What do a credit union and a long-distance relay race have in common? For Leading Edge Credit Union (8,435 members, $115 million in assets) in Newfoundland and Labrador, there’s a clear alignment of community and economic values — not to mention the sweat equity required to reach an end goal.
It’s those similarities that inspired Leading Edge to host Newfoundland and Labrador’s Annual Lighthouse Relay, Race to the Sea. Instead of just writing a cheque to keep the event going after it faced resource constraints, Leading Edge stepped in and took it over in 2013. It saw the event as a way to engage and give back to the community, promote health and fitness and do its part to bring in tourism dollars. “There are a number of wins,” says Leading Edge CEO Cory Munden. “We bring runners in from across Canada, add economic stimulus to the area and promote healthy living.” Participants range from newbies running in jean shorts and T-shirts to professional runners in top performance gear.
The annual 120-kilometre, 11-leg race — which travels along the breathtaking southwest coast of Newfoundland in August — is just one of a number of initiatives Leading Edge is working on as part of a shift away from being a community player to more of a community enabler. “We’ve turned the dial from simply pushing out money to community organizations to taking a leadership role and solving some socio-economic issues in our communities,” Munden says.
Supporting community vitality
More organizations are changing their business models to be more proactive and less reactive in the communities where they operate, says Coro Strandberg, a sustainability strategist and president of Vancouver-based Strandberg Consulting. “It’s a shift in how businesses are thinking about their roles in community. It’s about how to go beyond ad-hoc cheque writing to a more strategic approach.”
Financial institutions, credit unions in particular, are well poised to strengthen their community engagement given their direct connection to customers and communities. “They have a strong reach into the community already,” Strandberg says. “They can be a powerful instrument for community well being.”
With that power comes the responsibility to help support and build communities over the long term. Credit unions are closely tied to their communities, which means when one struggles the other is affected, Strandberg says. It’s why strong, sustainable community programs and initiatives aren’t just “nice to have,” Strandberg says. “It’s a business imperative to strategically support community vitality.”
Living and breathing the cooperative model
Leading Edge began to rethink its community investment initiatives after doing a cooperative principle audit of its organization a few years back. Through that process, the credit union realized it wasn’t doing enough to boost engagement with its members or help build capacity in the communities across the province where it has branches. That includes locations where the big banks pulled out because the business was no longer considered viable. “We were doing a good job of being a financial institution,” Munden says. “What we weren’t doing a really good job of was being a cooperative.” Since then, Leading Edge has been on a mission to bring back and deepen the cooperative principles across the organization, in particular by supporting the sustainable development of communities. “Even a credit union of our size, with limited resources, can do these things,” Munden says. “It’s a hands-dirty philosophy.”
Alongside the Race to the Sea event, Leading Edge is also a key driver behind the Growing our Future Childcare Co-operative (GOFCC), which is building a 38-space daycare in the community of Channel-Port aux Basques on Newfoundland’s west coast. The project is receiving funding from all three levels of government and Leading Edge is providing an interest-free loan. The municipality also donated the land on which the daycare is being built, as well as forgiving fees for water and sewer hook-ups and performing some site work.
The development aligns with the cooperative principle and concern for community, Munden says. “We aren’t doing this because it’s a nice thing to do. We are doing this because it’s who we are. This is what we represent. If we’re going to say we’re a cooperative we need to be living and breathing the cooperative model.”
Social impact bonds – an alternative finance option
Another solution credit unions are considering are social impact bonds, a “pay-for-success” alternative financing model that uses private capital to provide a social program. With social impact bonds, the government identifies a program and then seeks out private investors to fund it. If the project is successful, the government repays the investors a pre-arranged sum.
“It’s a shift in how businesses are thinking about their roles in community. It’s about how to go beyond ad-hoc cheque writing to a more strategic approach.” — Coro Strandberg
Canada’s first social impact bond was arranged in Saskatchewan to support Sweet Dreams, a facility in Saskatoon that provides mothers with a safe place to live with their children while they finish school or seek steady employment. Sweet Dreams was created thanks to a social impact bond between the Saskatchewan government, EGADZ’s Saskatoon Downtown Youth Centre (which runs the home), Conexus Credit Union (123,000 members and $5.6 billion in assets) and Saskatoon philanthropists Wally and Colleen Mah. The project’s five-year goal was to keep 22 children out of foster care and with their mothers continuously for more than six months after participating in the program.
They reached that goal within the first two years. “They over-delivered,” says Jacques DeCorby, senior vice-president of retail banking at Conexus, citing the work of EGADZ executive director Don Meikle and his team.
Meikle says that it’s more than the money that has helped them succeed so far; it’s the support from those involved in the bond. “It’s so powerful to know that other people in the community believe in you and what you do,” Meikle says. “They’re more than investors, they really believed in the project.” He says that the social impact bond arrangement is also better than other models because it’s a multi-year commitment and free of government red tape. What’s more, he is able to run the program independently and in a way he believes is most effective. “It has really allowed us to focus on the vision, values and mission of our organization to provide the level of service we believe will make it successful,” Meikle says. “Of course, what really matters is how the moms we are working with at Sweet Dreams are making positive changes and what this means for both them and their kids.” He describes Sweet Dreams as “life changing” for the families involved “and we are going to continue to work hard to improve the lives of moms and their children.”
Investors like Conexus also like the social impact bond model because it’s transparent, accountable and arguably more effective than simply writing a cheque. “The idea was very attractive because it requires a very clear definition of the outcome you’re trying to achieve,” says DeCorby. It also makes it easier to sell to stakeholders who may question the investment. “It needs to be something that is very measurable, which can be hard to do sometimes,” DeCorby adds. It’s also a natural fit for the cooperative business model because it allows the credit union to invest in cutting-edge solutions for social problems.
Conexus has since invested in another social impact bond, this one spearheaded by the federal government to help improve literacy, numeracy and computer skills for unemployed adult Canadians. The Essential Skills Social Finance (ESSF) project, a partnership between the federal government and members of Colleges and Institutes Canada, includes private capital from Conexus, the Catherine Donnelly Foundation and Dave and Pamela Richardson and Family. “This innovative social finance opportunity helps make a meaningful difference in people’s lives by improving their social situation and financial well-being so they will be better prepared to attain and sustain employment,” Conexus CEO Eric Dillon said in a media release this past November. “It aligns perfectly with our values and priorities and demonstrates concern for community, one of the seven cooperative principles that also guides us.”
Conexus now has a board-approved investment policy for social impact bonds, the first of its kind in Canada, which gives it authority to invest set amounts. DeCorby says Conexus can spend one percent of capital cumulatively, or about $4 million, and up to 0.25 percent of capital per investment of $1 million. Anything larger than that would require approval of the
board, he says. “We are now open to do business in the social impact bond space. We think this is a space that credit unions can step up and own.”
The capacity to be social innovators
Strandberg is excited and inspired by the examples from Conexus and Leading Edge, which she sees as leveraging their core competencies as financial institutions for social good. “They show the capacity of the credit union system to be social innovators.”
More credit unions need to do this kind of work and push boundaries to reengage with the cooperative principles they were built around and help to build stronger communities, Strandberg adds. “The more they can tell that story and promote the roadmap and the tools, the sooner credit union boards and managers can seize the opportunities and address the risks.” After all, “that’s the role of a financial institution and a unique role of credit union as operatives in their communities.” ◊