Exploring Social Finance & Social Enterprise
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EXPLORING SOCIAL FINANCE & SOCIAL ENTERPRISE
Social Enterprise Speaker Event Community Living Hamilton I Liuna Station, Hamilton
June 13th, 2012
OBJECTIVES1. Provide background on our work2. Examine the motivation for social enterprise and social
finance activities3. Build greater understanding of social enterprise and social
finance4. Explore social enterprise and social finance models5. Review pathways for further engagement
ADVICE & MENTORSHIP1200 clients since 2006700 active clients9,000 hours of mentorship provided in 2010
EDUCATION85 Entrepreneurship educational events programmed or delivered in 20108,000 attendees at events in 20101.5M page views at marsdd.com in 2010
INSIGHT900 completed market research requests for over 800 companies and entrepreneurs in 2010$13.4M in free market research provided13 market intelligence reports produced in 2010 covering topics such as consumer digital health, water and clinical trials
ACCESS TO CAPITAL$108M capital raised by MaRS clients from angel and venture capital investors and government in 2010600 new jobs created in Canada by MaRS portfolio companies in 2010
ABOUTSocial Innovation Generation (SiG) at MaRS Provides advisory supports, convenes stakeholders, and accelerates
social innovation initiatives Advisory supports provided to social entrepreneurs (for-profit and
non-profit) including legal, business planning, IP, impact assessment, and financing advice
Over 500 clients over the past four years Looking ahead: Leading initiatives over the next phase of
development will be focused on advisory services, Centre for Impact Investing and the MaRS Solutions Lab
Pre-2007 2007 2008 2009 2010 2011 2012
RBC announces impact investing strategy.
B Lab officially opens in 2006.
MaRS officially opens in fall 2005.
Concept paper written for in 2007, adopted as government policy in 2008.
Canada shows impact investing leadership with founding of Vancity in 1946, Sarona in 1954, CAIC in 1984, and le Chantier in 1997.
Social Finance Forum 2011 hosts 400 delegates and celebrates Centre opening.
Canadian Task Force on Social Finance launches in December 2010.
Market grows by $284M year over year.
Term “impact investing” coined; Rockefeller Foundation starts impact investing strategy.
First Social Impact Bond pilot launched
[email protected] starts. Initiates first Social Finance Forum.
ABOUTMaRS Centre for Impact Investing (CII)• hub of social finance excellence, serving as a neutral collaboration
platform for private, community, and government sectors to work together, co-create new financial products and services, as well as develop talent and forward-looking public policies to grow the asset class.
• recognized resource for Ontario and become the leadership hub on impact investing for Canada, building on our experience in the field of innovation and our work to date on the Task Force on Social Finance.
• resource and partner for local, national, and global leaders in impact investing and mainstream finance, from Social Finance UK to the Global Impact Investing Network (GIIN).
• focus on catalyzing the next phase of evolution, from uncoordinated innovation to marketplace building, and position Canada for success in a fast evolving field globally.
• Advancing the recommendations of the Task Force on Social Finance, including legislative reforms and tax regulations.
Research and Public Policy
• Developing and deploying best practice tools and models for measuring impact in nonprofit and for profit impact ventures.
• Catalyzing funds, connect investors and ventures and developing innovative tools (i.e. Social Impact Bonds).
Market and Product Development
• Educating and engaging prospective talent, ventures, and investors.
Education and Engagement
Pillar Description Strategic Initiatives
Objectives & Measures Deals: $30M in new impact
investing deals in Canada; Products: Supportive
development of five new impact investing products;
Talent: Recruit and retain 100 highly skilled volunteers;
Ventures: 100 ventures receiving financing or adopting impact metrics; and
Policy: Successful advancement of the public policy recommendations of the Task Force.
$5M Community Investing Fund
$1M Community Housing Bond
$20-40M Social Finance Strategy
$20M Impact Investing Strategy
Initial Impact: 2011-2012
Why does social enterprise and social finance matter to you?
Complex challenges:We are faced with seemingly intractable social and environmental problems at a global, national, and local level.
Constrained finances: Government revenues constrained due to
modest economic growth and budget pressures (deficit and rising core costs like
health care). Donations constrained and showing evidence of decline.
Source: Statistics Canada
Donations, Grants,Contributions (Gs&Cs) tonon-profits
Growing movement:Growing number of charities, non-profits, co-ops and for-profit companies building business models and turning to investors for financing to launch and scale up innovative new programs, become sustainable, and stimulate economic growth.
Funder and investor interest:Growing number of funders and investors
are interested in financing sustainable business models and investments that
generate impact alongside financial return.
Professor Michael PorterBishop William Lawrence University Professor at Harvard Business School
“In recent years business increasingly has been viewed as a major cause of social, environmental, and
economic problems. Companies are widely perceived to be prospering at the expense of the broader
community...The solution lies in the principle of shared value, which involves creating economic value in a way
that also creates value for society by addressing its needs and challenges…The purpose of the corporation
must be redefined as creating shared value, not just profit per se. This will drive the next wave of
innovation and productivity growth in the global economy.
”The concept of shared value recognizes that societal needs, not just conventional economic needs, define markets. It also recognizes that social harms or weaknesses frequently create internal costs for firms—such as wasted energy or raw materials, costly accidents, and the need for remedial training to compensate for inadequacies in education. And addressing societal harms and constraints does not necessarily raise costs for firms, because they can innovate through using new technologies, operating methods, and management approaches—and as a result, increase their productivity and expand their markets.
Opportunity:Social enterprise and social finance strategies present an opportunity to leverage your assets and effectively complement existing work to support community housing development, provide opportunity, and reduce poverty.
DEFINITIONS & BACKGROUND
FIGURE: SOCIAL VENTURE CONTINUUM
Social enterprises are revenue-generating social and/or environmental enterprises (whether run as a
project, or as a separately incorporated entity) that are owned and operated by nonprofits or charities. They
have the dual purpose of the dual purpose of generating income by selling a product or service in
the marketplace and creating a social, environmental or cultural value.
FACTS & EXAMPLES Ontario has a mature and growing social
enterprise sector: Almost half of all Ontario nonprofits
are engaged in social enterprise activity
One in five social enterprises has been operating for over 25 years
One third of nonprofit organizations without social enterprises plan on starting one in the next two years
Examples of social enterprises include Goodwill Industries, Habitat for Humanity’s Restore, Centre for Social Innovation, Me to We
CHARACTERISTICSEffective social enterprises:
are clearly aligned with the mission of the parent nonprofit;
have a simple and valuable product or service offering; focus on the desired impact for workers and customers; receive long-term financial & technical support from
BENEFITSThere are also many key benefits of social enterprise activity:
Increase the financial sustainability of an organization; Enhance the core mission and impact of the nonprofit
organization; Provide employment opportunities, particularly for
BACKGROUNDCHALLENGESSocial enterprises face challenges including: access to capital, lack of enabling supports, and uncertainty regarding laws and regulations
d & In
t & R
l & R
l & Fin
ADDITIONAL CHALLENGES Operational: hiring and training, authenticity, fit Balance: Investor demands, profitability and patient capital Philosophical: basic service delivery by government or private
sector Impact measurement
Social enterprise is not for every organization.
It presents an opportunity for an exciting and important hybridization of the work of social good organizations,
but it may be reckless for some organizations to start a business or enterprising activity that forces them to
drift from their core mission and ability to achieve positive impact.
BACKGROUNDSocial finance is an investment approach which aims to solve social or environmental challenges while generating financial return. This includes investments that range from producing a return of principal capital to offering market-rate or even market-beating financial returns.
Synonyms: Impact investing, community investing, and mission-related investing.
BACKGROUNDSocial Finance Marketplace Current market size in Canada estimated at ~$2 billion, projected to grow to
$30 billion over next ten years Global impact investing marketplace is estimated at $50 billion, projected to
grow to $400 billion over next ten years Funds: Over $250 million in funds (and foundation investments) with proven
track record; 30 funds operating or in development Deals: There is measurable (private) impact deal activity in Ontario mostly
focused on debt instruments. In total, there are over 200 “living” deals in place across the country.
Key sectors: Clean technology, sustainable agriculture, microfinance and affordable housing
Strong interest amongst governments and institutional investors, particularly foundations, HNWIs, and wealth managers (Recent investor survey: 70% interested in public housing bonds)
Impact + Return
Jobs for marginalized populations
Social housing units
1% p.a. over three years
Prime + 2%
Canadian Task Force on Social Finance
1. Mission Related Investing
2. Impact Investing Funds
3. Impact Investing Products
1. Pension Fund Assets
2. Regulatory Frameworks
3. Tax Incentives
1. Business Development Programs
Recommendations to Catalyze a Sector
Investment PipelineCapital Mobilization Enabling Tax & Regulatory Environment
MODELS Housing funds Community loan funds Social enterprise business models Social enterprise incubation spaces and institutions Social impact bonds
Case Study:New York City Acquisition Fund
MODELS Motivation: formed in 2006 to address the shortage of affordable
housing in New York City Goal: support the development of 30,000 low income housing units
in New York City Target ventures: for-profit and non-profit affordable housing
developers who refurbish existing units or build new housing Fund size: ~$200 million Investment size and term: Up to $7.5 mil (new build) or $15 mil
(acquisition); lending period of up to three years Interest rate: variable interest rate currently indexed to prime
(minus 40 – 60 basis points) Impact: $151M invested and 4,384 units created or preserved
MODELS Partners/Investors: Collaboration with the City of New York, major
foundations (ie. Ford Foundation, Rockefeller Foundation), and private investment groups (ie. JP Morgan Chase Bank)
Layered: Bank consortium provides senior debt as lending capital while other investors provides guarantees in the form of low-interest subordinated loans
Example Recipient: Serviam Gardens (Fordham Bedham Housing Corporation) 243-unit green, affordable
housing development for low- and moderate-income seniors
Purpose: Acquisition and predevelopment financing for 10 unit complex rehabilitation and 73 unit construction
Deal: $3.6 million loan Term: 36 months
Community Loan Fund: Ottawa Community Loan Fund (OCLF)OCLF turns investments and donations into accessible financing to fuel innovation, expand opportunities and improve lives.Financed by: Grant capital and investment capital Target: Small business, youth enterprises, trainingTerms: Variable (12 months – 5 years; Prime plus 6%)Loan Size: $5,000 - $15,000Impact: Poverty reduction, employment creationSuccess: Over $1M in capital mobilized
Toronto Enterprise Fund (TEF) Mission: support social
enterprises that employ people who are socially marginalized
Supports: grant funding and technical assistance
Portfolio: Currently fund 13 social enterprises; enterprises had total sales of over $3M in 2010
Impact: 82 per cent said of participants that their job skills had improved, 74 per cent said their self esteem had gone up, and 60 per cent said their health had improved. 2,096 participants have been trained and/or employed by TEF funded enterprises since 2000.
Friends Catering CompanyFood services social enterprise of the Fred Victor Centre: aim: to train, mentor and offer
jobs to people who have not worked for a long time, who lack the confidence to seek work or who have some mental or physical limitations
employs 3-5 Fred Victor clients trainees worked more than
2,250 hours in 2010-11 and filled 261 catering orders
training space for the Career Directions in Hospitality program offered in conjunction with Fred Victor’s Employment and Training Services
Partners: United Way and foundations like McCutcheon Foundation.
St. John’s BakeryFood services social enterprise of St. John the Compassionate Mission aim: to provide exceptional
breads and sweets that use the finest ingredients and no preservatives, and a nourishing environment that responds to the needs of all those who contribute to the creation of these products
employs people who have been outside the labour market, offering them training and opportunity for permanent employment
received $350,000 in TEF financing for technical assistance and working capital
Revenues grown from $81,000 in 2004 to $740,000 in 2009
Centre for Social Innovation (CSI)Non-profit social enterprise that creates community workspaces, incubates emerging enterprises, and develops new models and methods with world-changing potential Mission: to catalyze social
innovation in Toronto and around the world
Target ventures: nonprofits and social purpose businesses targeting economic, environmental, social and cultural challenges
Home to over 250 organizations and projects in two Centres in Toronto
School for Social Entrepreneurs (SSE-O)
Social Impact Bonds (SIBs) employ private investment capital to pay for early intervention programs delivered by nonprofit service providers
Social Impact Bonds monetize social outcomes by capturing the value between the cost of prevention now and the price of remediation in the future
The government pays investors their principal and a rate of return only if programs achieve predefined results
Social Impact Bond (SIB)
Deliver evidenced based interventions/social services
Provides upfront funding to delivery
agents via intermediary,
receives percentage of cost savings to
Contracts with intermediary for preventative services
Cost savings generated if outcomes are achieved
Coordinates relationships, measures outcomes
How can you engage in effective social enterprise and social finance activity in
PATHWAYSAs a community: Coordinate Efforts: Develop a social enterprise working group
and/or embed social enterprise/social finance initiatives into existing plans and strategies. Ensure all stakeholders, from tenants to housing providers to local politicians, are engaged in the conversation.
Profile Success: Profile existing social enterprise and social finance. Identify Leaders: Identify organizations or institutions that can take
leadership to fund, coordinate, build capacity, and deploy initiatives.
Take Action: Execute strategies that build community resilience.
PATHWAYSProcessAs a nonprofit organization: Discuss: Discuss the opportunity with your staff and board. Connect: Meet with community partners and practitioners to learn
more about how you might engage in social enterprise or social finance activities.
Explore: Develop potential options and determine feasibility. Resource: Acquire the necessary human resources, technical
supports, and financial support for an appropriate strategy. Deploy: Deploy a strategy that aligns with your core mission.
Supportive Activities Board development and literacy: There are a growing number of
organizations looking for a deeper level of understanding of the financial operations of their organization and others, as well as opportunities in social finance and their associated risks and regulatory implications.
Financial fitness tests: There are organizations like the Community Forward Fund that can test your organization’s financial fitness.
Enterprise feasibility: For those organizations interested in adding new enterprising activity or additional capacity, there are opportunities to work with paid & pro-bono advisors on financial feasibility.
Performance Management: In an era of fiscal restraint and outcomes-based financing, performance management in the social sector is increasing relevant for: operational improvements, funders, benchmarking for evidence and performance-based contracts.
PATHWAYSOther InitiativesStakeholders can consider certain initiatives: Foundations: Develop a comprehensive social finance strategy,
which would include setting aside a portion of your assets for impact investments. Consider setting aside grant funding for technical assistance for social enterprise activities.
Local Government: Consider means of supporting social finance investments (e.g. loan guarantees) and encourage business centres/advisory services to provide support to social entrepreneurs.