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Investing for Impact - Supply-Side Perspectives
 

Investing for Impact - Supply-Side Perspectives

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Presentation at a session titled "Investing for Impact: New Ways Capital is Flowing to Social Good". Describes the Canadian social capital market, the role of intermediaries, and the opportunities in ...

Presentation at a session titled "Investing for Impact: New Ways Capital is Flowing to Social Good". Describes the Canadian social capital market, the role of intermediaries, and the opportunities in place for social investors.

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    Investing for Impact - Supply-Side Perspectives Investing for Impact - Supply-Side Perspectives Presentation Transcript

    • Investing for Impact: Supply-Side Perspectives
      Karim Harji
      Manager, Partnership Development – Social Capital Partners
      Co-founder – socialfinance.ca
      Investing for Impact: New Ways Capital is Flowing to Social Good
      Cambridge, ON
      29 March, 2010
      1
    • Agenda
      • What is social finance?
      Social finance in practice across Canada
      An overview of the social capital market
      Aligning demand and supply
      Supply-side opportunities
      • Why does it matter?
      2
    • An Introduction to Social Finance
      • Social finance is the deliberate, intentional application of tools, instruments, and strategies to enable capital to achieve a blended value return. (Harji and Hebb, 2009)
      • Social finance is an approach to managing money that delivers a social dividend and an economic return. (Wikipedia)
      • Also known as… social investing , responsible investing, ethical investing, double or triple bottom line investing, impact investing, targeted investing , etc etc.  there are important differences!
      • Goes beyond simply capital for non-profit social enterprises
      3
      See: Karim Harji and Tessa Hebb (2009) “The Quest for Blended Value Returns: Investor Perspectives on Social Finance in Canada”, http://www.carleton.ca/3ci
    • Social Finance in Practice across Canada
      • Social Capital Partners – arranges for growth financing and provides advisory services to successful businesses that integrate a social mission into their HR model
      • Vancity – Canada’s largest Credit Union : 400,000 members, $14.5 billion in assets
      • Meritas – mutual fund committed to SRI: screening guidelines, shareholder activism and community development investments (up to 2% for microfinance)
      • Registered Disability Savings Plan (RDSP) – tax-deferred savings vehicle to assist families in planning for long-term financial security of their relatives with disabilities
      • Great Bear Rainforest Fund – public-private-philanthropic partnership structured to allow investments in ecologically-sustainable ventures within First Nations’ communities
      • Social Venture Partners (3 Canadian chapters) – network of engaged philanthropists that provide money and expertise for capacity building of nonprofits
      • CAPE Fund – $50 million fund launched by Paul Martin to provide equity and quasi-equity investment in the range of $1 million and $7.5 million to Aboriginal businesses
      • Enterprising Non Profits (BC/ON) – provides matching grants to non-profit organizations that are interested in starting or expanding a business
      • Ottawa Community Loan Fund (OCLF) – loans of up to $15,000 to small business owners, internationally-trained professionals, social enterprises, community groups.
      4
    • Elements of a Social Capital Market
      5
    • The Social Finance Continuum
      6
      Sources: F.B. Heron Foundation and Jessica Shortall (2009) “Introduction to Understanding and Accessing Social Investment”
    • Supply Side
      Adapted from: Causeway, SiG, Volans (2009) “Building The Case for Social Finance in Canada”
      Banks / Credit Unions
      • Vancity
      • Alterna Savings
      • Canadian Co-operative Association
      • Citizens Bank
      • Desjardins
      • Royal Bank
      Specialized Funds
      • Canadian Alternative Investment Co-op
      • Community Loan Funds (various: Ottawa, Montreal, Toronto, St. John)
      • Social Enterprise Fund (Edmonton)
      Institutional Capital
      • UNPRI Signatories: CPPIB, etc.
      Retail Investors
      • Mutual Funds: Meritas, Acuity
      • Registered Disability Savings Plan (RDSP)
      Investment Management Firms
      • CAPE Fund
      • Ecotrust Canada Capital
      • Fonds de solidarité
      • Investeco
      • Renewal2 Investment Fund
      • Resilient Capital
      • Social Capital Partners
      Foundations
      • Edmonton Community Foundation
      • J.W. McConnell Family Foundation
      • Maytree Foundation
      • Ontario Trillium Foundation
      • Tides Canada
      Grantors
      • Enterprising Non-Profits
      • Toronto Enterprise Fund
      7
    • Demand Side
      • Canada’s nonprofit and voluntary sector is the second largest in the world
      • CRA: over 161,000 nonprofit and voluntary organizations, of which approximately 83,000 are registered charities. (Pearson 2008)
      • Excluding hospitals, universities and colleges, the dominant revenue source (48%) of nonprofit and voluntary sector revenue is fees, compared to 39% for government support and 12% from philanthropy (Imagine Canada 2005)
      Reflects the importance of alternative revenue streams
      This does not discount the importance of grants
      • Brouard et al. (2008) have developed a dataset of eight hundred social enterprises in Canada
      • Québec has over 6,200 social economy enterprises employing more than 65,000 people and generating over $4 billion in revenues (Pearson 2008)
      8
      Source: Karim Harji and Tessa Hebb (2009) “The Quest for Blended Value Returns: Investor Perspectives on Social Finance in Canada”, http://www.carleton.ca/3ci
    • Aligning Demand and Supply
      9
      Source: Alex Nicholls and Cathy Pharoah (2008) “The Landscape of Social Investment”, http://www.sbs.ox.ac.uk/centres/skoll/research/Pages/landscapeofsocialinvestment.aspx
    • Intermediaries
      Adapted from: Causeway, SiG, Volans (2009) “Building The Case for Social Finance in Canada”
      Academic
      • University of Toronto (OISE, Rotman)
      • Carleton Centre for Community Innovation
      • Sauder School of Business
      • Schulich School of Business
      Capacity Builders
      • Causeway Social Finance
      • Social Innovation Generation
      • Community Futures Development Corporations
      • Ontario Nonprofit Network
      • Chantierl’EconomieSociale
      • BC Centre for Social Enterprise
      Associations
      • Social Investment Organization
      • Canadian Community Investment Network
      • Community Foundations of Canada
      • Philanthropic Foundations of Canada
      Credit Unions
      Community Development Financial Institutions
      Federal Government
      • Human Resources and Skills Development Canada
      • Canada Revenue Agency
      • Department of Finance
      Ontario Provincial Government
      • Community Economic Development Funds
      • First Nations Finance Authority
      • Ministry of Finance
      ESG Information
      • Jantzi-Sustainalytics
      Web Platforms
      • CommunityLend
      10
    • Mission Investing via Intermediaries
      11
      Source: FSG Social Impact Advisors (2007) “Aggregating Impact: A Funder’s Guide to Mission Investment Intermediaries“
    • Alterna Community Alliance Housing Fund
      • Created to address Ottawa’s affordable housing shortage
      • Provides low-cost financing for second-mortgage financing, and as necessary, primary-mortgage financing
      • Structured as investment grade instrument offering a five-year GIC rate of return
       It took 7 years before PSAC was able to find a “risk-free vehicle” to be able to do this!
      12
      Adapted from: Causeway, SiG, Volans (2009) “Building The Case for Social Finance in Canada”
    • Building the Social Capital Market
      13
      Source: Monitor Institute (2008) “Investing for Social & Environmental Impact, A Design for Catalyzing an Emerging Industry”
    • New Capital on the Horizon
      Loan and Investment Fund (Nora Sobolov)
      • Modeled similar to the Nonprofit Finance Fund in the US
      • Provide working capital and bridge loans to non-profit and charitable organizations
       
      Community Investment Vehicle (Social Investment Organization)
      • A product to channel investment dollars from individuals and institutional investors
      • Invested in revenue-generating social enterprise owned + operated by non-profits
       
      Fund of Fund Product (Mercer Consulting)
      • The Fund of Funds would allow investors to get access to socially responsible investment opportunities in a cost efficient manner (multi asset class, global diversification)
       
      Social Venture Fund (MaRS Capital Services and Edgestone Capital)
      • Primarily for early stage social ventures with strong potential to scale
      • Demonstration vehicle that can be leveraged to larger size with government participation
       
      PRI Fund (Community Foundations of Canada, Philanthropic Foundations of Canda)
      • Align more than 3.5% of foundation assets (i.e. endowments) with mission
      14
      Source: Adam Jagelewski (2010) “New Capital on the Horizon”, http://www.socialfinance.ca/blog/post/new_capital_on_the_horizon
    • Why Does It Matter?
      15
      • It’s already here
      Growing interest among institutional capital to incorporate ESG
      Moving from theory to practice across the country
      • It’s going to allow us to do things we’ve always wanted to do
      Greater recognition for the need for more effective solutions to our greatest challenges
      Leveraging capital through innovative, tiered deal structures e.g. “first loss capital”
      • It’s what we need
      Address the bifurcation between philanthropy (for impact) and investment (for returns)
      New generation of talent seeking to align their work with their values
    • The Opportunity
      • Creating new impact-related processes AND operating within strict investment policy discipline;
      • Optimizing for environmental & social impact AND applying the rigor of investment management tools;
      • Investing in new markets & asset classes AND maintaining exposure to traditional investment strategies;
      • Embracing new business models AND adhering to recognized financial theory;
      • Evaluating impact performance AND subjecting investments to recognized financial benchmarks; and
      • Expanding the scope and scale of philanthropic capital AND maintaining adherence to fiduciary responsibilities.
      16
      Source: Rockefeller Philanthropy Advisors (2009) “Solutions for Impact Investors: From Strategy to Implementation”
    • Thank You!
      Karim Harji
      karim@socialfinance.ca
      416-646-1871 x.108
      www.socialfinance.ca
      www.socialcapitalpartners.ca
      Presentation available at: www.slideshare.net/kharji
      17