Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Diamonds In The Rough

A rough first draft

  • Login to see the comments

  • Be the first to like this

Diamonds In The Rough

  1. 1. Diamonds in the Rough The opportunity of a marketplace for social finance in Canada
  2. 2. <ul><li>&quot;Only when the last tree has died and the last river been poisoned and the last fish been caught will we realize we cannot eat money.&quot; </li></ul><ul><li>- Cree proverb </li></ul>“ Money plays the largest part in determining the course of history.&quot; - Karl Marx
  3. 3. ‘Finance’ is about: managing risk… for financial return <ul><li>From wikipedia: </li></ul><ul><ul><li>The study of money and other assets; </li></ul></ul><ul><ul><li>The management and control of those assets; </li></ul></ul><ul><ul><li>Profiling and managing project risks; or </li></ul></ul><ul><ul><li>The science of managing money. </li></ul></ul>
  4. 4. Risk management = beware of uncharted waters. <ul><li>Motivates selecting the known, familiar, direct </li></ul><ul><li>Creates rigid and specific investment terms </li></ul><ul><li>Legal structure </li></ul><ul><ul><li>For-profit </li></ul></ul><ul><ul><li>Not-for-profit </li></ul></ul><ul><ul><li>Charity </li></ul></ul><ul><li>Use of proceeds </li></ul><ul><ul><li>Operations </li></ul></ul><ul><ul><li>Assets </li></ul></ul><ul><ul><li>Projects </li></ul></ul><ul><li>Investment structure </li></ul><ul><ul><li>Grant </li></ul></ul><ul><ul><li>Loan </li></ul></ul><ul><ul><li>Equity </li></ul></ul>
  5. 5. Which invites a game… of financial ‘Twister’
  6. 6. <ul><li>&quot;Money is a stupid measure of achievement, but unfortunately it is the only universal measure we have.&quot; </li></ul><ul><li>- Charles Steinmetz </li></ul>
  7. 7. “ Social finance” is… <ul><li>A sustainable approach to managing money that delivers social, environmental dividends and economic return. </li></ul>HIGH INVOLVEMENT LOW INVOLVEMENT CHARITABLE COMMERCIAL Venture philanthropy Traditional grant making Venture capital Bank lending Adapted from Margaret Bolton, 2003
  8. 8. … happens at many levels… <ul><li>Investment </li></ul><ul><ul><li>A financial investment that delivers a ‘blended return’ </li></ul></ul><ul><ul><ul><li>E.g. a loan issued to a social enterprise </li></ul></ul></ul><ul><li>Product </li></ul><ul><ul><li>Investment vehicles such as bond issues or private equity funds that combines investors with a variety of objectives around an investment area that will deliver a ‘blended return’ </li></ul></ul><ul><ul><ul><li>E.g. the $20 M EYE Fund </li></ul></ul></ul><ul><li>Catalytic </li></ul><ul><ul><li>(Re)application of financial capital to a specific issue with a comprehensive perspective that encourages a the (re)creation of new system for addressing a social or environmental issue </li></ul></ul><ul><ul><ul><li>E.g. the Great Bear Rainforest </li></ul></ul></ul>
  9. 9. … and is rooted in: <ul><li>A change in conversation </li></ul><ul><ul><li>Control » Potential </li></ul></ul><ul><ul><ul><li>Blended value return </li></ul></ul></ul><ul><ul><li>Conflicted » Collaborative </li></ul></ul><ul><ul><ul><li>Cross-silos </li></ul></ul></ul><ul><li>A change in flow </li></ul><ul><ul><li>Linear top-down » Complex </li></ul></ul>Government Business Charity & non-profit Hybrid Space Source: Aquillan Investments
  10. 10. <ul><li>&quot;Money. </li></ul><ul><li>It's a gas.&quot; </li></ul><ul><li>- Pink Floyd </li></ul>
  11. 11. It begins with a conversation… <ul><li>Aligning interests to create innovative solutions </li></ul>Requirements Return Source Perspective Use Perspective Constructive Dynamic Constrictive Dynamic Risk Restrictions
  12. 12. … results in specific products <ul><li>Venture capital </li></ul><ul><ul><li>Capital regional et coopérative Desjardins (CRCD ) is a $500 million venture capital fund created in 2001 by the Desjardins Movement with the help of a provincial tax credit. Individual investors can invest up to $3500 a year in shares with a 50% tax credit. Shares must be kept for a minimum of seven years. M ission : to provide capital, expertise and access to networks for businesses and cooperatives in all Québec’s regions </li></ul></ul><ul><li>Local community development </li></ul><ul><ul><li>The Columbus Foundation used $2 million to seed an $18 million low-cost housing fund to build 1,600 new units of affordable housing. </li></ul></ul><ul><li>Startup or expansion capital in underserved communities </li></ul><ul><ul><li>Deutsche Bank announced it will create an innovative $20 million investment fund to finance the expansion of eye care hospitals in developing countries. The Eye Fund I will provide loans and guarantees to support the development of affordable, sustainable and accessible eye care for the world's poor while providing a near-market return for investors </li></ul></ul><ul><li>Debt mechanisms </li></ul><ul><ul><li>Milestone achievement of $100m in loans to community finance institutions and social enterprises by Calvert Foundation’s Community Investment Note </li></ul></ul><ul><li>Acquisition of assets </li></ul><ul><ul><li>BC Pension Funds – 21 BC-based union and management pension funds pooled $27 M to form Concert Properties in 1989 (originally named VLC) with the objective of financing affordable rental housing in BC, and creating jobs in the unionized construction industry. Today the 100% pension plan owned real estate corporation has $800 million in assets , with a track record of creating 10 million hours of on-site employment for unionized construction workers. </li></ul></ul>
  13. 13. … and can change whole systems. <ul><li>Coming together of the great catalysts </li></ul><ul><ul><li>capital + community </li></ul></ul><ul><li>Great Bear Rainforest (2 million hectares) </li></ul><ul><ul><li>Start: environmentalists + lumber companies get together </li></ul></ul><ul><ul><li>2001: private foundations + BC premier’s office -> 1st nat. </li></ul></ul><ul><ul><li>2002/3: determination of ecological value and economic pot. </li></ul></ul><ul><ul><li>2007 Outcomes: </li></ul></ul><ul><ul><ul><li>$120 M across 2 funds: $30 M fed, $30 M prov., $60 M private </li></ul></ul></ul><ul><ul><ul><li>Provincial government actions </li></ul></ul></ul><ul><ul><ul><ul><li>New ‘ecosystem based’ land management regime (3x PEI) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>New park designation for ecological protection </li></ul></ul></ul></ul><ul><ul><ul><li>Collaborations </li></ul></ul></ul><ul><ul><ul><ul><li>Collective land-use agreement among prov. gov’t and first nations </li></ul></ul></ul></ul><ul><ul><ul><ul><li>North coast first nations collaborating (e.g. joint marketing and distribution of fish) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Shared governance between private, first nations, government </li></ul></ul></ul></ul>
  14. 14. P roposed Vancouver Homelessness LP <ul><li>from Vancouver Homelessness Funding Model Report </li></ul>
  15. 15. <ul><li>“ Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.” </li></ul><ul><li>- Ayn Rand </li></ul>
  16. 16. The social finance ‘diamond craft’ <ul><li>The potential value of any social finance undertaking is strongly influenced by: </li></ul><ul><li>Understanding (clarity) </li></ul><ul><ul><li>Depth of understanding </li></ul></ul><ul><ul><ul><li>What’s the issue? </li></ul></ul></ul><ul><ul><ul><li>What’s involved in addressing it? </li></ul></ul></ul><ul><li>Value (carat) </li></ul><ul><ul><li>Amount of capital involved in the issue? </li></ul></ul><ul><ul><ul><li>Assets, income, expenditures, etc. ? </li></ul></ul></ul><ul><li>Engagement (shape and facets) </li></ul><ul><ul><li>Comprehensiveness of input into discovery and design </li></ul></ul><ul><li>Participation (cut) </li></ul><ul><ul><li>Variety of participants and perspectives in envisioned solution </li></ul></ul>
  17. 17. <ul><li>You can do a lot with diplomacy, but with diplomacy backed up by force you can get a lot more done. </li></ul><ul><li>- Kofi Annan </li></ul>
  18. 18. On the precipice of unprecedented challenges + systemic failure <ul><li>Growing social and environmental pressures </li></ul><ul><li>+ government and market failure </li></ul><ul><li>= the conditions for innovation. </li></ul>
  19. 19. The U.S. and UK have responded <ul><li>US - New Market Tax Credits </li></ul><ul><ul><li>$37 B in economic infusion </li></ul></ul><ul><ul><li>Introduced in 2001 to provide tax credits to investors in Community Development Entities </li></ul></ul><ul><ul><li>88% of investors would not have made the investment in low- income communities without it </li></ul></ul><ul><li>UK - Community Interest Companies (CICs) </li></ul><ul><ul><li>1164 CICs registered </li></ul></ul><ul><ul><li>Hybrid legal structure </li></ul></ul><ul><ul><ul><li>Capped dividend payable to shareholders </li></ul></ul></ul><ul><ul><ul><li>Asset lock retains assets within the company or other CICs </li></ul></ul></ul>Source: US Dept. of the Treasury, Insights, New Markets Tax Credits
  20. 20. encouraging an entire marketplace U.S. Source: GoodCaptial Story Index Presentation and Jay Coen Gilbert, Don Shaffer and John Katovich
  21. 21. encouraging an entire marketplace UK
  22. 22. And in certain areas… Source: GoodCapital and Mark Beam?
  23. 23. … structured financial products. <ul><li>20 deals | 21 orgs | $6.5B </li></ul><ul><li>(affordable housing, microfinance, global ngo’s) </li></ul>
  24. 24. The Canadian diamond field <ul><li>Limiting regulatory framework </li></ul><ul><ul><li>Income Tax Act and charity law significantly constrain flow of capital </li></ul></ul><ul><li>Strong non-profit sector </li></ul><ul><ul><li>$120 B annual expenditures </li></ul></ul><ul><ul><li>>7% of Canada’s GDP </li></ul></ul><ul><ul><li>Above average growth </li></ul></ul><ul><ul><li>1.5 M workers + 0.5 M volunteers </li></ul></ul><ul><ul><li>2nd largest in world per capita </li></ul></ul><ul><li>Internationally significant </li></ul><ul><ul><li>Resources </li></ul></ul><ul><ul><ul><li>Water, energy, forests </li></ul></ul></ul><ul><ul><li>Examples </li></ul></ul><ul><ul><ul><li>Great Bear Rainforest </li></ul></ul></ul>
  25. 25. Preparing for a diamond harvest <ul><li>Changing the conversation </li></ul><ul><li>Developing the craft </li></ul><ul><ul><li>Financial structuring research, demonstration, and dissemination </li></ul></ul><ul><li>Enabling the marketplace </li></ul><ul><ul><li>Policy (tax incentives and supporting hybridization) </li></ul></ul><ul><ul><li>Opening systems to restructuring </li></ul></ul>
  26. 26. CAUSEWAY a national collaboration A national collaboration working on new pathways for financial investment in public benefit .
  27. 27. CAUSEWAY a national collaboration Michael Lewkowitz Start-up Coordinator Phone: (416) 607-5643 (778) 329-0021 Email: [email_address] Tim Draimin Chair, Steering Committee Phone: (604) 647-6611 x244 (416) 481-8652 Email: [email_address] CONTACT