Vancity Community Investment Bank (VCIB), born from Vancity’s community-first finance model, is a values-driven bank on a mission to finance a sustainable tomorrow. In this episode we learn more about how VCIB is creating lasting change in communities though financing for social purpose real estate, their acquisition of CoPower and simplifying investing for the future.

Last year in 2019 we added over 17 new social purpose real estate loans to our portfolio, these are predominantly mortgages to organizations driving social purpose real estate projects that represented over 600 new units of affordable housing predominantly in Ontario and over 300,000 sq feet of social purpose real estate, including things like co-working spaces and cultural spaces.

Lars Boggild, Investment Product Manager

Transcript of Interview with Lars Boggild

Jenelle:
Hello. How are you doing?

Lars Boggild:
Pretty good so far.

Jenelle:
Thanks for being here with us today Lars. So today we have with us Lars Boggild, Investment Product Manager at Vancity Community Investment Bank and you can look Vancity up at VCIB.ca. So Lars, why don’t you tell us a little bit about your organization, its mission and your role with Vancity?

Lars Boggild:
Yeah, sure. So Vancity Community Investment Bank, sometimes known as VCIB is a commercial banking arm of Vancity Credit Union. So we’re a national schedule one bank regulated under OSFI with a very unique mission as Canada’s first dedicated impact bank. We’re able to do that really as an extension building on the history of Vancity Credit Union as our parent company. The credit union is a really longstanding financial institution out West in Vancouver, British Columbia. And over the years has grown to be English Canada’s largest credit union with well over 500,000 members and nearly 30 billion Canadian in assets. But, more importantly really has been a progressive leader in trying to see community development and environmental sustainability values manifested and embedded into its core practices as a lender.

Lars Boggild:
To the degree where about a quarter of the overall asset base is actually deployed today with a triple bottom line, and is a number we’d love to see grow and really that’s one of the primary reasons for being of a VCIB is to really serve as a dedicated function that just does impact focus banking and lending to help grow that part of the economy. My own role within it is really working with our investor clients who are looking to make a kind of bank like, but impactful investments in their portfolio, mostly with mission driven institution. So I have the pleasure to work with a lot of both kind of small and scrappy nonprofits that have a little bit of money tucked away all the way through to really big organizations like foundations and unions and some municipalities that are interested in aligning their investments more with their values.

Jenelle:
Vancity Community Investment Banks, definitely been known to your point, be focused on community and economic and it’s great to hear the range with the different projects and organizations that you’re hoping to drive impact with. Can you speak to a few specific metrics that you believe highlight the impact that VCIB has had?

Lars Boggild:
Yeah, sure. And I would say, we’re fairly early in our journey as VCIB and benefiting obviously from nearly 70 years of history, we’re over 75 years of history at the credit union. But for VCIB, our lending and impact lending really is focused in two major areas. So one is social purpose real estate as a theme. So keep in mind things like affordable housing, green buildings, not for profit and facilities arts and cultural spaces, really any use of real estate assets where there’s a clear embedded social or environmental purpose. And then more recently as a theme that [inaudible] embedded in our work. We acquired a sustainable finance platform called co power and we’ve integrated that into the bank as our clean energy, energy efficiency team.

Lars Boggild:
And so clean energy, energy efficiency has really grown as an important theme in our work, driving deeper environmental impact. We’re also excited about a lot the intersections in between. So just to kind of speak to some of the examples of metrics there, so on the social purpose real estate side last year, so calendar year 2019, we added over 17 new social purpose real estate loans to our portfolios. These are predominantly kind of mortgages to organizations driving a social purpose for estate projects. That represented over 600 new units of affordable housing, predominantly in Ontario and over 300,000 square feet of social purpose real estate including things like co-working spaces and cultural spaces and cultural workspace as well. So quite a wide range there.

Lars Boggild:
Then on the clean energy side predominantly through the CoPower Green Bonds and the clean energy being underlying it there’s been well over 1600 underlying energy efficiency projects that actually have been financed that work. And it ranges from hundreds of buildings that have LED retrofits through to larger portfolios of solar feeding tier projects throughout Ontario and Alberta. So, you know, quite actually a lot when you add it all up together, but it’s still lots and lots of room to grow on our end.

Jenelle:
Those are pretty big numbers for the last year, I mean, 600 new units and in addition to that would be the mixed use spaces and 1600 new projects through energy efficiency. We’d love to hear any stories or antidotes that you would have that would highlight the impact because of course, without context, it’s really hard to understand the significance of the impact. So, yes, if you can speak to either one or both we’d love to hear.

Lars Boggild:
Sure, yes, no, for sure. Happy to. So on the social purpose real estate side I think the example I would highlight would probably be the Parkdale neighborhood land trust. So this is a newer nonprofit that was established by a network of about seven nonprofits that were all serving the Parkdale neighborhood in West and Toronto. Parkdale is very unique in that it is a part of the city that has a huge proportion of renters and so it’s kind of this area of a very high density of rental housing and has been kind of like the epicenter of a lot of gentrification in Toronto. So there’s a lot of buildings that were built in the 1980s often were renovated into kind of more of like a rooming house, so lots of smaller bachelor suites that became very kind of naturally occurring affordable housing.

Lars Boggild:
So if you look at average market rents, this is the more affordable housing, smaller units, but affordable. And what’s been happening is a process by which mostly existing, older landlords are retiring. They’re selling those buildings to newer landlords in some cases, investment groups that are seeing the hot property market in Toronto and often got turning those buildings over sometimes into bigger suites sometimes even into single family homes. But it’s led to too many stories of what’s are sometimes called rent eviction, where like renovation is the [inaudible] eviction and displacement of individuals essentially into homelessness. Because there aren’t a lot of alternatives at this level of affordability. So there’s a lot of people on fixed income. It’s a lot of people on like say, ODSP, which is like disability welfare or social assistance of some form.

Lars Boggild:
What ended up happening with disabilities is a smaller organization, as I mentioned. They really were kind of organized with a focus to develop a land trust, a community land trust that would acquire private properties, transition them into nonprofit and community ownership. And through doing so dedicate those units to longterm affordability. So multi decade longterm view in partnership with those operating nonprofits. Vancity as an organization has actually had a lot of experience with land trusts, mostly out West, ao there’s a large land trust called the Community Land Trust, which was created by the Co-op Housing Federation out there, which has become quite successful at having a large enough portfolio where it could actually leverage that to acquire new land, new sites as they come available. And so was able to operate with almost a level of sophistication of say even like a real estate investment trust or something like that. But with that nonprofit ownership and long-term affordability focus.

Lars Boggild:
The Parkdale neighborhood land trust is newer and so their issues, kind of how do they get to that scale, even with the philanthropic and kind of internal support they’ve received from their nonprofit partners. And so we helped them acquire their first property in 2019. It’s called the Mainer Building, not a huge product. I think it really kind of puts in scope some of the smaller scale that some of these opportunities can take place in. So it’s just a 15 unit rooming house. But I think what’s relevant and exciting about that is that, you know, I don’t think other lenders, because of the age and stage of the land trust and the complexity of the deal, which involved a lot of different public funding programs that had to get put in place necessarily would have done it.

Lars Boggild:
And so we created a somewhat creative structure where we were able to offer some short term amortization relief. So it was kind of an interest on the loan for early on in the acquisition while there were stabilizing the property and really provided essentially almost bridge financing to let that project later be CMHC insured. And so kind of a long term much cheaper financing, but in the interaction allowed them to move opportunistically on a project. Part of why I highlight that is, you know, it’s led to this really constructive dialogue with the land trust in thinking through what we can do more with them and so, we’re right now in fact in kind of active dialogue around building an acquisition program with them that would allow them to very rapidly acquire properties as they come to market. Because existing public funding programs, while those are necessary to maintain the longterm affordability of these projects, really aren’t fast enough to let them operate on the open market. And so we’re working with them creatively in a way. I don’t think most banks do, like were really constructively co-creating something that will allow them to rapidly acquire projects and hopefully that will go live later this year.

Jenelle:
That’s really neat and certainly seems to be a solution that’s to your point is creative and innovative. That would be longterm and sustainable. Speaking of sustainable you earlier mentioned a sustainable finance platform. I’m assuming, but don’t want to assume that this is CoPower.

Lars Boggild:
Yes, that’s exactly right and I’m happy to tell you a bit more about them if you’d like.

Jenelle:
Yes, so be keen to hear about what your big goals are for Vancity Investment Bank and CoPower and what you’ll be tracking for over the next year.

Lars Boggild:
With the acquisition I think, not to get kind of too into the weeds on it, but there was a really exciting opportunity with CoPower where they demonstrated a fairly robust project finance model where they were able to finance projects that are a bit smaller, sometimes much smaller than a conventional bank does. And so you hear about these big financing transactions that maybe TD did or SunLife or something like that and they’re fantastic, but they tend to only really be at the 50 to a hundred million plus scale. And that leaves a huge amount of perspective energy efficiency and clean energy projects out and especially as technologically a lot of these projects have become more distributed. It becomes more and more, so it’s economically viable to do a smaller, say, rooftop solar project, but it’s still harder to arrange actual capital financing for that project.

Lars Boggild:
And that’s really the gap that CoPower has been able to fill. What we saw in them was that it was working, but it wasn’t kind of big enough. And so through the capacity of both the bank and then the density group, we can really see opportunities to bring that to scale and so what that means is that is a few things; I think on one hand we have the opportunity to frankly drive their cost of capital lower and in doing so, do more deals than they would otherwise be able to do, so that’s great. It might also mean the opportunity to kind of begin gradually to extend to new markets. So things like, not just say solar power and feed in tariff contracts, but you can actually start looking at energy storage, UV charging infrastructure, geothermal. Like these are all spaces that are at point of technological maturity where we’re financing can make a really big difference in terms of growth.

Lars Boggild:
So I think where we see the opportunity for is a process of integration where full power is capacity where the augments are able to work in different markets. But at the same time some key pieces of CoPower including retail accessibility. So a big part of their mission had been to create retail accessible green bonds with the first retail accessible green bonds in the country will continue. And in fact we actually just kind of closed out another offering raising just over 5 million of that and that will open up again later in the year. But they’re really exciting opportunities as we look at the kind of capability they have to begin taking that more and more into the mainstream.

Lars Boggild:
So a good example is Vancity has a investment management arm, an asset management arm, call Vancity Investment Management. It provides kind of socially responsible investment portfolios like others do, but because of this acquisition integration, then we know we can start making it so that, you know, an everyday person who has their their wealth being managed by by VCIM can all of a sudden say, Oh, I’m really interested in green investing and you have options and could I put some money into a CoPower green bond? And all of a sudden, it’s not this big major issue. It’s actually something that could be done quite turnkey. Eventually we would like to actually see that extended through the credit union, that system. So a lot of credit unions use an organization called Advisor Wealth as their backend, and through that platform one day we would like to be able to see CoPower green bonds be accessible to really everybody in a direct bank environment, which would be really exciting, and drive a lot of capital to nuclear energy.

Jenelle:
It’s such an interesting way for VCIB to be looking at how they can continue to scale and drive impact and wishing you guys so much success as you’re launching new services and markets partnered with or through CoPower. So, Lars, thank you so much for being with us today and thank you for speaking with our audience. Again, you can find out more information about Vanciity Community Investment Bank at VCIB.ca. Thank you.

Leave a Comment

© RIDDL Tech Inc. 2020 All rights reserved.