Context

Over the last decade, impact investing—a targeted approach to investment in companies, organizations, and funds with the intention of generating social and/or environmental impacts alongside a financial return—has gained interest and traction within the financial sector. Many leading global financial institutions are actively engaged as investors, lenders, and wealth managers. Impact investment funds are increasing in numbers and their track records are showing early evidence of realizing positive financial returns and social impact.  Governments are also exploring the use of impact investing to address pressing social and environmental challenges, such as affordable housing and climate change.

Globally, the impact investing sector is estimated to have a market size of USD $60 billion, with steady growth projected over the coming years.  In Canada, the market is estimated at between CAD $2 billion and $4 billion, and it is expected to show continued growth across the country.  Impact investing opportunities have primarily been accessible to institutional and accredited investors. While there is some evidence of growing demand among individual investors for investment products that integrate social and/or environmental considerations, this has yet to translate into customized strategies and investment opportunities for retail investors on a large scale.

Given the intermediary role that credit unions play in the economy and the deep relationships they have within their communities, credit unions are well-positioned to catalyze the market for retail impact investors, while at the same time furthering their own contribution to fostering more sustainable communities.  Collectively, credit unions are already considered leaders in the impact investing space in Canada, with $698.2 million in impact investing assets. They engage in this sector by actively seeking opportunities to direct capital into areas that align with their values of community engagement and sustainable development. Credit unions themselves project a 60% increase in the value of their impact investing products by 2018.  However, while many credit unions are already well-established players in the impact investing sector, most do not yet offer targeted impact investment products for retail investors.

Credit unions that have the foresight to tap into this demand for new retail impact investment products will likely benefit from increased business with existing members, an expanding market share, and a stronger brand recognition within their communities. Beyond the benefits for individual credit unions, increasing the opportunities for retail investors to engage in impact investment can lead to a more resilient investment culture and ultimately, a more stable financial system.  Retail impact investment products may also generate interest from individual investors to expand the market for impact investment opportunities into their institutionally managed assets such as their pensions, where the majority of individuals’ wealth tends to be held.

Objectives

This guidebook highlights an opportunity for credit unions to engage further in the impact investing sector by addressing a gap that exists in the retail impact investing market in Canada. The guidebook provides a roadmap for credit unions seeking to create and to deploy their own retail impact investing products targeted at current or prospective members who wish to receive a financial return, while at the same time generating a targeted and measurable positive impact for local or global communities.

The specific objectives for this guidebook are as follows:

  • Introduce the need and rationale for retail impact investing for credit unions;
  • Identify broad trends and evidence around the potential for retail impact investing;
  • Profile retail impact investment products from Canada and globally;
  • Review the key elements of the product development process for a retail impact product;
  • Analyze the strategies, considerations, best practices and enabling conditions for success;
  • Provide resources that credit unions can use in their product development efforts; and
  • Identify a set of priorities and actions to catalyze retail impact investing for credit unions.

The primary audience for this guidebook is the Canadian credit union sector. Some credit unions may already have the capacity and infrastructure to explore retail impact investing product development independently, which this guidebook takes into consideration. The guidebook provides a foundation for those new to the concept, providing best practices and examples, but also offers information for staff members within all credit union departments, including senior management teams and board members. We also believe that this guidebook will be useful to the social finance sector more broadly, including product issuers and distributors, and social finance intermediaries.

Report Structure

Chapter 2 begins with an overview of the impact investment sector in Canada and globally, drawing on broad investment trends and activities to assess market opportunities. The section defines retail impact investment for the purposes of this report.

Chapter 3 explains the opportunities and challenges facing credit unions for retail impact investing.

Chapter 4 profiles six Canadian and global retail impact investment products to identify unique lessons and implications for credit unions.

Chapter 5 elaborates on the five stages of the product development process for a retail impact investment product: planning, product development, pre-launch, product launch, and post-launch. For each stage, the key activities, challenges and success factors are examined.

Chapter 6 distills the key findings and lessons into a set of actionable strategies and guidance for individual credit unions. The chapter also provides a set of priorities and actions to encourage the growth of retail impact investing in Canada.