Lessons

As impact investing continues to gain traction, retail impact investing presents an emerging and untapped set of opportunities. Credit unions are well-positioned to use retail impact investing to differentiate themselves from other financial institutions, provide innovative product opportunities for their existing members, attract new members seeking to integrate social considerations in investment decisions, and strengthen their link to their respective missions.

Responding to the need within the credit union sector, this guide attempts to identify the key considerations for credit unions that are interested in retail impact investment. This guide provided examples of retail impact products, and offered these case studies to provide lessons and inspiration for product development. It is also clear that there will be a need for product innovation in this area, as well as a more supportive enabling environment, to make it easier for credit unions to develop and launch these products.

In this section, we describe strategies for how the credit union sector can catalyze the development of new products and innovations – either as individual credit unions, or working collectively across the sector. We begin by summarizing the key lessons from successful models, and propose a set of actions that could be undertaken to advance retail impact investing in the credit union and social finance sectors.

Lessons from Successful Models

1.Strong alignment with credit union objectives and mission

A clear set of motivations and objectives is critical. In the credit union context, there can be an assumption that retail impact investing is a t with mission; this is not always true nor obvious, as there are many potential options around the nature of product selection and development. It is important to be clear how this alignment exists. As described earlier, each of the profiled organizations within the case studies had clear, but somewhat different motivations and objectives.

2. Solid rationale and business case

As with any other product, credit unions must make a strong case for retail impact investment products amongst competing opportunities and demands for the credit union. It is also important to consider the opportunity costs (i.e. the costs of not doing this), especially where broad member and societal trends would seem to favour these opportunities, and that it provides credit unions with a novel way to differentiate themselves and attract new members. Calvert Foundation’s journey in this area provides an illustrative example of why this is essential.

3. Visible and engaged leadership from an internal champion

Like many other organizational strategies, developing retail impact investment products requires a strong internal commitment that can bring together the relevant teams and individuals in a coordinated manner. It is powerful when this leadership is from the highest levels, and maintains high visibility. Many credit unions we spoke with have clearly expressed interest in retail impact investing, but recognize that the competing interests internally may favour other initiatives. As such, having an internal champion to galvanize action, as the case of MSCU demonstrates, is vital.

4. Strong internal coordination to maximize buy-in

As retail impact investing is still a novel idea for many credit unions, it will require the buy-in of several departments, and it will require that staff go beyond what is required for a typical product. The challenge is bringing these groups together to work collaboratively, even if it is not clear at the outset what the final product may look like. It is even more important to do this well if the group expects to face barriers that the organization has not experienced in the past. This was illustrated by the experience of various team members in Vancity’s Resilient Capital Program.

5. Partnerships with existing funds or organizations
It is often the case that partnerships will be critical to identify the impact opportunity. A high level of trust is required among the external partners and the credit unions, and common objectives and shared success measures. Building trust involves multiple conversations– in order to discuss options to move forward, identify individual and mutual concerns, and solidify a commitment to overcome them together. The partnership between the Jubilee Fund and Assiniboine Credit Union is an illustrative case, where a stated commitment to collaborate was key.

 

Priorities for Catalyzing Retail Impact Investing

In this concluding section, we identify four priority areas to catalyze retail impact investment among the credit union sector in Canada. Within each area, we identify potential strategies and activities that could be undertaken by credit unions individually or collectively, or by broader sector networks and intermediaries within the credit union and social finance sectors. While these priorities are most directly relevant to the credit union sectors, it will be important for credit unions to engage the broader social finance community across Canada.

For those priority areas that require system coordination, it is recommended that the Canadian Credit Union Association (CCUA) – through its Credit Union Social Responsibility Committee – engage in a process to assess which of these recommendations could be advanced.

Generate Awareness and engagement within the credit union sector

1.Share information and best practices among the credit union sector

The sector should commit to regularly updating the website that was created for this guidebook to showcase the range of impact investing opportunities and best practices in product development. Through the website and other system-wide communications channels (e.g. newsletters, social media), invite the credit union sector to participate and contribute their experiences, examples and questions. This should also include integrating impact investing at system-wide conferences or regional events.

2. Review product development approaches and share tools and templates

Credit unions can use existing networks and platforms (e.g. CCUA, Centrals and other system partners) to describe the specific approaches that they are taking to product development within their respective institutions. Ideally, they would also be able to share tools and templates that other credit unions can review and adapt. Over time, this could also include collaborating around shared standards for financial and impact performance reporting.

Validate member demand and strengthen the ability for credit unions to respond 

3. Validate existing or latent member demand through research and campaigns

Credit unions – individually or collectively – can commission targeted research on the demand and preferences of existing members related to impact investing, as well as assess interest from potential members. These assessments can draw on surveys conducted in the US and UK, adapted for the Canadian credit union context. The results can then inform product development or marketing activities (e.g. an “invest for impact” campaign).

4. Strengthen staff capacity and education through Professional Development

Credit unions can embed impact investing as a component of professional development objectives, either through in-house materials, or suggesting the topic to training providers (for example, CUSource, the professional development and education arm for Canadian credit unions and/or networks such as the Responsible Investment Association). Additionally, specific content can be developed for targeted staff members (e.g. financial advisors).

Develop shared platforms to catalyze product development 

5. Explore the feasibility of collectively negotiating a partnership with an established product issuer

To help reduce transaction and monitoring costs, credit unions could collectively negotiate a product partnership with an established product issuer (e.g. Oikocredit or Calvert). Such a partner- ship can significantly reduce the time and effort required for each institution around partnership development, increase accessibility to smaller credit unions, leverage collective assets, and reduce investment risks.

6. Explore the feasibility of a national thematic product accessible to retail investors

Credit unions could engage with Centrals and system affiliates to assess whether they can create a product in an established impact sector – such as affordable housing or renewable energy – to access investment opportunities and place capital at scale. As credit unions have a bias to invest locally, the national product could be structured to have specific regional allocations. This product could also attract capital from institutional impact investors such as foundations and governments.

Strengthen the enabling environment for social finance

7. Collaborate with social finance intermediaries to build a pipeline of qualified impact opportunities

The broader social finance sector has lamented the dearth of impact products and opportunities that are ready to receive investment. Credit unions can partner with local and regional intermediaries (such as community loan funds, community foundations, and business incubators and accelerators) to actively identify and vet potential opportunities, which could quickly help deepen the pool of existing opportunities. Credit unions also bring financial expertise that could be applied to strengthen the investment readiness of potential investees, and reduce the search and transaction costs of making impact investments.

8. Build on regional or national policy, regulatory and advocacy initiatives that promote social finance

Social finance has been identified as a priority for the federal government, and several provincial governments – including Ontario, BC, Saskatchewan, and Nova Scotia, among others – have specific initiatives focused on social finance, social enterprise or social innovation. Some networks are actively advocating for improved legal, regulatory and policy conditions, building on the recommendations on the Canadian Taskforce for Social Finance and the Canadian National Advisory Board. For credit unions, this should include engagement with appropriate provincial and federal regulators.