By David Maggs, Metcalf Fellow on Arts and Society
To say the world is at a crossroads is to name the current lump in our collective throat. As former IPCC researcher John Robinson said, “there is no future that is not transformative.” Given deepening disruptions in social, economic, political, and environmental systems, all roads lead to transformation, and — as perhaps we are experiencing now — none will transform us as unpleasantly as the path of business-as-usual.
However well Canada’s cultural nonprofit sector knows this, the system constrains progressive action. Instead of seeding experimentation, incentivizing transformation, and deepening purpose and impact, our resource model bends to its rising pressures, morphing into a buffer against declining fortunes.
Can we reorient it towards deeper relationships to communities, audiences, and markets? Can we ready it to thrive in a world unlike the one in which it emerged — yet one whose need for culture is so urgent and profound?
With this in mind, the Metcalf Foundation has been exploring the emergence of social finance or impact investing around the world and here at home. We’ve watched significant flows of capital, typically de-risked by public investment, strive to combine financial and social returns, funneling new money into health, environment, education, justice, and other social priorities. And we’ve seen that without the knowledge, capacity, and structures to attract and deploy such capital, culture is getting left behind, excluded from new forms of investment, and left off the list of social benefit sectors more and more often.
Grants vs. Loans
But how can social finance help address our sector’s challenge to cultivate new resources and capacity? Can the risk of loans serve a system that knows only the surety of grants? Can money we have to pay back be useful when we’re barely surviving with the money we get to keep?
I’ve been exploring these questions from two perspectives. Recently, I had the honour to work alongside Fran Sanderson and Seva Philips in reviewing a pilot project that brought social finance to the cultural sector in the UK. Arts & Culture Finance (ACF), an impact investment fund, built up £33 million in impact capital for culture, as significant investment from Arts Council England attracted foundations and private sector partners who don’t normally invest in culture at all.
This initiative not only provided new resources for the sector, but built new capacity as well. Working with low-interest loans and the team that delivered them, arts organizations inside ACF improved their governance models, financial management, entrepreneurial skills, connections to community, and capacity to identify and articulate the broader social and cultural impacts of their work. Following a detailed economic analysis, most organizations who worked with ACF loans emerged more resilient.
Consider a humbler illustration closer to home. About a decade ago, Camber Arts, the organization I co-lead in Western Newfoundland, realized that stable operating funding was not in our immediate future. Needing to pursue stability in other ways, we developed a performing arts program for youth but needed to borrow money for the facilities required.
At that moment, I felt the difference between getting a grant and getting a loan. Whenever I was lucky to receive a grant, it came after a jury of my peers adjudicated my application alongside dozens of others, and deemed my project, my vision, worthy of funding. With the arrival of that acceptance letter, I felt I had earned the money. I was accountable only to the vision that had secured it, and there were no consequences if no one found value in what happened next. After getting that loan, however, the opposite feeling arose. Now we had to start earning that money. We had to make ourselves deeply accountable to the audience, the community, the market we needed to service the debt. If they didn’t find value in what we did next, we were in trouble.
That difference transformed Camber Arts. We grew more sophisticated in managing our finances, our commercial instincts sharpened as we built better business cases for our activities, and we centred engagement around community. Rather than pandering to popular taste to make our loan payments, we found ourselves riveted artistically by the challenge to understand and serve the cultural needs of our surroundings.
The only thing I would change about that experience was that we had to do it the hard way. Without a low-interest loan program serving culture in Canada, we had to work with BDC, which underwrites non-traditional lending to organizations like us with higher interest rates than commercial banks. Having celebrated when we managed to switch to a standard commercial loan, I know firsthand how important something like ACF is for Canada to make capital available at below-market rates for cultural organizations.
Fixing the Bucket
The craziest statement you can make in Canada’s cultural nonprofit sector is, “we have enough money.” Try it. Close the door to your office and say it out loud. “Would you look at that? Turns out we have all the money we need!” It sounds hallucinatory, and under current circumstances, maybe so.
Certainly, the deeper belief in our sector is the opposite — that the only thing holding us back from being okay is that we haven’t been given enough money yet. The past decade is not comforting to this belief, however, given that our sector now finds itself facing historic levels of precarity following a decade of historic increases in funding (2015-2025). And yet almost all we see from cultural leadership — funders and organizations — is doubling down on that faith. Why? Does anyone actually believe that we’re just a 10% increase in funding away from a sustainable sector? That if we just get that next boost of grants, it’ll be smooth sailing from there?
Pathological ideologies are false beliefs that guide efforts to solve our problems in ways that inadvertently make those problems worse. They are a common feature to systems in decline. Whether discrete corporations or entire civilizations, the human tendency for deep, principled blindness makes tragic irony a persistent theme in human history.
Imagine you are watching someone pour water into a bucket with a hole in it, and they are panicking and scrambling to somehow find more water to pour in faster in order to prevent that bucket from running dry. Eventually, wouldn’t you feel compelled to go over and say, “hey, maybe you should fix the bucket instead?” At first, that person probably won’t want to listen. They will probably tell you that it can’t be done. They might list different things that have been tried before as reasons not to try anything else, or they might even go so far as to tell you that the bucket is supposed to have a hole in it — because that’s how the really precious buckets work.
Blending Capital for Better Worlds
The reason Metcalf has grown so interested in social finance for Canada’s cultural sector is not because it’s a way to scramble for more water, but because it might help fix the bucket. This interest began back in 2018 when Metcalf Fellows Elizabeth MacKinnon and Christine Pellerin wrote More Than Money, and then grew post-pandemic, as the need for alternative resource models gained wider appreciation. Camber Arts and Metcalf co-sponsored a gathering of arts funders and finance leaders in Toronto in July 2023, then collaborated with the Ontario Arts Council and the Canada Council on a feasibility study to examine the landscape of social finance and the arts in Canada. This past January, we gathered public arts funders from across the country for further dialogue and are preparing to engage a broader range of sector voices later this spring. Currently, we are collaborating with Rally Philanthropy to begin exploring the development of a pilot fund to nurture the capacity of funders and practitioners to work with this approach.
Alongside this work, I’ve been participating in blended finance gatherings and have been inspired by projects in food security, community hubs, health delivery, newcomer welcoming services, and other social innovations. So many people are working so hard to bring better futures our way. This innovative approach to financing can shape unique and strategic blends of grants and loans to transform those futures from possible to present. Hanging out with those folks has been both humbling and disorienting, ultimately leading me into a deep hallucinatory vision: Canada’s cultural sector already has all the money it needs to thrive and serve the cultural needs of this country.
Or is it actually true? Maybe we don’t need more money? Maybe we just need to abandon the pathological ideology that struggles to recognize the hole in our bucket, that struggles to conceive of things we can do with our money beyond grants, and that struggles to imagine investible activity within our business models. If the social innovators in those blended finance meetings knew of the resources at our disposal, they would certainly be jealous. We have the money we need to drive innovation, seed transformation, and deliver immense social and cultural impact. But when you see how cleverly some sectors are connecting investment to impact, our approach starts to look lazy and complacent.
Imagine if we work towards a goal of converting 20% of public funding for the arts into catalytic capital for a low-interest social finance fund for culture?
That money will attract significant new investment from foundations and private sector investors, yielding a substantial new resource for cultural activity. It will de-risk the fund and the loans, keeping interest rates low. It will support capacity building for cultural nonprofits in the form of investment readiness and the development of investible activities. It will establish an appetite for risk, ensuring loans can serve adventurous mission-aligned creative endeavours. It will scale success through performance incentives. It will develop impact reporting practices that reposition culture alongside other social benefit sectors, boosting our standing as a key strategic priority for governments at all levels. It will foster cultural nonprofits that are more resilient, more community-engaged, and less grant-dependent. And it will keep coming back to us, recycling itself through the sector, adding to the resilience of the system with each cycle of use.
Is there risk? Yes. Risk sits at the heart of this resourcing vehicle like an engine. We can design it to mitigate that risk in different ways. We can make its tires out of rubber, give it a bouncy suspension, and fit it with comfy seats, but without the risk sharpening our attention and driving accountability, that vehicle cannot carry us anywhere new. Might some loans fail? I hope so. Otherwise, we aren’t pushing investment far enough into the challenges and opportunities of sector activity. Might some organizations even collapse? Possibly. But that downside is already on the horizon, and with no corresponding upside in sight.
There is no future for our sector that is not transformative. The risk we will regret taking is the risk of doing nothing. Riding current patterns of decline into growing squabbles over standard resources that enter our sector through calcified legacy allocations, special lobbying from government cronies, and other un-strategic “spray and pray” approaches, is counterproductive and demoralizing. Canadians deserve a strong, engaged, and mobilized cultural sector, and our country needs it now more than ever. The resources are there for us to deliver on that need, should we choose to use them.