Taking an innovation to scale is tough, but some ideas have real resonance. Community Bonds have the magic to go to scale — but we need some help:
- Learn about Community Bonds — buy one and rip off the idea for your own project.
- Talk to people about Community Bonds, especially if they work for banks or the Ontario government. Explore how they might be used.
What follows is what we are asking the Ontario government to do to help us scale this social innovation for communities across the province…
The Community Bond
The Community Bond is a loan instrument geared to engaging citizens in the creation of infrastructure and assets in service to the community.
Used by nonprofits and charities to engage their constituents in building a healthier and a more resilient Ontario, the Community Bond is essentially a hybrid involving
- Ontario Securities Commission exemption as a benevolent society
- RRSP-eligibility (because mortgages are RRSP eligible)
- A bond backed against the mortgage
As a loan instrument, the investor enters into an agreement with the community-based organization, whereby the organization promises to repay the loan with interest. The interest rate is set based on the security and philanthropic aspects of the project.
Community bonds are currently possible and are being implementing in Ontario. We are seeking the provincial governments ‘clarification and blessing’ to make them more accessible to communities and to build the confidence of investors.
We are recommending that the Ontario government support the implementation of Community Bonds with the following recommendations:
1. Recognize nonprofit organizations for public benefit as explicitly included in the Ontario Securities Act ‘benevolent’ exemption.
Nonprofit organizations issuing community bonds currently have access to the “benevolent” exemption from existing securities regulation which restricts anyone from soliciting investments from the public unless the investor is considered ‘qualified.’ While these restrictions make sense for ‘for-profit ventures’ that are meant to maximize a return, it creates confusion for members of the community from making investments into their community. The ‘benevolent’ exemption section of the Securities Act should be clarified to include a nonprofit organization for public benefit.
2. Publicly recognize Community Bonds as a legitimate social finance strategy to support community vibrancy.
By blessing Community Bonds and supporting their implementation in communities, at nonprofit board tables and within financial institutions, the government will be helping to scale a social innovation and paving the way for other creative do-it-yourself approaches to community building.
3. Begin to explore the oversight of social enterprise similar to coops.
Nonprofit organizations exempted from the Securities Act should have the option to utilize a simplified risk disclosure regime such as that available to cooperative organizations in Ontario.
Community bond like instruments have been in use in various regions around the world. Canadian organizations have been implementing variations of these for years. CEDIF’s in Nova Scotia are quite similar. The Calvert Community Investment Note (in the US) has leveraged $200M, in assets over 15-year period. Similar tools are in place in the UK as well. The Canadian Task Force on Social Finance has supported the implementation of Community Bonds as one of its 7 recommendations.
2. Mobilizing Private Capital for Public Good: Measuring Progress During Year One, Canadian Task Force on Social Finance
3. Bulletin on Securities Regulation