Impact Investing with the Hamilton Community Foundation

Hamilton is a city on the move. After many years of economic turbulence, we are rediscovering our roots as an ambitious community.

This is reflected in an explosion of creative social enterprises and endeavours. Hamiltonians are building new organizations – and even new ways of organizing – that create value and build community. Hamilton is a city that embraces the mantra of doing well by doing good. Hamilton Community Foundation has always supported “doing good” but recently, we’ve been playing an increasing and evolving role in supporting these endeavours.

Traditionally, the foundation receives endowments from donors, investing the money to produce a return. The investment profit goes into grants that support local charitable initiatives and programs.

That’s a sound approach to developing community, but we have been eager to put more of those assets to work. Recently, we’ve moved into “impact investing,” offering three new tools that allow us to go beyond traditional granting to align our assets with our vision, mission and values.

The first tool is the Hamilton Community Investment Fund, a $5 million fund that makes loans to charities, not-for-profits and social enterprises in the Hamilton area.

We’re not trying to take the place of a bank, but for organizations that have sound financials and responsible development plans, we can help bridge the financing gap to support their project. Look around town and you’ll see the results, starting with a bridge loan to Hamilton Artists Inc. to complete their new gallery and resource centre on James Street North and Cannon Street.

More recently, we made a loan to the Mustard Seed Co-operative, the innovative new member-owned nonprofit grocery store at York Boulevard and Locke Street North, which provided working capital through the store’s start-up phase.

As we speak, we’re in the process of a very important project: a mortgage to develop 47 units of much-needed supportive affordable housing in Hamilton.

In all cases, as the borrowers pay back their loans, the money is returned to the Hamilton Community Investment Fund, in effect, recycling the capital to be loaned out again for additional projects.

Our second and third impact investing tools have been built with the assets of The Young Fund whose advisor Bill Young Jr. is a major contributor to the advent of impact investing in Canada. A direct impact investing fund of $7 million makes conscious investments in funds and organizations that have a social or environmental purpose in addition to generating a financial return – companies that endeavour to do well while also doing good.

The first direct impact fund we have invested in is Sarona Frontier Markets Fund, which has the dual objective of earning financial returns and providing community benefit in emerging and frontier markets.

Our third tool is a $30 million public market fund that gives consideration to investments in corporations with sound environmental, social and governance (ESG) practices. This fund works to encourage corporation to institute better ESG practices.

Today, there is a movement globally around impact investing that is developing tools to measure social and environmental impact as well as financial return. Reporting standards are being developed internationally on how we measure that impact.

These new impact investing funds are managed with the same rigour and careful oversight as our traditional portfolio. Investments need to pass a meticulous due diligence process by a committee of experts who evaluate the investees’ mission and financial returns as well as assessing the level of risk.

For direct loans via the Hamilton Community Investment Fund, we partner with a charitable financial institution called the Community Forward Fund, which does the due diligence, a process which loan recipients have found very beneficial. As Mustard Seed president Graham Cubitt says, working with Hamilton Community Foundation and the Community Forward Fund “forced us to refine our business plan and project our needs as thoroughly as possible.”

Impact investing is a relatively new area, so our expansion is evolutionary. In fact, Hamilton Community Foundation was one of the first community foundations in Canada to adopt impact investing as a strategy to put more assets to work.

Impact investing will never replace our core mission of granting, but it serves as an important additional vehicle through which we can help support community building in a way that is consistent with our mission and the creativity of our city.

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