Impact Investments Are Building Resilience in Canada’s Local Food Sector

From foodtank.com, by Emily Nink
Impact Investments Are Building Resilience in Canada’s Local Food Sector

The J.W. McConnell Family Foundation released a new report, Food, Farms, Fish, and Finance: Practical Impact Investment Strategies to Seed and Sustain Local Food Systems. The publication, based on interviews with 43 social entrepreneurs, 26 local food sector leaders, and 16 investors, focuses on the realities faced by food system entrepreneurs in Canada.

Beth Hunter, a Program Director for the J.W. McConnell Family Foundation, hopes the new report will “generate both discussion and action.” The research assessed the role of access to finance in the success, challenges, or failures of food initiatives and business startups, along with cultural, social, regulatory, and landscape conditions in the sector. The publication sought to identify ways in which impact investors could strategically intervene in the food sector, to build capacity and resilience through a focus on measurable outcomes.

Three interrelated areas of financing, including seed capital, slow money, and impact investing, will be vital to capacity development in Canada’s food sector, according to the research.

Seed capital refers to the high-risk financing of new initiatives and businesses, aimed at organizational development. Access to early-stage loans and new lines of credit are crucial to the launching of a new farm or food business. TheBauta Seed Initiative exemplifies this type of funding in Canada through its community grant programs. Furthermore, beginning entrepreneurs and farmers often require mentorship and technical assistance.

Slow money refers to investments based on direct relationships between lenders and borrowers. According to the research, investments in land are needed by farmland trusts, farm purchase and development bridge financing organizations, and land and quota transfer financing. The FarmWorks Investment Co-operative Limited in Nova Scotia allows the purchase of common shares of a diversified set of local food businesses and farms. Character-based lending programs and community or co-op structures also need investments in operating capital.

The third type of investment strategy, impact investment, focuses on program-related financing and measurable outcomes. Venture capital and accelerator programs such as Founders Fuel in Montreal, Canada, fall into this category.

The report also highlights several useful frameworks for measuring the impact of investments, which can focus on sustainable livelihoods, vulnerability of populations served by institutions, or other measurable outcomes.

Investment can deter food crises in Canada through technical assistance to farmers and entrepreneurs and mitigation of risk, and can build capacity through seed capital and start-up loans. The report discusses existing funds that act as potential impact investment or mission funds and calls for new initiatives that engage existing institutions. In the view of interviewees, the network of public and private institutions and nonprofits that currently make up the food sector can be utilized for improved partnerships and technical expertise.

The authors conclude that there are many investment opportunities in the local food system, but that many of the existing opportunities need facilitation and development capacity. To increase social impact, investors should focus on vulnerable populations and take real risks, sharing returns equitably. By scaling equipment and infrastructure in the food sector, encouraging demand for local food, and funding applied research, investors can make a huge difference in building resilience into Canada’s food system.

The J.W. McConnell Family Foundation’s Sustainable Food Systems initiative, a backer of the publication, is in its fifth year. The initiative hopes to build greater sustainability and resilience in Canada’s food system through impact investments, commissioned research, innovation labs, and partnerships between sectors. The three flagship projects of the Sustainable Food Systems program are the Banking on Change Program, the Regional Value Chain Program, and the Institutional Food Program. The foundation awards US$5.1 million in grants through the Sustainable Food Systems program.

The report was launched at a strategic forum in Ontario that took place at the Centre for Social Innovation May 25-26, 2015. The forum connected social finance leaders with investors and entrepreneurs, focusing on concrete action items and key financing issues.