Scaling Impact: A Summary of the Pathways to Growth Report Part 1, compliments of SocialFinance.ca

Scaling Impact: A Summary of the Pathways to Growth Report Part 1

Posted: 25 Jun 2013 06:01 AM PDT

By Sara Bartolomeo

In February 2013, Grantmakers for Effective Organizations (GEO) published Pathways to Growth, a heavily researched report as part of their Scaling What Works initiative.

The publication was a collaborative effort between Ashoka, TCC Group, Social Impact Exchange and Taproot Foundation that identified the key activities undertaken by non-profits that are scaling impact, as well as the key grantmaker practices that are universally beneficial and effective in supporting a non-profit’s efforts to achieve this impact.

As the report is expansive and highlights numerous non-profits who have demonstrated impact along with many grantmaking institutions, Part 1 of this post will serve merely as a summary of the report.
Scale is defined as growth in impact, which is not limited to financial impact (i.e. scaling the programs delivered by non-profits or the size of the organization itself). Non-profits can also achieve growth in the impact of their ideas/innovation, technology/skills, and policy.

In terms of financial impact, the type most commonly pursued by non-profits, there were statistically significant variations between organizations that have grown financially and those that have remained stagnant or have shrunk. These three attributes were revealed to matter the most:

Research and Design

Non-profits must be capable of not only gathering and interpreting data from their clients, but also using these findings to inform the design and implementation of their programs. This requires engaging key leaders in the organization in the analysis process and deciding upon metrics only after documenting client successes stories and results.

When formalized and institutionalized into an organization’s performance management system, these research and design activities enable a non-profit to move from measuring outputs to measuring outcomes. As a result, non-profits that invest in research and design activities are almost two and a half times more likely than other organizations to grow faster than the rate of inflation.

Revenue Independence

Revenue dependence is inarguably one of the greatest barriers nonprofits face to scaling their operations. When non-profits rely on only a handful of organizations or customers for income, their ability to make strategic decisions and invest in critical infrastructure is limited by the restrictions that grantmakers may place on how funds can be spent.

Non-profits can avoid these restrictions by generating diverse and sustainable revenue streams, which in turn allow an organization to refuse funding that comes with too many caveats. Diluting any one funder’s influence on program delivery can be achieved by acquiring numerous repeat donors or customers, while also solidifying sources of unrestricted revenue, such as individual donations and program fees. Non-profits can also achieve this independence by building an internal capacity to collect outcome data and then using this date to report on their achievements shortly after securing grants.

Program Reliability

Non-profits also need to have quality assurance capabilities in place to ensure that their programs are being delivered consistently, regardless of location. This entails codifying their program model by documenting processes in operating manuals, and delivering consistent training on program delivery to both staff and volunteers. Once employees are trained, ensuring that program delivery is up to standard then requires incorporating program data and client results into staff assessments and performance measurement systems.

So what can grantmakers do to help non-profits develop these characteristics? While the report offers various suggestions and best practices, the overarching theme is that grantmakers can best support high-performing non-profits by providing funding that is flexible over the long term, and funding that supports investments in data and performance measurement.

This entails offering general operating support (unrestricted funding) as opposed to insisting on providing funding directly to a non-profit’s programs. While most grantmakers believe that placing limits on the use of their funds implies greater fiscal responsibility, in reality, such restrictions can significantly increase the challenge for organisations seeking to maximize the effectiveness of their allocation of resources. Providing general operating and multiyear support enables non-profits to invest in crucial technology and infrastructure that they could not otherwise secure, especially for those in the start-up phase.

In addition, while grantmakers are increasingly demanding that non-profits demonstrate their impact with metrics, few are willing to invest directly in the resources required to measure performance. Supporting these investments is critical, as is the willingness of grantmakers to interpret data that indicates weak performance as an opportunity for learning rather than an indication of failure. Embracing past failures may be common practice for traditional venture capitalists, but in the non-profit world, many grantmakers still fear it and view it as a predictor of future poor performance.

My next post will identify the progress being made by the Canadian non-profit community to scale impact and support the activities above identified by GEO that make this possible.

 

How to Raise $2 Million to Finance Community Solar

Posted: 24 Jun 2013 11:56 AM PDT

By Julie Leach

With global climate change and economic recession, it is no wonder that solar energy development and alternative investment models have merged. Yet, even with drastically decreasing technology costs, the initial investment in a solar project can be daunting, making individual projects inaccessible for the average Canadian.

In response to this growing demand, renewable energy co-operatives (also known as “community power” groups) have rapidly increased in number in Europe and now in Ontario, since the formation of the Green Energy Act in 2009.

For those unfamiliar with the model, co-operatives allow citizens to pool investment in projects, either through shares or bonds. You can find more details about Community Solar Bonds here.

Building a Co-op

SolarShare incorporated as a non-profit co-op in January 2010 with much enthusiasm and encouragement from our supporters.

Yet immediately after incorporation, the uphill battles began. The first of these challenges was locating appropriate roofs for the placement of our solar panels. For Community Solar, this was a challenge as Ontarians are still largely unfamiliar with the term “community power.” To be frank, negotiating land lease agreements with landowners is difficult when no one knows your name.

Despite these challenges, after knocking on many doors and entreating farmers for a year, SolarShare built 17 microFITs (solar projects under 10 kW), which we ground-mounted in farmers’ fields across the province. The 18th project was the WaterView rooftop installation which went live in 2011 around the same time the co-op launched (pictured at left).

We were confident that we would have 200 members in the first week. We had the Green Energy Act, a board with decades of experience developing renewable energy co-ops, and we had private capital to finance construction. We had all the ingredients and the passion to make the project work, and at that time, the possibilities seemed endless. But things weren’t so simple.

Regulatory Hurdles

When co-operatives issue a share offering, they must first receive approval from the Financial Services Commission of Ontario (FSCO). This part of the co-op process involves drafting an Offering Statement, much like the prospectus for an investment product. After investing much time and expending a significant amount in legal fees, completing the offering statement was a significant endeavour and consumed more resources than expected. Renewable energy co-ops were new in Ontario and it took time for government agencies to become comfortable with our ask.

Under an exemption, it was discovered that we could sell $1,000 bonds per member. Although it was exciting to start recruiting member-investors, the limitation seriously affected the impact of our marketing efforts. Furthermore, these hurdles were especially frustrating knowing that it was over decade ago the Danes were selling millions of dollars in shares to 10,000 co-op member-investors to build a multi-megawatt wind farm. Yet at the same time in Ontario, we were unable even sell a bond to our members over $1,000 to finance a small portfolio.

After many resubmissions and just over a year of hard work however, the SolarShare Offering Statement was approved in October 2012. It was at that time that we were able to begin offering bonds in larger quantities. Presently, SolarShare’s current investment limit per member sits at $100,000.

Through successful word of mouth and dedicated grassroots marketing efforts, we have managed to recruit over 500 members for the SolarShare co-operative, and we have raised nearly $1.9 million in Solar Bonds. This is amazing, given that since it has only been half a year since we received regulatory approval.

Building a Sector 

The game has changed significantly since SolarShare made its first offering statement submission. The Federation of Community Power Co-operatives (FCPC) was formed this year by President Judith Lipp, Executive Director of TREC (an incubator of community power co-ops, including SolarShare), and there is now an umbrella organization for co-ops to receive support and share resources. Recently FSCO agreed to host a webinar to advise co-ops with offering statements and TREC is now offering co-op services to start-ups. Presently, renewable energy co-ops can expect approval in about 4 months.

In this climate, there are now many emerging co-operatives which either have offering statements approved by FSCO, or those in the queue. These include ZooShare Biogas Co-operative, OREC, and Wintergreen Renewable Energy Co-operative.

Collective Action to Mitigate Challenges

The greatest challenge now facing community bonds is the institutional barriers created by major banks to hold these bonds in a registered account. While Community Solar Bonds are legally eligible for RRSPs, currently banks don’t have a process available to facilitate the transaction for regular investors in a cost-effective way.

In order seek to remove some of these barriers, co-operatives have channeled their efforts through the common voice of the FCPC. Though changing policies in the banking sector is challenging, this group has strength in numbers. It is estimated that the Community Bond industry could be worth many millions of dollars in Ontario alone. We believe that soon we will have an option through the Canadian Workers’ Co-op Federation (CWCF) to file our bonds in a Self-Directed RRSP account with Concentra Credit union. CWCF has facilitated similar transactions such as in the case of the Centre for Social Innovation’s Community Bonds.

In sum, the horizon looks promising. We are working with other social enterprise groups and participating in innovation discussions about the future of ethical investing. In the case of renewable energy, it will be a long road for those co-ops who do not have contracts yet, but hopefully with the lessons learned, shared resources, and some institutional recognition, we will see both investment and resources open up to them.

All photos are credit of SolarShare

 

Speak Your Mind

*