co-ops in Ontario use a combination of dollars raised from members and commercial lending arrangements, with investment from outside of the membership not playing a large part in their capital base. This reflects the traditional form and use of co-ops: they are organized for members, and so member equity (often in some combination with other lending) is used to drive the expansion and growth of these co-ops. Conversations about larger capital pools designed for social enterprises or socially responsible investments outside of the membership may not have impact on these types of co-ops.

Which co-op sectors are likely to be seeking investment from outside the membership, and therefore will be looking for sources of investment?

The renewable energy co-op sector is one that is built on developing a larger community investment base that can support the capitalization of their projects. In many cases, co-ops are proposing to use a combination of member investment and non-member community investment (and often, a commercial lending arrangement).

Worker co-operatives working with fair trade or similar products may also be a potential co-op sector that can provide socially responsible investment opportunities for socially responsible investors. These worker co-ops exist to provide employment for their members, and they generate revenue through the sale of socially or environmentally responsible products (fair trade coffee or chocolate would be the most common example). Beyond the ability of these co-ops to capitalize on the interest of consumers to support these co-ops by buying their products, there may be socially responsible investment opportunities for non-worker members to support the growth of these enterprises.

The need to generate greater awareness among advisors and financial institutions that can drive investors towards these types of co-ops is critical as a first step in generating potential interest in the existence of these types of investments.

Photo Credit: http://www.flickr.com/photos/uggboy/4807789993/

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