By Tessa Hebb.
We’ve heard a lot about resilience during the COVID-19 pandemic. We know what resilience means for the human body, mental health and for community well-being, but what does it mean for a nonprofit and charitable sector now straining to keep doors open and lights on?
COVID has shone a spotlight on many systemic weaknesses. Vulnerable populations – the elderly, those living in poverty, precarious workers, racialized communities, and people with disabilities – have all been disproportionately affected. This is as true in Canada as elsewhere. Governments have demonstrated their value through this difficult time. So too has our nonprofit and charitable sector. Food banks, shelters, community health services, employment services, housing, eldercare, and childcare are just a few examples of assistance to Canadians through this crisis. But the sector isn’t immune to systemic weakness. At a moment of great need, it’s in the precarious position of lacking the resources required to serve communities in trouble.
The sector’s reliance on government transfers and individual donations makes it vulnerable when those resources are scarce – as COVID has demonstrated. But this dilemma isn’t new. I and others have long argued that social finance offers a way out, a way that enables organizations to diversify revenues. And the capacity to diversify strengthens resilience – witness sewing co-ops shifting to make personal protective equipment, or food-based social enterprises providing meals to isolated seniors, or courier companies pivoting to deliver groceries.
Social finance doesn’t replace traditional sources of funding for nonprofits and charities. It’s only one of many sources. As noted by the Government of Canada: “Social finance is a tool that seeks to mobilize private capital for the public good. It creates opportunities for investors to finance projects that benefit society and for community organizations to access new sources of funds.” This intentionality for both a financial return and a positive social or environmental impact distinguishes social finance.
Social finance allows a charity or nonprofit to recognize its assets, articulate its value and to ask ‘Who else values these assets?’ and ‘Who’s willing to invest in what we do?’. This mindset is entirely different from one that asks ‘Who will fund my good works?’. Such a shift can unlock significant creative energy and innovation within an organization.
Yet despite its benefits, social finance has been slow to advance in Canada. For many years, I and others saw the lack of investment capital as the major barrier to a well-coordinated social finance marketplace. But it turns out that while access to capital is necessary, it’s not sufficient. Challenges also exist around the demand for capital. A report just released by Imagine Canada details the obstacles that Canadian charities face in using social finance to diversify revenues. Drawing on a survey of more than a thousand charities in Canada, the report finds that risk aversion (particularly from boards of directors), small size, and lack of knowledge remain major barriers to the demand for social finance capital today.
One of the lessons of the Covid-19 pandemic is that resilience in our sector requires a broad suite of resources to ensure that services can be delivered when most needed. Let’s not overlook a tool in our toolbox when our communities need us more than ever.
Tessa Hebb is an Adjunct Professor at the School of Public Policy and Administration. She’s also a Distinguished Research Fellow and past Director of the Carleton Centre for Community Innovation. Her research focuses on Responsible Investment, Impact Investment, Social Finance and Impact Measurement. Hebb is on Twitter and Linkedin. Photo of shelves is courtesy of Konstantin Rotkevich and Pixabay.
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Sunday, October 11, 2020 in Public Policy & Advocacy, Social Finance
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