ENTR 4800: Social Entrepreneurship                           Class 7: Impact Investing and                              So...
© Norm Tasevski & Assaf Weisz
© Norm Tasevski & Assaf WeiszAgenda•  Kiva.org•  What did we learn – Last Week?•  Overview of Impact Investing & Social Ca...
© Norm Tasevski & Assaf WeiszLast Week – What did we learn?                                                     4
Ethical Investing!                                                    Mission-Related Investing!                Responsibl...
© Norm Tasevski & Assaf Weisz      The Looking-Glass World of Nonprofit Money                                             ...
© Norm Tasevski & Assaf Weisz      The Spectrum of Markets                  FINANCIAL CAPITAL                            I...
© Norm Tasevski & Assaf Weisz    Social Finance Continuum        Purely Philanthropic                                     ...
© Norm Tasevski & Assaf Weisz  The Social Capital Market                                      Intermediaries              ...
© Norm Tasevski & Assaf WeiszSocial Finance Across Canada                                                  10
© Norm Tasevski & Assaf WeiszSerge LeVert Chiasson                                           11
© Norm Tasevski & Assaf Weisz    Supply of Finance                                                                        ...
© Norm Tasevski & Assaf WeiszFinancing Options – Over the SocialEntrepreneurship “Life Cycle”MORE EQUITY-LIKE    GRANTS	  ...
© Norm Tasevski & Assaf Weisz Supply: Major Players                                                                       ...
© Norm Tasevski & Assaf WeiszAligning Supply and Demand                                                                   ...
© Norm Tasevski & Assaf WeiszAdam Spence                                 16
© Norm Tasevski & Assaf WeiszWhy Intermediation Matters•    Scale = reduce transaction and search costs•    Investment rea...
© Norm Tasevski & Assaf Weisz     Alterna Community Alliance Housing Fund•      Created to address Ottawa’s affordable hou...
Break        19
© Norm Tasevski & Assaf WeiszExercise: In The Investor’s Chair•  Which business is suited to which type of   investment?• ...
© Norm Tasevski & Assaf WeiszWhat did we learn?                                        21
© Norm Tasevski & Assaf WeiszNext Week•  Jon Packer, Idea Workshop•  Deliverable: Have Questions Ready!!•  Readings       ...
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09 entr 4800 class 9 - impact investing - for lecture (1)

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09 entr 4800 class 9 - impact investing - for lecture (1)

  1. 1. ENTR 4800: Social Entrepreneurship Class 7: Impact Investing and Social Capital Markets Monday, November 14, 2011Instructors:Norm Tasevski (norm@socialentrepreneurship.ca)Assaf Weisz (assaf@socialentrepreneurship.ca) 1
  2. 2. © Norm Tasevski & Assaf Weisz
  3. 3. © Norm Tasevski & Assaf WeiszAgenda•  Kiva.org•  What did we learn – Last Week?•  Overview of Impact Investing & Social Capital Markets•  Activity: In the Investor’s Chair•  What did we learn – Today?•  Next week 3
  4. 4. © Norm Tasevski & Assaf WeiszLast Week – What did we learn? 4
  5. 5. Ethical Investing! Mission-Related Investing! Responsible Investing! Venture So, what are we talking about? Philanthropy! Program-Related Investing! Charitable Giving! Social Finance! Impact Investing! Donations! Value-Based Investing! Socially Responsible Investing! Environmental, Blended Value! Social and Governance Social Investing! Screening! Triple-Bottom-Line!Mission-Driven Investing! Sustainable & Responsible Investing! 5
  6. 6. © Norm Tasevski & Assaf Weisz The Looking-Glass World of Nonprofit Money TRUE or FALSE?F •  The consumer buys the product •  Price covers cost and eventually produces profits, or elseF the business foldsF •  Cash is liquid •  Price is determined by producers’ supply and consumers’F ability and willingness to pay •  Any profits will drop to the bottom line and are thenF available for enlarging or improving the business •  Investment in infrastructure during growth is necessaryF for efficiency and profitability •  Overhead is a regular cost of doing business, and variesF with the business type and stage of development 6Full article available at: http://nonprofitfinancefund.org/files/docs/2010/NPQSpring05.pdf
  7. 7. © Norm Tasevski & Assaf Weisz The Spectrum of Markets FINANCIAL CAPITAL IMPACT INVESTING PHILANTHROPY MARKETS MARKETS (GIVING MARKETS) RETURN Financial Return Financial + Social Return Social ReturnMEASUREMENT Financial Performance Measurement Financial + Social Measurement Social Performance Measurement •  Debt •  Debt •  Grants INVESTMENT TYPE •  Equity •  Equity •  Retail (mutual funds, online brokers) •  Retail (online micro finance) •  Retail (offline channels, online •  Institutional (Exchanges, Alternative •  Institutional (Impact Funds, giving, Donor Advised Funds) PLATFORMS Trading Systems) emerging platforms) •  Institutional (Foundations) AVERAGETRANSACTION About 5% About 10% About 30% COST FINANCIAL SOCIALLY CAPITAL RESPONSIBLE MARKETS INVESTING MARKET SIZE Social Screening and Shareholder Advocacy $5 Billion $300 Billion $50 Trillion $7 Trillion SOCIAL CAPITAL MARKETS / MARKETS FOR GOOD
  8. 8. © Norm Tasevski & Assaf Weisz Social Finance Continuum Purely Philanthropic Purely Commercial Social Enterprise SociallyOrganization Traditional Non- Traditional (Non-Profit & For- Responsible Type Profit Corporate Profit) Corporate Non-financial Social mission with Profit driven withPrimary Goal mission (social and/ minimum social and/or Profit driven or environmental expectation of environmental (economic value) value) financial return objectives Below-market Market-rate capital Donations and capital, or mix of Capital (including SRI Market-rate capital Grants donations and investments) market-capital rate Subsidized rates or Charge for Beneficiaries pay mix of full payersProducts and Market-rate prices Market-rate prices nothing and those who pay Services nothing 8Jed Emerson (2003) “The Blended Value Map: Tracking the Intersects and Opportunities of Economic, Social and Environmental Value Creation ”
  9. 9. © Norm Tasevski & Assaf Weisz The Social Capital Market Intermediaries Non-ProfitsSocially Responsible Investment Credit Unions Social Enterprises Commercial Investors Social Stock Exchanges Social Purpose Businesses Venture Philanthropists Community Loan Funds Co-Operatives Foundations Rating Agencies Entrepreneurs Taxpayers Associations Social Economy Organizations Supply Demand 9
  10. 10. © Norm Tasevski & Assaf WeiszSocial Finance Across Canada 10
  11. 11. © Norm Tasevski & Assaf WeiszSerge LeVert Chiasson 11
  12. 12. © Norm Tasevski & Assaf Weisz 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 12 Source: F.B. Heron Foundation and Jessica Shortall (2009): “Introduction to Understanding and Accessing Social Investment”
  13. 13. © Norm Tasevski & Assaf WeiszFinancing Options – Over the SocialEntrepreneurship “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. 14. © Norm Tasevski & Assaf Weisz Supply: Major Players Source:  Social  Venture  Exchange  (SVX)   DEBT EQUITY VANCITY CAPITAL CORPORATION ($50k to $10 mil) CAIC: MORT. (Up to $500k) SCP INVESTECO (Up to $300k) (Up to $2 mil) CAIC: ENTERPRISE (Up to $50k) RENEWAL FUND (Up to $2 million) ACCESS COMMUNITY TSX CLEANTECH CLUSTER CAPITAL ($10 - $100+ mil Deals) CAPE FUND (Up to $5k) ($1 - 7.5 million) OTTAWA COMMUNITY LOAN FUND (Up to $15k)$0    $500,000    $1  million        $10  million                                            $100  million        
  15. 15. © Norm Tasevski & Assaf WeiszAligning Supply and Demand 15 Source: Alex Nicholls and Cathy Pharoah (2008) “The Landscape of Social Investment”, http://www.sbs.ox.ac.uk/centres/skoll/research/Pages/landscapeofsocialinvestment.aspx
  16. 16. © Norm Tasevski & Assaf WeiszAdam Spence 16
  17. 17. © Norm Tasevski & Assaf WeiszWhy Intermediation Matters•  Scale = reduce transaction and search costs•  Investment readiness of ventures•  Common language and industry standards•  Risk assessment tools•  Assessing social value creation Who will build (and pay) for these intermediaries? 17
  18. 18. © Norm Tasevski & Assaf Weisz 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! Carleton  Centre  for   Public  Service   Alterna  Savings   OQawa  Community   Community   Alliance  of  Canada   Credit  Union   Loan  Fund   InnovaRon   •  Invested  $2m  to   •  Structured  an   •  Non-­‐profit   •  Intermediary  that   create  the  fund   investment  vehicle   responsible  for   helped  to  align  the   •  CommiQed  to   to  provide  market   screening  projects   interests  of  the   responsible   rate  of  return  as   that  are   groups   invesRng   well  as  direct   •  Affordable  to   •  Suggested   •  Market  rate  of   social  impact   those  most  in   alternaRve  models   return  in  a   •  Provides   need   drawing  on   “vehicle”  that   operaRonal  /   •  Affordable  in  the   research  and   fulfilled  fiduciary   admin.  support   long-­‐term   experience  from   responsibility   •  Constructed  by   the  US  and  UK   unionized   workers   Adapted  from:  Causeway,  SiG,  Volans  (2009)  “Building  The  Case  for  Social  Finance  in  Canada”   18
  19. 19. Break 19
  20. 20. © Norm Tasevski & Assaf WeiszExercise: In The Investor’s Chair•  Which business is suited to which type of investment?•  Which business would you invest in?•  What can you improve on to pitch to investors? 20
  21. 21. © Norm Tasevski & Assaf WeiszWhat did we learn? 21
  22. 22. © Norm Tasevski & Assaf WeiszNext Week•  Jon Packer, Idea Workshop•  Deliverable: Have Questions Ready!!•  Readings 22

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