Social Finance and Impact Investing in Canada
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The document discusses social finance in Canada, defining it as an investment approach delivering social and environmental benefits alongside financial returns. It highlights the involvement of various stakeholders including credit unions and community loan funds while illustrating existing initiatives like the Regent Park revitalization. Key issues in the sector include regulatory challenges, the need for innovation in solving social problems, and balancing financial and social returns.
![soŸcial
fiŸnance
[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.](https://image.slidesharecdn.com/sec-socfin-impinv-canada-nov2012-121126081324-phpapp01/85/Social-Finance-and-Impact-Investing-in-Canada-3-320.jpg)
Social Finance and Impact Investing in Canada
- 1. Social Finance & Impact Inves7ng in Canada OISE Social Economy Centre Lunch Box Series November 21, 2012
- 2. Social Finance • What is it? • Who is involved? • What is the state of the market? • What are the key issues today?
- 3. soŸcial fiŸnance [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.
- 4. Why we need it Need for greater Government can’t Employee and investor innovaHon in solving afford to solve values are shiRing social problems problems alone Emerging number of not-‐for-‐profit and for profit ventures driving social/environmental impact alongside financial return
- 5. What does it look like Regent Planet Canoe-‐ Park Bean Creek Coffee Hydro • $250k loan & share • $5M loan for the First • $1B revitalizaHon issue for expansion • $450M worth of NaHons plant • revenues tripled • generate annual market-‐rate bonds from $500k to • over 6,000 mixed-‐ revenue of $1.6M $1.7M • power for 1,700 income housing • increased global & units homes local impact; doubled co-‐op membership
- 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 6"
- 7. Toronto Community Housing Corporation (TCHC) Bond: $1B Regent Park Revitalization with $450M Bond
- 8. Centre for Social Innovation (CSI): $1.8M bond issue for the acquisition and re- development of new facility. http:///watch?v=QgzlmKPoMEo&feature=related
- 9. Impact Inves7ng In Canada Aboriginal Today: $2B Quebec -‐ Funds, $285.7 Solidarity 50 Funds: $250M Finance, $850.5 Community Futures Development CorporaHons, $910.6 2011/12: $324M Quebec -‐ Development Capital, $1,049.1 Community Loan Funds and Social Projected Venture Capital, $348.8 growth: $30B Credit Unions, $951.5 InternaHonal Impact Investments, FoundaHons, $5.6 $32 Assets (Millions), 2010 Source: MaRS CII ; SIO (2010) Impact InvesHng in Canada: A Survey of Assets
- 10. Who’s involved: spectrum of Canadian investors Established and emerging actors Credit Unions Community Loan Funds Social Responsible Investing Microfinance Mission-Related Investing Venture Philanthropy Private Equity Funds
- 11. Who’s Involved? Social & Financial Return Con7nuum Social finance approaches support a spectrum of organizaHonal business models '()*+,-./-&0,12+*3-45-6+)78(972(48:;-'+43-<=7+(2(,:-24-#+7>(2(487?-@*:(8,::,: !)/0'11'()+ :61')#11 5(,'%* 5(,'%**. ;6$# !"#$%&'()%*+ #)&#$"$'1')2 4)&#$"$'1')2 2'9')2+%+"($&'()+ 8(/("#$%&'9#1 "6$"(1# $#1"()1'7*# ,(00#$,'%* ,-%$'&. %$0+(3+%+ )()/"$(3'& (3+"$(3'&1+&( 761')#11 761')#11 #)&#$"$'1# ,-%$'&. ,-%$'&. 5(,'%*+>0"%,& !"#$!%& =')%),'%* :*#)<#< Source: Adapted from Charities Aid Foundation (CAF) Venturesome, “Financing Big Society: Why social investment matters” (2010). Non-‐profit For-‐profit
- 12. Supply of Finance Cash Fixed Income Public Equity Private Equity Higher risk Lower risk Guarantees Lower risk Higher risk Grant Subordinated Private Equity Senior Loans Cash Support Loans -100% -90% to -10% 0% 1% to 7% 8% + Capital-protected Commercial-return Grants “Soft” Investments investments investments Very soft debt Market-rate debt “Blended return” equity Social returns only Mix of grants and Equity Soft debt other capital Full commercial returns Willing to take below- Willing to lose Social benefit can be a market return some money requirement Source: F.B. Heron Foundation and Jessica Shortall (2009): “Introduction to Understanding and Accessing Social Investment”
- 13. Financing Op7ons – Over the Social Entrepreneurship “Life Cycle” MORE EQUITY-LIKE GRANTS 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 MORE DEBT-LIKE IDEA DEVELOPMENT PROOF OF CONCEPT START-UP SCALE REPLICATION EXIT 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
- 14. 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
- 15. 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
- 16. 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
- 17. Type aariety of Measurement Approaches A V nd Maturity of Measurement Methods 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
- 18. 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 Source: Social Venture Technology Group, 2008
- 19. Investor percep7ons on tradeoffs between financial and impact returns
- 20. 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
- 21. 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
- 22. Role of philanthropy mission related Inves.ng GRAPH: DEAL SIZE FOR COMMUNITY/ MISSION-RELATED INVESTMENTS FOR Foundations SELECTED CANADIAN FOUNDATIONS, 2010 Recent study $10M 1 reported that nine $2M 1 Can. foundations $1M 1 had $32 million $500k to 1M 6 community/ $150 to 325 k 11 mission investing $95 to 100 k 18 assets in their $75 k 4 endowments, 25 to 50 k 2 representing four Under $25 k 5 (4) per cent of 0 5 10 15 20 their total assets.
- 25. 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?
- 26. Karim Harji Co-‐Founder Purpose Capital [email protected] Joanna Reynolds Program Manager MaRS Centre for Impact InvesHng [email protected]