SDG Social Finance Prototype: Harvest Impact by 10C
Cover Photo: Megan Franken from Franken Farms, located in the northern Bruce Peninsula. Franken Farms was a COIL STEP Cohort 1 participant.
- In Canada, the social finance ecosystem is growing with interest and investments from the public, private and community sectors increasing in recent years.
- Continued success of the sector and the enterprises it supports requires a commitment to impact measurement and management that is trusted and useful
- The SDGs provide a valuable framework for social finance funds to align their investment strategies and communicate impact
- This Social Finance Prototype for Harvest Impact, aims to develop and share a common outcomes framework that will help enterprises and the fund itself see and track impact, build the impact measurement capacity, and tell compelling stories.
Background
Social finance tools are designed to mobilize capital for public good, addressing pressing social and environmental problems such as increasing housing affordability, fighting climate change, or increasing availability of local food. A definition from the MaRS Centre for Impact Investing provides a definition of the existing gaps that social finance is well suited to fill.
Social Finance is an approach to managing money that delivers social and/or environmental benefits, and in most cases, a financial return. Social finance encourages positive social or environmental solutions at a scale that neither purely philanthropic supports nor traditional investment can reach.
MaRS Centre for Impact Investing
Across the Canadian social finance ecosystem today, there are approximately $1 billion in funds under management, with the sector experiencing significant growth over the last few years. This signals a promising future for those seeking to access financing, and those looking for social investing opportunities within their communities.
Over the next several years in Canada, the federal Social Innovation and Social Finance (SI/SF) Strategy aims to inject and foster much-needed support and funding to help communities tackle pressing challenges and contribute towards Canada’s commitment to the Sustainable Development Goals (SDGs). The recently announced Social Finance Fund is a core mobilizing tool of the strategy that will invest $755 million into Canada’s social finance ecosystem. The SFF has specific goals to mobilize capital in support of equity deserving groups, and recognizes the critical role of social purpose organizations for the advancement of the SDGs in Canada.
Social Finance and Impact Measurement
With increased interest and investment in the social finance ecosystem comes an increased need for data and evidence that can help us to understand and communicate impact. Impact Measurement is the practice of demonstrating, with data, evidence and stories, the changes that are happening as a result of your work.
A strong social finance and social innovation ecosystem must have impact measurement that is relevant, trustworthy, community-driven, inclusive, achievable, and interoperable.
Common Approach to Impact Measurement
However, in order for impact measurement to be useful and valuable in the context of social finance, it must work for both social purpose organizations, social finance intermediaries and fund managers alike. Achieving this requires a flexible approach – the kind of approach that is being advanced by the Common Approach to Impact Measurement. The Common Approach is a non-profit organization – with close ties to Ottawa’s Carelton University – that has been working to develop community-driven data standards and resources to increase data interoperability across the social purpose and social finance sectors. Their work has the potential to improve how organizations measure impact and ensure that social finance funds have access to the right kind of information to report on impact.
To make this happen Common Approach has developed critical tools: Common Foundations and the Common Impact Data Standard. Common Foundations sets out a minimum standard for how you do impact measurement across five essential practices. The Common Impact Data Standard is a system for organizing impact data that makes it easier for software (designed for impact measurement) to enable data sharing and aggregation.
A Social Finance Prototype for Harvest Impact by 10C
The context of Canada’s social finance ecosystem and the critical role of impact measurement provide valuable framing for the development of a SDG Social Finance Protype for Harvest Impact by 10C. The SDG Social Fiance Prototype aims to increase the capacity for impact measurement across the Harvest Impact Loan Fund Portfolio, and better align the impact strategy to existing frameworks and tools, such as the Common Approach Data Standard and the Sustainable Development Goals (SDGs).
Harvest Impact by 10C
10C Shared Space (10C) began a social finance journey in 2012, exploring development of a community bond program that brought place-based community investment to the non-profits social financing mix. Experience gained through 10C’s community bond campaign, and through years of social finance listening, learning and leadership, drove the creation of Harvest Impact. Community investors frequently asked 10C ‘what’s next?’ and what other products might be available for local impact investing. In 2019, the City of Guelph and County of Wellington alongside a network of community organizations, won the federally funded Smart Cities Challenge, with a goal of sparking circular economy practices across the food sector. Within this work, 10C led the creation of Harvest Impact, with the mandate: to design and build a social impact lending program that supports food, farm and environment sector entrepreneurs who are driving the circular economy transition.
Through a collaborative partnership with COIL (Circular Opportunity and Innovation Launchpad) and Innovation Guelph (now Boundless Accelerator), Harvest Impact has administered over $536,000 in loans to 56 social purpose businesses from 2020-2023 across southern Ontario. Approximately 80% of these businesses are led by those with intersectional identities including women / gender-diverse and/or equity-deserving entrepreneurs, each working on exciting projects that advance equity and sustainability.
For 2023 and beyond, Harvest Impact seeks to scale its operations and continue to support innovation and entrepreneurship and the transition to a circular economy. A capital demand survey has supported the team as they plan forward and work to meet the needs of businesses across the ecosystem. This survey found that there was an immediate demand for $2.4 million in capital among 49 respondents, as well as a further demand over the next five years for $18 million in small business financing across the region . The survey also identified additional need for mentoring, strategic guidance and support with effective impact measurement.
To help meet this need, Harvest Impact designed and delivered COIL STEP, a Social Enterprise Training Program, in 2023. The program supported 14 social enterprises learning to apply circularity, and equity-based approaches to their business models. Enterprises participating in the program came from food, environment, agriculture, and material sectors (fabric, material reuse, packaging etc.). The new program aimed to strengthen these enterprises with $8,500+ in program value offered through a mix of grant funding, mentorship, place based and educational support. The program resulted in 8 new social finance loans administered by Harvest Impact with a focus on impact.
A Common Outcomes Framework for Circular Enterprises
Defining Circularity with Enterprises
Harvest Impact provides financing for social and environmentally focused enterprises across the food, farm and environment sectors. The common link across these investments is a commitment to “circularity” and the circular economy. Circular economy (CE) as defined by the Ellen MacArthur Foundation has three core principles; eliminate waste and pollution, circulate products and materials and regenerate nature. This definition rejects the take-make-waste processes of a linear economy and proposes a future where economic and human systems are aligned with and inspired by natural systems.
CE with focus on waste reduction and resource efficiency has obvious environmental benefits with the potential to reduce greenhouse gas (GHG) emissions, increase resource efficiency and promote ecosystem regeneration. However, there is mounting evidence that consideration of the equity and social outcomes in the context of CE is necessary. These considerations are critical for ensuring that CE can help to create new and decent jobs, ensure more equitable management of resources and increase ownership and engagement of marginalized groups. This awareness has driven Harvest Impact towards a more holistic definition of circularity that aims to link social, environmental and economic benefits and aligns well to the SDGs.
Developing the Common Outcomes Framework
The Common Impact Framework was developed as part of the prototype to help structure the impact measurement data gathered from Harvest Impact Enterprises. The framework includes four main components:
- Impact Themes: The Framework is built on the foundation of four broad and intersecting themes that encompass the social, environmental and economic impacts related to the circular economy.
- Circular Tags: These tags are descriptive of the kinds of principles that drive circular enterprises to achieve impact.
- Common Outcomes: Common outcomes describe the direct results that enterprises are able to create through the implementation of circular practices in their enterprises. The enterprise specific outcomes used by clients connect to one or more of the common outcomes.
- The SDGs: Connected to the common outcomes, the SDGs help to connect the changes and enterprises are achieving on the ground with globally recognized goals for sustainable development.
Harvest Impact Common Outcomes Framework
(click in the embedded map below to explore the Common Framework)
Enterprise Indicator Library
With the Common Impact Framework developed, the next step was to create a library of indicators that would support impact measurement for clients. The indicator library is not intended to be prescriptive or dictate the indicators that should be chosen. Rather the indicator library provides a starting place for enterprises that could inform their impact measurement approach, drawing from existing frameworks such as IRIS+, B Impact Assessment, and GRI Standards. The development of the indicator library was also informed by research conducted with Harvest Impact Clients by Common Approach for Impact Measurement and Carleton University. Each indicator in the library is aligned to one or more SDG target.
The draft Indicator Library with 80+ indicators for circular enterprises can be viewed here.
Many Harvest Impact clients are in the early stages of their circular enterprise development and impact measurement journey. Developing an enterprise indicator library will be particularly valuable for enterprises still developing their impact measurement and reporting practice. Through the indicator selection process, enterprises will develop clear and useful metrics to help them understand and plan for impact. The indicator library will continue to grow as new indicators are identified by enterprise and the Harvest Impact team.
Implementing the SDG Social Finance Prototype
Development of the SDG Social Finance Prototype resulted in tools and resources critical for effective impact measurement of Harvest Impact’s investment portfolio. Moving towards use and implementation of the Prototype required consideration of how Harvest Impact staff would engage clients and gather impact data across a diverse range of enterprises. The implementation plan is intended to support and guide these enterprises to develop effective and sustainable approaches to impact measurement that contribute to the growth of their impact focused enterprises.
This implementation plan uses Common Foundations as a guide, drawing on current best practices for impact measurement to provide useful insights for both clients and for the Harvest Impact Loan Fund as a whole. Implementation carefully considers how Harvest Impact can support clients to meet the the Common Foundations – a minimum standard of good impact measurement practice – described by the 5 essential practices listed below:
- Describe Your Intended Change
- Use Indicators
- Collect Useful Information
- Gauge Performance and Impact
- Communicate Results
Describe Intended Change
As part of their loan application process, client enterprises identify alignment with one or more of the Circular “Tags” to describe the kind of CE principles enterprises are implementing. With these Circular “Tags” as a starting place, client enterprises are guided through the development of their Circular Enterprise Theory of Change. This tool will help clients describe their intended change and clearly link their commitment to CE, described in their Circular “Tags”, to action and outcomes.
Use Indicators
With a clear sense of the outcomes they are working to achieve, clients will next work to select indicators that will help them measure and communicate progress towards these outcomes. The Enterprise Indicator Library has been developed to guide indicator selection. However, clients will be encouraged to select indicators that are meaningful to them. As new indicators are identified by clients, they will be categorized and added to the library demonstrating a client driven approach to indicator selection and use.
Collect Useful Information
With their indicators clearly defined, clients will begin to collect impact data that can be tracked internally and shared back with Harvest Impact for aggregate reporting. With the relational lending approach in mind, this impact data will be collected as a part of quarterly loan check-ins where the Harvest Impact team connects with clients to review the progress of their loans. Collecting information in this way, will allow for important context and progress notes to also be gathered along side impact data .
Gauge Performance and Impact
Harvest Impact is dedicated to impact measurement as a useful and worthwhile practice for client enterprises. Part of this is providing guidance and support to enterprises as they review, learn from and act on the impact data that is collected. A customized Impact Gap Canvas – a commonly used enterprise tool for assessing opportunities for impact – can be used by clients as they evaluate and reflect on the progress they have made and where new opportunities exist.
As a social finance fund, Harvest Impact will use impact data gathered across enterprises to better understand how investments and enterprise support are helping to grow the circular economy.
Communicate and Use Results
Impact data collected by enterprises and shared with Harvest Impact has the potential to tell a story of how the CE transition is being supported and advanced by impact focused businesses. A primary goal of implementation of the Prototype is to create processes that not only build the capacity of social enterprises to measure their impact, but to cultivate and share these impact stories with a broad audience. This will create opportunities to tell stories that highlight the impact of individual enterprises and of the Harvest Impact portfolio as a whole. Impact stories will become valuable tools for communicating with impact investors, clients and the community.
Exploring Impact Measurement Software
A key consideration of impact measurement is how Harvest Impact will manage, store and analyze impact data across a growing number of enterprise clients. To support this, Harvest Impact has explored the utility of available impact measurement software aligned to the Common Impact Data Standard. These aligned software are valuable tools supporting data interoperability within the social finance ecosystem.
Some of the most significant barriers related to software are cost and complexity. While software has the potential to be an extremely valuable tool to both lower the burden on reporting enterprises and make aggregation across dissimilar indicators easier for fund managers – there is still lots of work to do to find software that meets these needs. The good news for Harvest Impact and other social finance funds, is the number of software’s aligned to the Data Standard is growing, meaning there are more tools to choose from. Through development of the Prototype, Harvest Impact now has a clear impact framework that can be onboarded to software and the team continues to explore software options in the hopes of finding something that streamlines data collection and aggregation across enterprises.
Conclusion
Effective and transparent impact measurement and is a critical component of a thriving social finance ecosystem. Development of a SDG Social Finance Prototype for Harvest Impact is a critical step towards effective impact measurement for both client enterprises and the fund itself. The tools and resources developed will support impact driven reporting and storytelling to investors, funders and the broader community.
References
Birliga Sutherland, A. & I. Kouloumpi (April 8, 2022) How the Circular Economy Can Help us Reach the Sustainable Development Goals. Circle Economy Foundation. Accessed online: https://www.circle-economy.com/blogs/how-the-circular-economy-can-help-us-reach-the-sustainable-development-goals
Circle Economy Foundation. (n.d.) The Key Elements of the Circular Economy. Accessed online: https://www.circle-economy.com/circular-economy/key-elements
Common Approach (n.d.) What is Impact Measurement? Accessed online: https://www.commonapproach.org/what-is-impact-measurement/
Ellen MacArthur Foundation. (n.d) What is a Circular Economy? Accessed online: https://www.ellenmacarthurfoundation.org/topics/circular-economy-introduction/overview
L. Yahia and C. Barr. (2023). Journey to Impact: Unlocking Purpose through Social Finance Experiences of Canadian Social Purpose Organizations. Imagine Canada. Accessed online: https://www.imaginecanada.ca/sites/default/files/journey-to-impact-unlocking-purpose-through-social-finance.pdf
Table of Impact Investment Practitioners. (2021). Impatient Readiness: The State of Social Finance in Canada 2021. Accessed online: https://tiip.ca/wp-content/uploads/2021/07/State-of-Social-Finance-in-Canada-Report-2021_EN_Spreads.pdf