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Volans Social Innovation Tour - Canadian Government

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  • 1. UK Social Innovation Policy Tour: Social Finance March 28th – April 2nd 2009 Key Takeaways 1
  • 2. Contents 1. Tour Overview 2. Social Finance 3. Public Policy 4. Culture and Enabling Environment 5. Actions 2
  • 3. Contents 1. Tour Overview 2. Social Finance 3. Public Policy 4. Culture and Enabling Environment 5. Actions 3
  • 4. Tour Organizers The primary aim of SiG is to encourage effective methods of addressing social problems on a national scale. The activities of SiG serve to facilitate the exploration of structural, institutional and systemic evolution in order to promote broad system change. A national collaboration to fast-track Canada’s adoption of social finance. Part broker, part incubator, part think-tank, part consultancy, Volans works globally with entrepreneurs, businesses, investors and governments to develop and scale innovative solutions to social and environmental challenges.. Volans is based in London and Singapore. www.volans.com 4
  • 5. Canadian Participants Nino Antadze Dr. Carin Holroyd PhD candidate, School of Planning, University of Waterloo Department of Political Science, University of Waterloo Richard Blickstead Jaqueline Koerner CEO Wellesley Institute Chair, EcoTrust Canada Tim Brodhead Bayla Kolk President and CEO, J.W. McConnell Family Foundation Associate Assistant Deputy Minister, Income Security and Social Development, HRSDC Lee Davis Sean Moore President and CEO VanCity Capital SiG Fellow Tim Dramin Tony Nimeh, MD Executive Director, SiG National Consultant Patricia Else Joanna Reynolds Director, Grant Operations, Ontario Trillium Foundation Program Coordinator, Causeway SiG National Al Etmanski Judy Rogers President and Co-Founder PLAN Chair, 2010 Legacies Now Board of Directors Don Fairbairn Dr. Frances Westley President, DCF Consulting Director,SiG Waterloo, J.W.McConnell Chair in Social Innovation Lois Fine Andrew Wharton Director of Finance, YWCA Special Advisor, Disability Services, BC Gordon Floyd Faye Wightman Executive Director and CEO, Children’s Mental Health Ontario President and CEO Vancouver Foundation Allyson Hewitt Donna Thompson– tour observer Director, Social Entrepreneurship, MaRS, SiG@MaRS Special Advisor, PLAN Institute 5
  • 6. Connecting Ideas and Concepts Culture of Social Innovation Social Finance Public Policy Social Social Enterprise Entrepreneurship
  • 7. Key Definitions Social • An organization or venture (within an organization) that advances a social mission through entrepreneurial, earned Enterprise income strategies. ~Social Enterprise Alliance • Social innovation is a complex process of introducing products, Social processes or programs that profoundly change the basic routines, resource and authority flows or beliefs of the social Innovation system in which they arise. Such successful social innovations have durability and broad impact. ~ Dr. Frances Westley • An entrepreneur who engages in business seeking Social both financial and social return ~ PFC (Philanthropic Entrepreneurship Foundations Canada) 7
  • 8. Key Definitions – Social Finance Social Finance is the flow of financial capital to human need uses: Charity and • Affordable Housing Non-profit • Social Enterprise • Support for working families • Health & Home Care Hybrid • Community Development Space • Social Economy • Clean Technology • Microfinance Business Government • Fair Trade • Green Building • Education • Bottom of the Pyramid source: market sector listing adapted from www.xigi.net)
  • 9. Contents 1. Tour Overview 2. Social Finance 3. Public Policy 4. Culture and Enabling Environment 5. Actions 9
  • 10. Creating Social Finance Solutions Venturesome Venturesome is not a bank, nor a granting organisation - it provides underwriting/stand-by facilities, unsecured loans and equity and quasi-equity 3 models of social enterprise 1. Profit Generator – goal to get profit and give some (or all) away to charity (Patagonia) 2. Trade Off Financial and Social Returns - activity has social impact, but needs to trade off between financial and social impact (ie, The Hoxton) 3. Lock-Step – no trade- off between social and financial impact - if one side goes down, the whole organisation does (ie. community wind farms) • Responding to issues in the third sector – charities are undercapitalized with weak balance sheets and a ‘donor’ culture rather than an ‘investor’ culture • Provided £12m to 200 organisations, with a default rate of less than 5% • Current fund is £10m with banks, foundations and HNW individual investors • Exploring the ‘negative return’ spectrum - 100% - 15% 0% + 8% Grant-makers Capital-protected Market-rate return 10 Courtesy of Paul Cheng at Venturesome
  • 11. Social Venture Capital Models Bridges Ventures • Currently running 2 Community Venture Funds (Bridges CDV1 is a £40m fund and Bridges CDV2 is a £75m fund) with investments focussed on delivering a financial and social return. • Investment focussed on under-invested inner city areas of London • Reports to investors include the social impact as well as the financial and economic progress of investments • Exits are flexible – trade sale, float or manager buy-back • November 2008 launched the £4.25m Social Entrepreneurs Fund – a charitable trust which invests in scalable social enterprises delivering high social impact Portfolio Company Example – THE GYM • No-frills, clean gyms with good equipment, open 24 hr/day •Located in lower income communities • £14.99/month with no contracts •Social benefit (providing health benefits to lower income communities) and financial benefit to investors (company is expanding) 11
  • 12. The Role of Banks Triodos Bank Opportunity Fund • Triodos Bank only finances enterprises with which add social, environmental and cultural value - using finance and capital to fuel social change • €3.5 Bn with operations in 5 EU countries • Involved in the Global Alliance for Banking on Values Banking • Triodos’ Opportunity Fund looks to return a profit to LPs through investment in social enterprises – providing both funding and support as they grow The biggest problem is deal flow.... 12
  • 13. Financing Social Businesses Catalyst and ClearlySo • Catalyst has 4 areas of activity; Fund Management, Information and Research, Advisory Services and Events. • ClearlySo is an online marketplace for social business, enterprise and investment. • In creating a legal structure for a social enterprise be critical of models such as CICs and aware of what would work in Canada based on its unique culture • Similar to mainstream VC – big. returns are needed in some investments to offset the risk and inevitable losses in others It's a business that integrates commercial objectives (growth, profits) with a social, ethical or environmental one Looking for scale and high return – is this possible in Canada? 13
  • 14. Social Finance Support Systems The UK marketplace also contains many social finance INTERMEDIARIES Investment Corporate Bank Finance Social Finance Ltd Catalyst Research Legal Guidestar Structures Ashoka Social CIC’s Enterprise Growth What systems exist in Canada? 14
  • 15. Building & Applying Financial Tools Social Finance Ltd. • Action- research projects focused on applying tools and expertise of investment banking and other financial sectors to social finance and the third sector Projects include: o Social Investment Bank - per recommendations from the Commission on Unclaimed Assets (approx value of Canadian unclaimed assets is $300m) o Savings/loan Vehicle for those with disabilities (like the RDSP in Canada) o Social Impact Bond (financial derivative) ie. looking at ways of reducing reoffender rates and calculating the value in social and financial terms Lessons from UK: Strategic conversations need to be nonpartisan to remain relevant in the long term 15
  • 16. Mission Based Investment Guidestar International and F. B. Heron Foundation • F. B. Heron Foundation is a $350m foundation where the corpus is put into action by deploying the endowment into mission related investment without conceding returns • Limitations exist in Canada on missions based investing • Guidestar International is an online service which provides details reports on CSOs (civil society organisations) to improve their visibility to those who support their work • Create competition for the philanthropic dollar (disappointing to see no other foundations making a play for Buffet’s gift to the Gates Foundation) • Business model involves partnering with foundations and other grant-makers • Some of the leg-work completed in Canada and system uploaded with CRA data – would cost $250K/yr to run it Guidestar International is looking for partnerships 16
  • 17. Building Speciality Legal Structures for Social Enterprises BWB LLP • Under British Law tax relief exists for charities, but not social enterprises • Need new kind of company- Community Interest Company (CIC) • 2,628 CICs established in 3.5 years Key Elements of CIC legal structures • Founder control of social enterprise • Asset-Lock which prevents privatization • Allows for financing through debt (secured or unsecured) or equity (share issuance permitted with dividend cap with a maximum annual dividend, 5% above base rate, total 35% net distributable profits) • Allows for payment to directors Issues that need to be addressed to improve CIC structures • Explore tax break effects in to encouraging investment (charities and high growth companies receive this consideration) • Only CICs limited by shares can use debt AND equity – those limited by guarantee can only use debt financing 17
  • 18. Legal Structure Basics What is an appropriate legal structure? What is CIC? Community interest companies (CIC) are a type of limited company designed specifically for those wishing to operate for the benefit of the community rather than for benefit of owners of the company.. CICs can be limited by shares, or by guarantee, and will have a statutory “Asset Lock” to prevent the assets and profits being distributed, except as permitted by legislation. This ensures the assets and profits are retained within the CIC for community purposes, or transferred to another asset-locked organisation, such as another CIC or charity. What is an L3C? L3C'sare low-profit limited liability corporations, which function via a business modality that is a hybrid legal structure combining the financial advantages of the limited liability company, an LLC, with the social advantages of a non-profit entity. An L3C is run like a regular business and is profitable. However, unlike a for-profit business, the primary focus of the L3C is not to make money, but to achieve socially beneficial aims, with profit making as a secondary goal. What is the Community Enterprise Act? Sector leaders in Canada are exploring the creation of a legal structure, learning from CIC and L3C models. Each model has its pros and cons...what is right for Canada? 18
  • 19. Financial Stakeholders in Canada Charitable Foundations Endowments Mainstream Banks Private Companies Financial Federal and Provincial Pension Funds Stakeholders Government High Net Worth Insurance Companies Individuals SIO & SRI Mutual Credit Unions Funds How do we engage and connect the individuals in these stakeholder groups? What is he role of crowd sourcing and micro-investors? 19
  • 20. Contents 1. Tour Overview 2. Social Finance 3. Public Policy 4. Culture and Enabling Environment 5. Actions 20
  • 21. Enabling Public Policy The UK civil society contains many successful ADVOCATES and ASSOCIATIONS • Social Enterprise Coalition provides research and awareness programs and is proactively developing relationships with both political parties • The National Council for Voluntary Organisations (NCVO) provides the support and voice for the voluntary and community sector The UK has an OFFICE OF THE THIRD SECTOR • Created in 2006 • Sits within Cabinet with its own minister, Kevin Brenn an • Pros and Cons to placement in central government The Third Sector includes voluntary and community groups, social enterprises, charities, cooperatives and mutuals Which government body, advocates and associations do we need in Canada? 21
  • 22. Public Policy in the UK Office of the Third Sector • The ‘Third Sector’ includes charities, social enterprises, voluntary organisations - there are 135,000 registered charities and 55,000 social enterprises • Established in 2006, The Office of the Third Sector is located in Cabinet Office, has its own minister, Kevin Brennan, and £550m spending review package • Proximity to central government has its advantages (high profile, access to key players) and disadvantages • Right to Request’ program where public service professionals can start social enterprises and guaranteed a 3-5 year government contract Four key aims 1. Campaigning and Empowerment, especially those at risk of social exclusion 2. Strengthening Communities, providing funding and convening people 3. Transforming public service delivery, design, innovation and campaigning 4. Enabling the growth and development of social enterprises Recommendation from the UK: be in central government, have a tie to treasury and balance policy development with programme delivery 22
  • 23. Government Programs Funding services Rosemary Mitchell – Futurebuilders Futurebuilders provides loans and grants to the Third Sector £250m fund • Set up by Home Office with funds sitting partially in this office and partially in the treasury – commercial agreement with a fund manager 3 investment KPIs 1. # of public service delivery contracts 2. funding dispersal within 2 years 3. customer satisfaction (2008 rating 85%) • +300 investments, mostly healthcare, education and children • In addition to funding, also provides professional support (finances, contracts...) • Recently awarded £100m DOH fund contract in consortium with Partnerships UK What role should government play in creating social capital markets? 23
  • 24. Success Snapshot- Homelessness Community and Local Government (CLG) • Government's Housing initiatives include help with home ownership, reducing homelessness and tackling anti-social behaviour • Key is PREVENTION - from which ideas and initiatives emerge • Success measured against targets set in 2003 Metric 2003 2008 Statutory homeless (new cases/yr) 137,000 57,000 Temporary accommodation backlog 100,000 67,000 Rough sleepers 1500 499 What kind of initiatives drive these kind of results? 24
  • 25. Contents 1. Tour Overview 2. Social Finance 3. Public Policy 4. Culture and Enabling Environment 5. Actions 25
  • 26. Culture and Enabling Environment Program Type UK examples CAN examples Teaching social School for Social ENP , MaRS entrepreneurship Entrepreneurs (SSE) Entrepreneurship 101, Supporting entrepreneurs Unltd. MaRS, George Brown Galvanizing social Challenge fund McConnell, CSI, SiG innovative thinking members Public awareness Social Enterprise Coalition Social Entrepreneurship (SEC) Ambassadors Summit Celebrations Social Enterprise Week SES, ENP Awards Youth engagement Make your Mark with a Canadian Youth Tenner Business Foundation Support and networks The Hub, SEC Causeway Mentorship SSE MaRS Paired research and The Young Foundation Waterloo, Carleton 3Ci, network support LaunchPad UBS CSSI, What programs are needed in Canada? 26
  • 27. Advocacy and Awareness Programs Uniting the networks to form a coalition Social Enterprise Coalition • Language of social enterprise still contested – golden thread is that an organisation trades for a social/environmental purpose • Formed in 2003, today 20 staff and £2m turnover Ambassadors and ‘Voice’ Conference Social Enterprise Coalition has 3 key activities 1. Awareness/Promotion: media, events and ambassador program 2. Best Practice Research: case studies, ‘how to’ guides and training materials 3. Inform Policy Agenda: advocating for a strong culture for social enterprise • Key programmes include Social Enterprise IDEA! Evolve current social enterprise networks into a structured coalition 27
  • 28. Social Innovation Public services for public benefit NESTA • NESTA (National Endowment for Science Technology and the Arts) – endowment of £300m focussed on ‘radical’ innovation (rather than ‘incremental’ innovation) • Looking at the incentives that can motivate radical change – ie challenge grants • New initiative is ‘The Lab’ which fosters innovation in public service by bringing together people from the public, private and third sectors to collaborate on practical projects What programs from NESTA work and should be replicated in Canada? What opportunities exist? 28
  • 29. Supporting Entrepreneurs Encouraging social entrepreneurship Unltd. • Unltd. is a support program from social entrepreneurs (not enterprises) and founded with a £100m endowment fund from Millennium Awards Trust • Works with 1000+ social entrepreneurs and spend £7.5m per year • 3I’s : INVEST in INDIVIDUALS with IDEA Provides 3 different levels of awards: • L1: £500 - £5K – focuses on first steps building entrepreneurial capacity • L2: up to £15K - focuses on freeing up individuals’ time to develop project • L3: up to £20K - focuses on replication and scaling up • Partnership with Bridges Ventures connected to investment readiness • Youth programs include Unltd. Sport Relief (funding young people to develop ideas to reduce social conflict) which work because of freedom & structure, trust the people and run by young people for young people • Unltd. World –www.unltdworld.com - 9000 members (3/4 active) includes real-time data mapping, community building and marketplace Unltd. is rolling out globally – is Canada interested in a partnership? 29
  • 30. Innovation Foundation Applied Research and Incubation The Young Foundation • Focussed on building the field of social innovation – systematically encouraging it by developing ideas, working with local agencies and developing scale strategies • Founded by Mel Young ‘success rate of social enterprises is 1/10’ • Programs include: • Health Launchpad – provides funding and support for health related innovation (in partnership with NESTA) • Language Line – providing translation services for public service • Plan my Care – provides help to the elderly in accessing programs designed specially for them What programs can be replicated in Canada? 30
  • 31. Teaching Social Entrepreneurship School for Social Entrepreneurs • School for Social Entrepreneurs provides training to social entrepreneurs – currently approx 40 students with another 7 schools in the UK • Focus on small group action-learning and runs once a week for a year with courses including ‘expert witness’, ‘project visit’ and ‘peer learning’ • Cost is £8500 with bursaries and subsidies available Charles Takawira Max Graef www.healthcarelink.org www.radioactive.org.uk A not-for-profit, community investment organisation which RadioActive provides complete technical services, recovers and redistributes surplus medical supplies and equipment and training to communities and NGOs equipment ,with a dedication to a three-fold mission of around the world, to help them build and run environmental stewardship, job opportunity creation for the community radio stations and recording studios marginalised, and improving health in Africa. Entrepreneurs have the ability to see opportunity and drive change 31
  • 32. Contents 1. Tour Overview 2. Social Finance 3. Public Policy 4. Culture and Enabling Environment 5. Actions 32
  • 33. Outreach Engagement Strategy What kind of Outreach is necessary? Financial Stakeholder Causeway Strategy Public Policy ON Strategy All Policy Tour Participants Program BC Strategy Overall Communication Research Strategy Through outreach we can educate investors & policy makers on national and regional levels 33
  • 34. Study Tour Actions - Finance Resilient Capital BC Social Capital Pilot Fund OSVC, ON Capital Market Instruments Causeway and Other Social Impact Bonds Regional Actors Social Capital Funds Enabling Infrastructure Policy Tour Funder Communities Feasibility Studies Participants finance services, back office for funds and SiG Legal Structure Working Grp BC Centre for social exploring CIC and L3C models enterprise Regulatory Reform Working Grp Casuseway Working foundation reforms, tax policy Group Key Step: Getting tour participants involved in ACTION 34
  • 35. Structure and Reform Two big issues for working groups to tackle Issues to Address: Legal Structure • Designing and advocating for a legal structure for Canada • Pros and cons of CIC and LC3 • Provincial and Federal actions need to be activated Regulatory Reform (Foundations and Taxes) •Revising and advocating for improvement of regulations for foundations • CRA and PRI guidelines for foundations • Exploring how tax levers might support investment in social innovation and social enterprises Key Step: Convene a high profile working group 35
  • 36. Study Tour Actions – Policy Finding the right innovation policy catalyst Social Innovation Public Policy Sean Moore, SiG National Catalyst Working Group (Tim Draimin), Al Etmanski Federal: Sean Moore and Causeway Self Organized - Policy coalitions Provincial: BC (Al) targeted by ON and BC ON (Allyson Hewitt) Interested Tour Delegates Key Step: Getting tour delegates involved in ACTION 36
  • 37. Policy Catalyst Working Group Reflecting public benefit through government Key Issues to Address What is an appropriate policy catalyst? •Creation of a social innovation ministry (Office of the Third Sector)? •Creation of a social innovation endowment (NESTA)? What should a ‘government body’ cover? • How should public benefit services be reflected in government •Focus Innovation and not cost-cutting What should a ‘NESTA-like’ organisation do? •Canada-wide knowledge management and research • Funding for social innovation projects •Challenge Grant Programs Should the catalyst be provincial, federal or both? Is there a role for municipal leadership? 37
  • 38. Study Tour Action - Culture and Enabling Environment Supporting Enabling Activities in Ontario Trillium Foundation Ontario SSE Feasibility Study SiG@MaRS Unltd. Canada Feasibility Study TBD Challenge Grants TBD Uniting the Networks TBD Key Step: Getting tour delegates involved in ACTION 38
  • 39. UK Social Innovation Policy Tour For more information on Volans Social Innovation Tours, please contact Charmian Love charmian@volans.com 39