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.

1. Social
Finance
&
Impact
Inves7ng
in
Canada
OISE
Social
Economy
Centre
Lunch
Box
Series
November
21,
2012

2. Social
Finance
• What
is
it?
• Who
is
involved?
• What
is
the
state
of
the
market?
• What
are
the
key
issues
today?

3.
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.

4. 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

5. 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

6. SolarShare is a non-profit that
allows Ontarians to invest in
community based solar energy
installation across the Province.
By offering bonds backed by larger
solar systems hosted on commercial
and institutional rooftops.
http://bit.ly/toVzT0
6"

7. Toronto Community Housing
Corporation (TCHC) Bond:
$1B Regent Park Revitalization
with $450M Bond

8. Centre for Social Innovation
(CSI): $1.8M bond issue for
the acquisition and re-
development of new facility.
http:///watch?v=QgzlmKPoMEo&feature=related

9. 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

10. Who’s
involved:
spectrum
of
Canadian
investors
Established
and
emerging
actors
Credit Unions Community Loan Funds Social Responsible Investing
Microfinance
Mission-Related Investing Venture Philanthropy Private Equity Funds

11. 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,::,:
!)/0'11'()+ :61')#11
5(,'%* 5(,'%**. ;6$#
!"#$%&'()%*+ #)&#$"$'1')2 4)&#$"$'1')2 2'9')2+%+"($&'()+
8(/("#$%&'9#1 "6$"(1# $#1"()1'7*# ,(00#$,'%*
,-%$'&. %$0+(3+%+ )()/"$(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

12. Supply
of
Finance
Cash Fixed Income Public Equity Private Equity
Higher 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”

13. 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

14. 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

15. Bridging
Demand
and
Supply
Source: Karim Harji and Edward Jackson (2012) “Accelerating Impact: Achievements, Challenges and What’s Next
in Building the Impact Investing Industry”,
http://www.rockefellerfoundation.org/what-we-do/current-work/harnessing-power-impact-investing/publications

16. Source: Karim Harji and Edward Jackson (2012) “Accelerating Impact: Achievements, Challenges and What’s Next
in Building the Impact Investing Industry”,
http://www.rockefellerfoundation.org/what-we-do/current-work/harnessing-power-impact-investing/publications

17. 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.pdf
Source:
Social
Venture
Technology
Group,
2008

18. 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.pdf
Source:
Social
Venture
Technology
Group,
2008

19. Investor
percep7ons
on
tradeoffs
between
financial
and
impact
returns

20. 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

21. 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

22.
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.

23. Social
Impact
Bonds

24. http://socialfinance.ca/guide
24

25. 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?

26. Karim
Harji
Co-­‐Founder
Purpose
Capital
karim@purposecap.com
Joanna
Reynolds
Program
Manager
MaRS
Centre
for
Impact
InvesHng
jreynolds@marsdd.com