OISE  Social  Economy  Centre  Lunch  Box  Series    

November  21,  2012  

Social  Finance  &    Impact  Inves7ng    

in  Canada        

Social  Finance  

•  What  is  it?  •  Who  is  involved?  •  What  is  the  state  of  the  market?  •  What  are  the  key  issues  today?  

         so�cial  fi�nance        [soh-­‐shuhl  fi-­‐nans,  fahy-­‐nans],  n.;  synonym:  impact  inves.ng  •  Social  finance  is  an  approach  to  managing  money  that  

delivers  a  social  and/or  environmental  dividend  and  an  economic  return.    

•  Includes:  community  invesHng,  micro-­‐lending,  sustainable  business  and  social  enterprise  lending.    Grant  making  and  program-­‐related  investments  also  fall  under  the  umbrella  of  social  finance.    

•  Social  finance  aims  to  leverage  exisHng  capital  to  aLract  new  investment  for  public  benefit.    

•  These  approaches  to  investment  and  funding  share  the  focus  of  sHmulaHng  posi7ve  social  and  environmental  returns  for  investors  and  the  larger  world.  

Need  for  greater    innovaHon  in  solving    

social  problems    

Government  can’t  afford  to  solve  problems  alone    

Employee  and  investor  values  are  shiRing    

Emerging  number  of  not-­‐for-­‐profit  and  for  profit  ventures  driving  social/environmental  impact  alongside  financial  return  

Why  we  need  it  

•  $1B  revitalizaHon  •  $450M  worth  of  

market-­‐rate  bonds  •  over  6,000  mixed-­‐

income  housing  units  

•  $5M  loan  for  the  First  NaHons  plant    

•  generate  annual  revenue  of  $1.6M    

•  power  for  1,700  homes  

•  $250k  loan  &  share  issue  for  expansion  

•  revenues  tripled  from  $500k  to  $1.7M  

•  increased  global  &  local  impact;  doubled  co-­‐op  membership  

Regent    Park  

Canoe-­‐  Creek    Hydro  

Planet  Bean    Coffee  

What  does  it  look  like  

6"

SolarShare is a non-profit that allows Ontarians to invest in community based solar energy installation across the Province. By offering bonds backed by larger solar systems hosted on commercial and institutional rooftops. http://bit.ly/toVzT0

Toronto Community Housing Corporation (TCHC) Bond: $1B Regent Park Revitalization with $450M Bond

Centre for Social Innovation (CSI): $1.8M bond issue for the acquisition and re-development of new facility.

http:///watch?v=QgzlmKPoMEo&feature=related

Impact  Inves7ng  In  Canada  

Aboriginal  Funds,  $285.7    

Community  Futures  

Development  CorporaHons,  

$910.6    

Community  Loan  Funds  and  Social  Venture  Capital,  

$348.8    

Credit  Unions,  $951.5    

FoundaHons,  $32    

InternaHonal  Impact  

Investments,  $5.6  

Quebec  -­‐  Development  

Capital,  $1,049.1    

Quebec  -­‐  Solidarity  

Finance,  $850.5    

Assets  (Millions),  2010  

Source:  MaRS  CII  ;  SIO  (2010)  Impact  InvesHng  in  Canada:  A  Survey  of  Assets  

Today:  $2B    50  Funds:  $250M      2011/12:  $324M      Projected  growth:  $30B                  

Established  and  emerging  actors      

 

Who’s  involved:  spectrum  of  Canadian  investors    

Credit Unions Community Loan Funds Social Responsible Investing

Microfinance

Mission-Related Investing Venture Philanthropy Private Equity Funds

!"#$%&'()%*+,-%$'&.

!)/0'11'()+#)&#$"$'1')2%$0+(3+%+,-%$'&.

4)&#$"$'1')2)()/"$(3'&

5(,'%*"6$"(1#761')#11

8(/("#$%&'9#15(,'%**.

$#1"()1'7*#761')#11

:61')#112'9')2+%+"($&'()+(3+"$(3'&1+&(,-%$'&.

;6$#,(00#$,'%*#)&#$"$'1#

!"#$!%&:*#)<#<

=')%),'%*5(,'%*+>0"%,&

Source: Adapted from Charities Aid Foundation (CAF) Venturesome, “Financing Big Society: Why social investment matters” (2010).

'()*+,-./-&0,12+*3-45-6+)78(972(48:;-'+43-<=7+(2(,:-24-#+7>(2(487?-@*:(8,::,:

Social  &  Financial  Return  Con7nuum  Social  finance  approaches  support  a  spectrum  of  organizaHonal  business  models      

Non-­‐profit   For-­‐profit  

Who’s  Involved?  

Cash

Source: F.B. Heron Foundation and Jessica Shortall (2009): “Introduction to Understanding and Accessing Social Investment”

Grant Support

-100% -90% to -10% 0% 1% to 7% 8% +

Private Equity Subordinated

Loans Senior Loans Cash

Lower risk Higher risk Higher risk Lower risk

Guarantees

Fixed Income Public Equity Private Equity

Grants “Soft” Investments Capital-protected investments

Commercial-return investments

Social returns only Very soft debt

Mix of grants and other capital

Willing to lose some money

“Blended return” equity

Soft debt

Willing to take below-market return

Market-rate debt

Equity

Full commercial returns

Social benefit can be a requirement

Supply  of  Finance  

MORE DEBT-LIKE

13  Source: Alex Nicholls and Cathy Pharoah (2008) “The Landscape of Social Investment”, http://www.sbs.ox.ac.uk/centres/skoll/research/Pages/landscapeofsocialinvestment.aspx

Financing  Op7ons  –  Over  the  Social  Entrepreneurship  “Life  Cycle”  

IDEA DEVELOPMENT PROOF OF CONCEPT START-UP SCALE REPLICATION EXIT

GRANTS  

MORE EQUITY-LIKE

SOCIAL  VENTURE  CAPITAL  FUNDS  

ANGEL  INVESTMENT   VENTURE  CAPITAL  

PROGRAM-­‐RELATED  INVESTMENT/RECOVERABLE  GRANTS  

FORGIVABLE  LOANS  

SOCIALLY  RESPONSIBLE  INVESTMENT  FUNDS  

BELOW-­‐MARKET  DEBT  

MARKET-­‐RATE  DEBT  

Aligning  Supply  and  Demand  

Source: Alex Nicholls and Cathy Pharoah (2008) “The Landscape of Social Investment”, http://www.sbs.ox.ac.uk/centres/skoll/research/Pages/landscapeofsocialinvestment.aspx

Bridging  Demand  and  Supply  

Source: Karim Harji and Edward Jackson (2012) “Accelerating Impact: Achievements, Challenges and What’s Next in Building the Impact Investing Industry”, http://www.rockefellerfoundation.org/what-we-do/current-work/harnessing-power-impact-investing/publications

Source: Karim Harji and Edward Jackson (2012) “Accelerating Impact: Achievements, Challenges and What’s Next in Building the Impact Investing Industry”, http://www.rockefellerfoundation.org/what-we-do/current-work/harnessing-power-impact-investing/publications

Source:  Social  Venture  Technology  Group,  2008      

Type  and  Maturity  of  Measurement  Methods  A  Variety  of  Measurement  Approaches  

Source: Sara Olsen and Brett Galimidi (2008) “Catalog of Approaches to Impact Measurement”, http://svtgroup.net/wp-content/uploads/2011/09/SROI_approaches.pdf

Source:  Social  Venture  Technology  Group,  2008      

Where  Measurement  Approaches  are  Applied  Measurement:  Context  and  Uses  Maeer  

Source: Sara Olsen and Brett Galimidi (2008) “Catalog of Approaches to Impact Measurement”, http://svtgroup.net/wp-content/uploads/2011/09/SROI_approaches.pdf

Investor  percep7ons  on  tradeoffs  between  financial  and  impact  returns  

What  are  the  key  regulatory  issues  today?    

1)  Federal:  CRA  No  profit  for  non-­‐profits    2)  BC:  Community  ContribuHon  Companies  (C3)    3)  Ontario:  SecuriHes  approvals  for  community  bonds            

What  are  the  key  issues  today?  

Principles  for  Community  Financing  in  Ontario    

1.  Integrity  2.  Verifiability  3.  Transparency  4.  Social  Impact  5.  Accessibility  6.  Accountability  7.  No  third  party  solici7ng  of  investment    8.  Trustee  administra7on  

Challenge  ques,on:        To  regulate  or  not  to  regulate  social  finance  security  offerings?  

           Ontario  Social  Economy  Roundtable    

 

 Role  of  philanthropy  mission  related  Inves.ng  

5

2

4

18

11

6

1

1

1

0 5 10 15 20

Under $25 k

25 to 50 k

$75 k

$95 to 100 k

$150 to 325 k

$500k to 1M

$1M

$2M

$10M

GRAPH: DEAL SIZE FOR COMMUNITY/ MISSION-RELATED INVESTMENTS FOR SELECTED CANADIAN FOUNDATIONS, 2010  

Foundations Recent study reported that nine Can. foundations had $32 million community/mission investing assets in their endowments, representing four (4) per cent of their total assets.

Social  Impact  Bonds  

24  http://socialfinance.ca/guide

What  are  the  key  issues  today?  

•  How  do  these  trends  apply  to  you?  •  What  else  is  missing?  •  How  do  we  grow  the  sector?  •  Task  Force  recommendaHons?    

Joanna  Reynolds    Program  Manager    MaRS  Centre  for  Impact  InvesHng      jreynolds@marsdd.com  

Karim  Harji    Co-­‐Founder    Purpose  Capital      karim@purposecap.com