Investing for Impact: Issues and Opportunities for Social Finance in Canada

Investing for Impact: Issues and Opportunities for Social Finance in Canada
Karim Harji & Tessa Hebb
Carleton Centre for Community Innovation
Carleton University, Ottawa
ANSER Annual Conference
Montreal, Quebec
2 June, 2010
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Paper Summary
The Canadian social capital market
The trade-offs between risk, return and impact
Canadian investors’ perspective on social finance
Emerging opportunities
Definition
Social finance is the deliberate and intentional application of tools, instruments, and strategies to enable capital to achieve a social, environmental, and financial (“blended value”) return.
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Elements of a Social Capital Market
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The Social Finance Continuum
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Sources: F.B. Heron Foundation and Jessica Shortall (2009) “Introduction to Understanding and Accessing Social Investment”

Investor Perspectives on Social Finance
Definitions
Need for more clarity and consistency around language
Bifurcation between philanthropy and investment
“Raising capital for hybrid structures that are not well understood. Most investors think you have to pick one of two boxes. Either the money is for financial investment or it is for charity. They can’t understand an investment that is a hybrid structure...”
Deal Making
Few specialized intermediaries
More successful examples including potential risk/return expectations across varied investors are needed
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Investor Perspectives: Structural Barriers
Institutional investors
Identifying/structuring deals entail high search/transaction costs
Opportunities must be at scale large enough to justify due diligence
Questions around fiduciary duty and legal obligations
Retail investors
Greater incentive through the current tax structure (i.e. tax deduction) to make donations rather than below-market investments
Common
Need for social impact metrics and/or standards that are well-understood, that promote accountability and ease of use
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Emerging Opportunities
Engage large institutional investors
Utilize the broader range of foundation assets
Create innovative financial vehicles
Build legislation that fosters an enabling environment
Develop social impact metrics
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Implications
Evidence that the supply of impact-oriented capital may not currently be the limiting factor
Governments at all levels have a range of policy instruments to stimulate the flow of investments towards social finance
Canadian examples: tax credits (CEDIFs), loan guarantees
International models: CICs in the UK; L3Cs in the US
Canadian social capital market is not yet calibrating risk and opportunity adequately
Need to enhance the sophistication of financial intermediaries
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Thank You!
Karim Harji
karim@socialfinance.ca
Tessa Hebb
thebb@attglobal.net
www.carleton.ca/3ci
www.socialfinance.ca
Presentation available at: www.slideshare.net/kharji
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http://socialfinance.ca	49
http://www.socialfinance.ca	15

Investing for Impact: Issues and Opportunities for Social Finance in Canada

by Karim Harji on Jun 27, 2010

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Investing for Impact: Issues and Opportunities for Social Finance in Canada — Presentation Transcript