Kat Tancock is co-founder and co-editor of nature-focused Rewilding Magazine and of Workshop, a small business magazine for makers and creators in Canada.
For years, I’ve kept the bulk of my savings in a portfolio of diversified, low-cost exchange-traded funds. While for the most part I’ve been happy with that decision, one aspect has long bothered me: The very nature of index investing means you don’t get to choose where your money is (and isn’t) going. Unfortunately, that means I’m invested in companies whose actions are at odds, to put it mildly, with my values, such as big energy companies with questionable environmental records.
I’ve been exploring market funds that are more selective in their holdings as one strategy to make my portfolio greener and more socially responsible. But during that process, I realized that I was longing for an investment vehicle that would do more than just alleviate my guilt. I wanted to be putting at least some of my money toward something that was making a positive difference, and whose results I could see up close. And that’s when I found out about community bonds.
Community bonds are a tool that allows non-profits, charities and co-ops to borrow money to fund their work, and investors to profit from supporting organizations and projects they believe in. This isn’t simple charity – issuers must have a revenue model so they will be able to pay interest to bondholders. Each bond issuer creates its own terms, including duration, interest rates and minimum investments. For instance, Montreal-based environmental organization Earth Day Canada is currently raising funds to install a network of electric-vehicle charging stations in Quebec and New Brunswick. With a minimum investment of $1,000, lenders can choose a five-year commitment at 3.5-per-cent interest or a seven-year term at 4 per cent, with earnings paid out annually.
One pioneer in this area has been Toronto’s Centre for Social Innovation (CSI), a social enterprise that has been offering co-working, event, meeting and office space as well as community and collaboration to those who are “doing good” since 2004. By 2009, CSI had a large membership and a waiting list and was looking to buy its own space. With only $50,000 in savings, the nearly $7-million needed to purchase and renovate the building they had their eye on seemed far out of reach, chief executive Tonya Surman says.
Thanks in part to a loan guarantee from the City of Toronto, Ms. Surman and her team were able to secure a mortgage – but they still needed to come up with $2-million elsewhere. That’s when Ms. Surman had a brainwave in how to turn what she calls their “community capital” into financial capital. CSI created bonds secured against the value of the building and raised the funds. “It was mayhem,” Ms. Surman says. “But it was the first example of an at-scale community bond, where ultimately it allowed us to now own two buildings.”
CSI’s experience has been a model for many groups. One of these is 10C in Guelph, Ont., a social innovation hub similar to CSI that’s been in operation since 2008. Thanks in part to community bonds, 10C was able to purchase and renovate a historic building in downtown Guelph that has become its home base. The bonds were essential in accelerating 10C’s ability to serve its community, executive director Julia Grady says. “If we were running a donation campaign, it would take us 10 years” to reach the financing that was needed, Ms. Grady says. “Community bonds gave us a way to build the project and be doing the work versus planning for a day in the far future.”
A standard investment portfolio is a mix of stocks and bonds, and community bonds “definitely sit on the bond side of that equation,” says Tim Nash, a financial planner and founder of Toronto-based Good Investing. While community bonds can be competitive with other types of bonds – especially during times like the past few years, which have seen relatively poor bond performance – there are a few trade-offs.
First, Mr. Nash points out, unlike some fixed-income investments, community bonds are not liquid, so investors should be confident in leaving that money where it is for the duration of the term. Second, he says, “they do tend to have different risk profiles than standard investments,” so it’s important to understand what assets, if any, are backing them. (Both Ms. Grady and Ms. Surman have held numerous information sessions with potential investors over the years, and highlight that this direct relationship is one of the benefits of community bonds.) And third is that while community bonds are technically eligible for registered investment accounts, the logistics mean that holding them in a registered retirement savings plan or tax-free savings account is cumbersome at best and often comes with additional fees, so many investors choose to simply hold them outside those accounts and pay tax on the returns.
Mr. Nash suggests that community bonds and other impact investments might make up between 5 per cent and 10 per cent of an investor’s portfolio. He suggests that what he calls the “warm fuzzies” – the positive feelings that come along with this type of investing – should be taken into account when making investing decisions. “Evaluate the risk, but also evaluate the return as the financial return plus the warm fuzzies,” he says. “That’s different for everyone. And it’s different for every bond.”
For me, it comes down to why I’m investing in the first place. It’s to save money so I can buy things in the future, yes. But my cash flow 30 years from now isn’t going to be the only factor that affects my well-being. The strength of my community and the state of the environment I’m surrounded by will have a huge impact, too. If I can contribute to making those better and make a decent return on my investment, all the better. And judging by the success of so many community bond programs, I’m not the only one who thinks this way. “We’ve become so disconnected from where our money is invested,” Ms. Surman says. “And I think people ultimately want to see how their money is working for society.”
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
