Key trends, issues, and opportunities for investors seeking a combination of economic, social, and environmental ("blended value") returns. Includes an introduction to the Canadian social capital market, supply-side challenges and opportunities, and how to align the demand and supply of social finance. Presented at the Social Economy Centre, University of Toronto.

1. Social Capital Financing: Supply-Side Perspectives Karim Harji Manager, Partnership Development – Social Capital Partners Co-founder – socialfinance.ca Social Economy Centre University of Toronto 24 March, 2010 1

3. The Canadian social capital market

4. An introduction to the supply-side

5. Aligning demand and supply

6. Supply-side challenges

7. Supply-side opportunities2

9. Social finance is an approach to managing money that delivers a social dividend and an economic return. (Wikipedia)

10. 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!

11. Goes beyond simply capital for non-profit social enterprises

12. The social finance ecosystem: demand, supply, intermediaries3

14. Vancity– Canada’s largest Credit Union : 400,000 members, $14.5 billion in assets

15. Meritas– mutual fund committed to SRI: screening guidelines, shareholder activism and community development investments (up to 2% for microfinance)

16. Registered Disability Savings Plan (RDSP) – tax-deferred savings vehicle to assist families in planning for long-term financial security of their relatives with disabilities

17. Great Bear Rainforest Fund – public-private-philanthropic partnership structured to allow investments in ecologically-sustainable ventures within First Nations’ communities

18. Social Venture Partners (3 Canadian chapters) – network of engaged philanthropists that provide money and expertise for capacity building of nonprofits

19. 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

20. Enterprising Non Profits (BC/ON) – provides matching grants to non-profit organizations that are interested in starting or expanding a business

21. Ottawa Community Loan Fund (OCLF) – loans of up to $15,000 to small business owners, internationally-trained professionals, social enterprises, community groups.4

22. Elements of a Social Capital Market 5 Source: Alex Nicholls and Cathy Pharoah (2008) “The Landscape of Social Investment”, http://www.sbs.ox.ac.uk/centres/skoll/research/Pages/landscapeofsocialinvestment.aspx

23. Financing The Social Economy 6 Don McNair (2010) “The Financial Ecosystem of Canada’s Social Economy”, http://www.cedworks.com/files/pdf/free/MW200308.pdf

24. The Spectrum of Social Finance 7 Jed Emerson (2003) “The Blended Value Map: Tracking the Intersects and Opportunities of Economic, Social and Environmental Value Creation ”

25. The Social Finance Continuum 8 Below-Market Investments Public Equity Fixed Income Private Equity Cash Guarantees Subordinated Loans Senior Loans Cash Grant Support Equity Market-Rate Investments Source: F.B. Heron Foundation

27. Alterna Savings

28. Canadian Co-operative Association

29. Citizens Bank

30. Desjardins

32. Community Loan Funds (various: Ottawa, Montreal, Toronto, St. John)

35. Ecotrust Canada Capital

36. Fonds de solidarité

37. Investeco

38. Renewal2 Investment Fund

39. Resilient Capital

41. J.W. McConnell Family Foundation

42. Maytree Foundation

43. Ontario Trillium Foundation

45. Toronto Enterprise Fund 9

47. CRA: over 161,000 nonprofit and voluntary organizations, of which approximately 83,000 are registered charities. (Pearson 2008)

49. Québec has over 6,200 social economy enterprises employing more than 65,000 people and generating over $4 billion in revenues (Pearson 2008)10 Source: Karim Harji and Tessa Hebb (2009) “The Quest for Blended Value Returns”, http://www.carleton.ca/3ci

51. secured and unsecured loans; or loan guarantees;

52. a loan only repayable by a royalty on future sales of a product or service (quasi-equity);

53. a royalty deal which shares profits with the investor once the enterprise generates a specified surplus (quasi-equity); or

54. the subscription or purchase of shares in a social enterprise (Note: a charity can not offer shares – assets are held for the public benefit).Source: Trillium Foundation, “Social Finance” , http://www.trilliumfoundation.org/User/Docs/PDFs/research/Social_finance.pdf 11

55. Aligning Demand and Supply 12 Source: Alex Nicholls and Cathy Pharoah (2008) “The Landscape of Social Investment”, http://www.sbs.ox.ac.uk/centres/skoll/research/Pages/landscapeofsocialinvestment.aspx

57. Carleton Centre for Community Innovation

58. Sauder School of Business

60. Social Innovation Generation

61. Community Futures Development Corporations

62. Ontario Nonprofit Network

63. Chantierl’EconomieSociale

65. Canadian Community Investment Network

66. Community Foundations of Canada

68. Canada Revenue Agency

70. First Nations Finance Authority

73. Provides low-cost financing for second-mortgage financing, and as necessary, primary-mortgage financing

74. Structured as investment grad 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! 14 Adapted from: Causeway, SiG, Volans (2009) “Building The Case for Social Finance in Canada”

75. Building the Social Capital Market 15 Source: Monitor Institute (2008) “Investing for Social & Environmental Impact, A Design for Catalyzing an Emerging Industry”, http://www.monitorinstitute.com/impactinvesting/

78. Addressing the Key Challenges: Silver Buckshot, Not Silver Bullet 18 Source: Monitor Institute (2008) “Investing for Social & Environmental Impact, A Design for Catalyzing an Emerging Industry”, http://www.monitorinstitute.com/impactinvesting/

84. J. Emerson and J. Spitzer. From Fragmentation to Function: Critical Concepts and Writings on Social Capital Markets' Structure, Operation, and Innovation. (Oxford: Skoll Centre for Social Entrepreneurship, 2007).

85. J. Emerson, T. Freundlich and J. Fruchterman. Nothing Ventured, Nothing Gained: Addressing The Critical Gaps in Risk-Taking Capital for Social Enterprise. (Oxford: Skoll Centre for Social Entrepreneurship, 2007).

86. K. Fulton and J. Freireich. Investing for Social and Environmental Impact: A Design for Catalyzing an Emerging Industry. (Monitor Institute, January 2009).

87. K. Harji. Delivering More Capital to Communities: A Supply-Side Perspective on the Canadian Social Capital Market. (Making Waves magazine, forthcoming April 2010). <http://www.cedworks.com/waves.html>

88. K. Harji and T. Hebb. The Quest for Blended Value Returns: Investor Perspectives on Social Finance in Canada. (draft; Ottawa: Carleton Centre for Community Innovation, November 10, 2009). <http://www.carleton.ca/3ci/3ci_files/Documents/Social_Finance_in_Canada.pdf>.

89. B. Martin and C. Strandberg. Education and Training on Responsible Investing for Canadian Foundations and Endowments: An Inventory and Needs Analysis. (Toronto: Social Investment Organization, September 2009). 20