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Impact investment hub lunch 240511

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  • 1. Impact Investment: A New Asset Class? Thats what JP Morgan calls itSocial Finance, Impact Investment, and Finance for Social Enterprise A Conversation Hub Lunch @ Islington 24 May 2011
  • 2. Vancity Community Capital (“VCC”)● Born out of a division of Vancity, Canadas largest credit union, provides growth capital to high impact enterprises● Vancitys objectives explicitly include improving community well-being, supporting high social and environmental impact businesses, and redefining wealth – has over Cdn$15 billion of assets under management● VCC manages a portfolio of subordinated and structured loans of around Cdn$45 million – with a further Cdn$25 million available to lend● VCC launched the Resilient Capital Program in May this year to invest in high impact opportunities that may feature higher risk or require more patient capital – raised around Cdn$4 million and aiming to raise a total of Cdn$10-15 million● VCC works alongside other divisions and partners of Vancity, such as Vancity Community Foundation and Vancity Community Investment, which provide grants and technical assistance – ranging from business planning to strategic grants to help social enterprises through various stages of development
  • 3. Impact
  • 4. Impact Investment
  • 5. Impact Investment Impact investments are investments intended tocreate positive impact beyond financial return. They require the management of social andenvironmental performance in addition to financial risk and return. JP Morgan/ Rockefeller Foundation
  • 6. Social
  • 7. Social Finance
  • 8. Social Finance Social finance is an approach to managing money that delivers a social and/or environmental dividend as well as an economic return.SiG, Causeway, Volans - Building the Case for Social Finance in Canada 21 August 2009 Sustainable finance with a social or environmental goal. Tim Draimin, TIDES Canada - 29 May 2007 Leveraging multiple sources of financing to achieve long term, accountable social impact and economic return. Al Etmanski, President, PLAN, Partner, Social Innovation Generation (SiG)
  • 9. Social Finance & Impact InvestmentSocial impact bonds, Big Society Bank, Big Issue Invest – a specialisedprovider of finance to social enterprises or trading arms of charities that are findingbusiness solutions that create social and environmental transformation, BridgesVentures – a sustainable growth investor, Microfinance, Kiva, CommunityDevelopment Finance Institutions, Credit Unions & Financial Co-ops,Transform Capital Management – a global impact investment bankSocially responsible investment, Philanthropy & Philanthrocapitalism,Patient Capital, UnLtd, UnLtd Big Venture Challenge, NESTA, YoungFoundation, RSF Social Finance – founded as the Rudolf Steiner Foundation,Nonprofit Finance Fund – Where money meets mission, Renewal Partners –funding change through investments, grants, and collaboration, Vancity CommunityCapitalSome frequently recurring phrases: mission-based, change, social andenvironmental performance/ return/ benefits/ dividend, investment,grants, finance, sustainable, growth, global
  • 10. Challenges● Gaps in language and terminology used amongst investors, entrepreneurs, and social purpose business people● Many professionals working at impact investment firms are from the conventional investment sector (note: based on personal observation, not empirical evidence)● Lack of innovation, creativity, and openness in the impact investment sector – does not mirror the organisations they seek to finance and support – Slow to embrace co-design of finance, neither side seeing each other truly as a partner, attempts to innovate with financial instruments rather than addressing behaviours or culture of social finance● Risk of value extraction and exploitation of social enterprises rather than true capacity building● Frequent use of terminology such as “fast growth”, “scale”, “replicable”, which are not necessarily appropriate for social enterprises
  • 11. ChallengesWhat other challenges do you see or have you experienced?Solutions & OpportunitiesWhat are the solutions and opportunities to bridge the gapbetween social financiers and the enterprises they want tosupport?Lets open up the conversation...
  • 12. Ideas● Impact investors and social financiers must look at their own business model and strategy – Consider co-operative, open-source, and other unconventional ways of doing things and ask themselves how they could apply those models● They should walk a mile in the shoes of their investee companies – secondments to social enterprises, sit on the Board – and learn their language, experience their issues first hand● Invite social enterprises to shadow impact investors or conduct peer reviews of business models and business plans – so that they can understand better the investment process, improve transparency● Impact investors and social financiers need to move out of their comfort zone – step away from the numbers, examine behavioural and intuitive aspects of investment in social enterprises – consider non- financial incentives, measures, resources, and services (the importance of advice, strong management teams and operational experience, training and continuing education)
  • 13. Stay in ContactBonnie WongAt work: bonnie_wong@vancity.com or +1 604 877 8284All the time: bonnie.o.wong@gmail.comOn Twitter: @BonnieOWongBlog: http://beopenionated.wordpress.com (mainly aboutimpact investment and social finance, with links to my otherwriting)