Theory: How is finance being directed to achieve a combination of social and financial returns? What are the key trends and issues being addressed in the development of social capital markets? Practice: What range of organizations are actively engaged in social finance in Canada and overseas? How are investors assessing the tradeoffs between risk, return and impact? http://www.socialentrepreneurship.ca/entr4800

1. ENTR 4800: Social Entrepreneurship
Class 7: Impact Investing and
Social Capital Markets
Monday, November 1, 2010
1
Instructors:
Norm Tasevski (norm@socialentrepreneurship.ca)
Karim Harji (karim@socialentrepreneurship.ca)

2. © Norm Tasevski & Karim Harji

3. © Norm Tasevski & Karim Harji
Agenda
• Kiva.org
• What did we learn – Last Week?
• Presentation – Serge LeVert Chiasson & Adam
Spence
• Overview of Impact Investing & Social Capital
Markets
• “Live Case” – Serge & Adam
• What did we learn – Today?
• Next week
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4. © Norm Tasevski & Karim Harji
Last Week – What did we learn?
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5. © Norm Tasevski & Karim Harji
Speakers…
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6. So, what are we talking about?
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Social Finance! Impact Investing!
Socially Responsible Investing!
Social Investing!
Mission-Driven Investing!
Sustainable & Responsible Investing!
Blended Value!
Value-Based Investing!
Mission-Related Investing!
Ethical Investing!
Responsible Investing!
Program-Related Investing!
Triple-Bottom-Line!
Environmental,
Social and
Governance
Screening!
Donations!
Charitable Giving!
Venture
Philanthropy!

7. © Norm Tasevski & Karim Harji
The Looking-Glass World of Nonprofit Money
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• Price covers cost and eventually produces profits, or else
the business folds
Full article available at: http://nonprofitfinancefund.org/files/docs/2010/NPQSpring05.pdf
• The consumer buys the product
• Cash is liquid
• Price is determined by producers’ supply and consumers’
ability and willingness to pay
• Any profits will drop to the bottom line and are then
available for enlarging or improving the business
• Investment in infrastructure during growth is necessary
for efficiency and profitability
• Overhead is a regular cost of doing business, and varies
with the business type and stage of development
F
F
F
F
F
F
F

8. © Norm Tasevski & Karim Harji
The Spectrum of Markets
FINANCIAL CAPITAL
MARKETS
Financial Return
Financial Performance Measurement
• Debt
• Equity
• Retail (mutual funds, online brokers)
• Institutional (Exchanges, Alternative
Trading Systems)
About 5%
FINANCIAL
CAPITAL
MARKETS
$50 Trillion
SOCIALLY
RESPONSIBLE
INVESTING
Social Screening and
Shareholder Advocacy
$7 Trillion
RETURN
MEASUREMENT
PLATFORMS
INVESTMENT
TYPE
AVERAGE
TRANSACTION
COST
MARKET SIZE
IMPACT INVESTING
MARKETS
Financial + Social Return
Financial + Social Measurement
• Debt
• Equity
• Retail (online micro finance)
• Institutional (Impact Funds,
emerging platforms)
About 10%
$5 Billion
PHILANTHROPY
(GIVING MARKETS)
Social Return
Social Performance Measurement
• Grants
• Retail (offline channels, online
giving, Donor Advised Funds)
• Institutional (Foundations)
About 30%
$300 Billion
SOCIAL CAPITAL MARKETS / MARKETS FOR GOOD

9. © Norm Tasevski & Karim Harji
Social Finance Continuum
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Jed Emerson (2003) “The Blended Value Map: Tracking the Intersects and Opportunities of Economic, Social and Environmental Value Creation ”
Organization
Type
Primary Goal
Capital
Charge for
Products and
Services
Traditional Non-
Profit
Social Enterprise
(Non-Profit & For-
Profit)
Socially
Responsible
Corporate
Traditional
Corporate
Non-financial
mission (social and/
or environmental
value)
Social mission with
minimum
expectation of
financial return
Profit driven with
social and/or
environmental
objectives
Profit driven
(economic value)
Donations and
Grants
Below-market
capital, or mix of
donations and
market-capital rate
Market-rate capital
(including SRI
investments)
Market-rate capital
Beneficiaries pay
nothing
Subsidized rates or
mix of full payers
and those who pay
nothing
Market-rate prices Market-rate prices
Purely Philanthropic Purely Commercial

10. © Norm Tasevski & Karim Harji
The Social Capital Market
10
Socially Responsible Investment
Commercial Investors
Venture Philanthropists
Foundations
Taxpayers
Supply
Non-Profits
Social Enterprises
Social Purpose Businesses
Co-Operatives
Entrepreneurs
Social Economy Organizations
Demand
Credit Unions
Social Stock Exchanges
Community Loan Funds
Rating Agencies
Associations
Intermediaries

11. © Norm Tasevski & Karim Harji
Social Finance Across Canada
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12. © Norm Tasevski & Karim Harji
Serge LeVert Chiasson
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13. © Norm Tasevski & Karim Harji
Cash
13
Source: F.B. Heron Foundation and Jessica Shortall (2009): “Introduction to Understanding and Accessing Social Investment”
Supply of Finance
Grant
Support
-100% -90% to -10% 0% 1% to 7% 8% +
Private Equity
Subordinated
Loans
Senior Loans Cash
Lower risk Higher risk
Higher risk Lower risk
Guarantees
Fixed Income Public Equity Private Equity
Grants “Soft” Investments
Capital-protected
investments
Commercial-return
investments
Social returns only
Very soft debt
Mix of grants and
other capital
Willing to lose
some money
“Blended return” equity
Soft debt
Willing to take below-
market return
Market-rate debt
Equity
Full commercial returns
Social benefit can be a
requirement

14. © Norm Tasevski & Karim Harji
MORE DEBT-LIKE
14Source: Alex Nicholls and Cathy Pharoah (2008) “The Landscape of Social Investment”,
http://www.sbs.ox.ac.uk/centres/skoll/research/Pages/landscapeofsocialinvestment.aspx
Financing Options – Over the Social
Entrepreneurship “Life Cycle”
IDEA DEVELOPMENT PROOF OF CONCEPT START-UP SCALE REPLICATION EXIT
GRANTS
MORE EQUITY-LIKE
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

15. © Norm Tasevski & Karim Harji
DEBT EQUITY
$0
$500,000
$1
million
$10
million
$100
million
OTTAWA COMMUNITY LOAN FUND
(Up to $15k)
INVESTECO
(Up to $2 mil)
TSX CLEANTECH CLUSTER
($10 - $100+ mil Deals)
RENEWAL FUND
(Up to $2 million)
ACCESS COMMUNITY
CAPITAL
(Up to $5k)
CAPE FUND
($1 - 7.5 million)
VANCITY CAPITAL CORPORATION
($50k to $10 mil)
CAIC: ENTERPRISE
(Up to $50k)
CAIC: MORT.
(Up to $500k)
SCP
(Up to $300k)
Source:
Social
Venture
Exchange
(SVX)
Supply: Major Players

16. © Norm Tasevski & Karim Harji
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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

17. © Norm Tasevski & Karim Harji
Adam Spence
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18. © Norm Tasevski & Karim Harji
Why Intermediation Matters
• Scale = reduce transaction and search costs
• Investment readiness of ventures
• Common language and industry standards
• Risk assessment tools
• Assessing social value creation
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Who will build (and pay) for these
intermediaries?

19. © Norm Tasevski & Karim Harji
Alterna Community Alliance Housing Fund
• Created to address Ottawa’s affordable housing shortage
• Provided low-cost financing for second-mortgage financing
• Structured as investment grad instrument offering a five-year GIC ROR
• Took 7 years before PSAC was able to find a “risk-free vehicle” to do this!
19Adapted
from:
Causeway,
SiG,
Volans
(2009)
“Building
The
Case
for
Social
Finance
in
Canada”
Public
Service
Alliance
of
Canada
• Invested
$2m
to
create
the
fund
• CommiQed
to
responsible
invesRng
• Market
rate
of
return
in
a
“vehicle”
that
fulfilled
fiduciary
responsibility
Alterna
Savings
Credit
Union
• Structured
an
investment
vehicle
to
provide
market
rate
of
return
as
well
as
direct
social
impact
• Provides
operaRonal
/
admin.
support
OQawa
Community
Loan
Fund
• Non-­‐profit
responsible
for
screening
projects
that
are
• Affordable
to
those
most
in
need
• Affordable
in
the
long-­‐term
• Constructed
by
unionized
workers
Carleton
Centre
for
Community
InnovaRon
• Intermediary
that
helped
to
align
the
interests
of
the
groups
• Suggested
alternaRve
models
drawing
on
research
and
experience
from
the
US
and
UK

20. Break
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21. © Norm Tasevski & Karim Harji
“Live Case”
• What is the investor perspective?
• Is your idea a good candidate for investment?
• What can you improve on to pitch to investors?
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22. © Norm Tasevski & Karim Harji
What did we learn?
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23. © Norm Tasevski & Karim Harji
Next Week
• Jon Packer, Idea Workshop
• Deliverable: Have Questions Ready!!
• Readings
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