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Social Finance and Impact Investing in Canada
 

Social Finance and Impact Investing in Canada

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Presentation at OISE - November 21, 2012 ...

Presentation at OISE - November 21, 2012
• An overview of the state of social finance and impact investing across Canada
• An analysis of why Canada is well positioned to become a leader globally
• A participatory discussion on the key issues such as:
-- The perceived trade-offs between social impact vs. financial return;
--- How philanthropy can complement social finance;
--- Measurement of social value creation;
--- Legislation and public policy; and
--- Bridging silos between sectors and organizations.

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    Social Finance and Impact Investing in Canada Social Finance and Impact Investing in Canada Presentation Transcript

    • Social  Finance  &    Impact  Inves7ng     in  Canada     OISE  Social  Economy  Centre     Lunch  Box  Series     November  21,  2012  
    • Social  Finance  •  What  is  it?  •  Who  is  involved?  •  What  is  the  state  of  the  market?  •  What  are  the  key  issues  today?  
    •          soŸcial  fiŸnance        [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.  
    • 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  
    • 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  
    • SolarShare is a non-profit thatallows Ontarians to invest incommunity based solar energyinstallation across the Province.By offering bonds backed by largersolar systems hosted on commercialand institutional rooftops.http://bit.ly/toVzT0 6"
    • Toronto Community HousingCorporation (TCHC) Bond:$1B Regent Park Revitalizationwith $450M Bond
    • Centre for Social Innovation (CSI): $1.8M bond issue for the acquisition and re- development of new facility.http:///watch?v=QgzlmKPoMEo&feature=related
    • 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   $32     Assets  (Millions),  2010    Source:  MaRS  CII  ;  SIO  (2010)  Impact  InvesHng  in  Canada:  A  Survey  of  Assets  
    • Who’s  involved:  spectrum  of  Canadian  investors     Established  and  emerging  actors      Credit Unions Community Loan Funds Social Responsible Investing   MicrofinanceMission-Related Investing Venture Philanthropy Private Equity Funds
    • Who’s  Involved?   Social  &  Financial  Return  Con7nuum   Social  finance  approaches  support  a  spectrum  of   organizaHonal  business  models    ()*+,-./-&0,12+*3-45-6+)78(972(48:;-+43-<=7+(2(,:-24-#+7>(2(487?-@*:(8,::,:   !)/011()+ :61)#11 5(,%* 5(,%**. ;6$# !"#$%&()%*+ #)&#$"$1)2 4)&#$"$1)2 29)2+%+"($&()+ 8(/("#$%&9#1 "6$"(1# $#1"()17*# ,(00#$,%* ,-%$&. %$0+(3+%+ )()/"$(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  
    • Supply  of  Finance   Cash Fixed Income Public Equity Private EquityHigher 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”
    • 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
    • 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
    • Bridging  Demand  and  Supply  Source: Karim Harji and Edward Jackson (2012) “Accelerating Impact: Achievements, Challenges and What’s Nextin Building the Impact Investing Industry”,http://www.rockefellerfoundation.org/what-we-do/current-work/harnessing-power-impact-investing/publications
    • Source: Karim Harji and Edward Jackson (2012) “Accelerating Impact: Achievements, Challenges and What’s Nextin Building the Impact Investing Industry”,http://www.rockefellerfoundation.org/what-we-do/current-work/harnessing-power-impact-investing/publications
    • 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.pdfSource:  Social  Venture  Technology  Group,  2008      
    • 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.pdfSource:  Social  Venture  Technology  Group,  2008      
    • Investor  percep7ons  on  tradeoffs  between   financial  and  impact  returns  
    • 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            
    • 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        
    •  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.
    • Social  Impact  Bonds  
    • http://socialfinance.ca/guide 24  
    • 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?    
    • Karim  Harji     Co-­‐Founder     Purpose  Capital       karim@purposecap.com      Joanna  Reynolds    Program  Manager    MaRS  Centre  for  Impact  InvesHng      jreynolds@marsdd.com