Toronto Foundation LogoWith its deep knowledge of the city, Toronto Foundation has long been an expert in helping Torontonians channel their philanthropic dollars to where they will do the most good. For nearly forty years the foundation has helped philanthropists find ways to make their money go further by supporting “small but mighty” nonprofits working to build an inclusive, just, and sustainable city.

It’s no surprise that the foundation is also at the forefront of a new movement that’s all about finding new ways to leverage money for greater good.

Impact investing is an investment strategy that seeks financial returns alongside positive social and environmental change, and for Chief Operating Officer, Denise Arsenault, the case for getting started was straightforward.

“Simply put, we realized that we had been missing out on using an available means to achieve our mission,” said Denise of the fact that Canadian foundations typically dedicate just 3-5% of their assets to granting with the other 95% invested traditionally.

“If we can make investments that change our community for the better and we can do it in a way that meets the foundation’s financial needs, why wouldn’t we do that?”

 


“If we can make investments that change our community for the better and we can do it in a way that meets the foundation’s financial needs, why wouldn’t we do that?”


 

Today, Toronto Foundation is working to bring its investment portfolio in line with the same kind of positive, catalytic change it aims for through its grants. “Impact investing is just one more tool in our toolkit, one more way to do good beyond straight granting.” 

Denise Arsenault, Chief Operating Officer Toronto FoundationOne of the foundation’s most recent impact investments was a $750,000 purchase of CoPower’s Green Bonds which help finance community-scale clean energy and energy efficiency projects in Toronto and across Canada while offering competitive annual returns.

To set its investment priorities the foundation looks to Toronto’s Vital Signs Report--its annual ‘checkup’ on the issues that matter most to the those living in the city. With an anticipated “four-fold spike in heatwaves” and “doubling of rainfall” facing the city in the coming decades, supporting the environment and climate action is a priority area of focus.

“We wanted to see real carbon savings and CoPower’s Green Bonds were in the sweet spot,” said Denise. “The fact that some of the energy efficiency projects in the bond portfolio are in Toronto was important to us, but we were also impressed by the diverse range of projects and CoPower’s reach across the country.”

 


“Impact investing is just one more tool in our toolkit, one more way to do good beyond straight granting.”


 

The 5% annual interest earned on their 6-year Green Bonds is returned to their fund through a cyclical process.

“Impact investing and granting are complementary strategies, not an ‘either-or’ consideration,” said Denise. “In many cases, the dollars that we’re able to invest with an organization like CoPower are not dollars that we could ever provide through granting. Impact investing is allowing us to support a very different kind of work.”

 

Getting started with impact investing

Establishing a Social Impact Investment Committee was one of the first steps Toronto Foundation took to get started. The most interesting part was working out what the foundation’s impact investment strategy and criteria would be. How would they balance social and financial goals? Would they invest in activities outside of Toronto? Would they only invest in projects run by charities and nonprofits, or might they invest through a for-profit social enterprise as well?

“We didn’t rush into it,” said Denise. “We ran what I would call a responsible pilot that was grounded in the kind of good process you would want to see.”

The first step was education and lots of it. “We’ve benefitted greatly from early adopters like Hamilton Community Foundation and McConnell Foundation. The MaRS Centre for Impact Investing, in particular, has helped educate our staff and our board, and it continues to support our work.”

“This is an evolving area, and we’re on a learning curve. It was important to develop a flexible strategy,” John Sherrington, Chair of Toronto Foundation’s Social Impact Investment Committee said. “The CoPower investment fit our strategy well.” 

There can be a lot to learn with each individual investment too. “In many cases, we’re looking at one-off investment opportunities, and there can be a lot to learn both for us and for the organization which is often learning how to structure an investment of this kind for the first time.” 

“This was one of the attractions with CoPower. The bonds are a well-developed investment already. The legal documents are done. The management team is working with investors every day,” said Denise. “They’re set up to make it easy for foundations to just step in.”

 


"CoPower's Green Bonds are set up to make it easy for foundations to just step in." 


 

An easy entry point to impact investing or not, it was “the strength and responsiveness of CoPower’s management team” that gave the foundation the confidence to move forward with their Green Bond purchase according to Denise. 

“After the Ontario election, we had questions about what impact the new government might have on CoPower. The team came in to discuss with our investment committee and we were impressed by their thoughtful answers. They had done their homework and it was great education for us.”

As they work to grow their impact investments, Toronto Foundation hopes that their own experience will help others do the same. Through a demonstration grant, “the foundation will pilot a new Social Impact Investment Fund in 2018/19 for donors interested in establishing a permanent fund where every dollar is maximized for social good, and matched one to one.” Matches made by the fund will be up to $818,000. 

Embracing the possibilities of impact investing could dramatically increase the effectiveness of foundations in building a better world. Consider that Canada's public and private foundations today control financial assets of more than $73 billion according to Philanthropic Foundations Canada. The effect of even shifting a small percentage of that toward impact could be powerful. 

To learn more about the Toronto Foundation's impact investments, click here.  

 

Meet CoPower's Green Bonds, 6-year, 5% interest annually.

 

Editor's note: The Toronto Foundation invested in CoPower's third issuance of Green Bonds (Green Bond III) which is now available. This blog was solicited by CoPower and may not be representative of the views of other investors or potential investors in CoPower Green Bonds. Please consult the Offering Memorandum of CoPower Finance Inc. dated May 11, 2018 for all material information in respect of CoPower Finance Inc., the third issuance of CoPower Green Bonds and the terms of the offering of the third issuance of CoPower Green Bonds.