Impact investment fair

Toronto’s 1st Impact Investment Fair
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Deﬁning Impact Investments
Impact investments are investments intended to
create positive impact beyond ﬁnancial return.
Blended Return = Financial + Social Returns
Financial
Social
Blended
0%
2%
4%
6%
8%
ROI

Modern Portfolio Theory
-Assumes that ﬁnancial returns come with risk
-Higher risks demand higher returns
-Some investments are negatively correlated
(ie. when stocks go down, bonds go up)
-Diversiﬁcation is a good thing
Timothy Nash @timenash nash@sustainableeconomist.com May 30, 2013

Modern Portfolio Theory
-Systemic risk is any risk that affects the entire
ﬁnancial system (ie. the crash)
-Since most impact investments are not traded
in the traditional system, they aren’t subject to
the same level of systemic risk
-Investors can strengthen their portfolios with
impact investments (diversiﬁcation)

Asset Mix
Rule of Thumb:
your age = the % of bonds in your portfolio
Bonds = 40%
Can. Stocks = 20%
US Stocks = 20%
Global Stocks = 20%
20%
20%
20%
40%

Bonds = 30%
Can. Stocks = 20%
US Stocks = 20%
Global Stocks = 20%
10%
20%
20% 20%
30%
Impact Bonds = 10%
Asset Mix
Impact investments can make a
portfolio more diversiﬁed

Suitability
-Always consider impact investments within the
context of your entire investment portfolio
-Don’t have more than 15% of assets in any
one investment
-Make sure you won’t need the money before
maturity, and are comfortable with the risks

Accredited Investor?
-Owns ﬁnancial assets of more than $1M
(net of liabilities)
-Net income of more than $200K each of the
past 2 years
* Only applies to a small handful of impact
funds in the room

Renewable Energy Co-ops
-Equitable legal structure
-Investors must be members of the co-op
-Equal voting rights (one member one vote)
-Beneﬁt from Ontario’s feed-in tariff for
renewable energy

Co-op Bonds - Risks
-Transparency risk: Low
-Default rate: UNKNOWN
-Liquidity risk: HIGH
-Duration risk: Moderate

MicroFinance
-Tiny loans to businesses in emerging economies
-Replaces the need to use loan sharks
-Loans are repaid over time incl. interest, allowing
for reinvestment (recyclable philanthropy)
-Creates employment and stronger local
economies (internationally)
-Relative strength of the Canadian dollar
multiplies the impact

MicroFinance - Risks
-Transparency risk: HIGH
-Default risk: Low

Social Enterprise MicroLoans
-Small loans to social entrepreneurs ($1k - $25k)
-Creates meaningful employment and stronger
local economies (in your backyard)
-Can be used to ﬁnance startup or expansion

Social Enterprise MicroLoans - Risks
-Transparency risk: Depends on reporting
-Default rate: Depends on company’s stage

RRSP, TFSA
-Currently, most impact investments are not
RRSP or TFSA eligible
-Some impact investments have been included
in RRSP accounts, but the future is murky
-It’s best to assume non-eligibility, and to
subtract taxes from your expected return

Questions to Ask
-What is the minimum investment?
-What is the duration of the investment?
-What is the expected ﬁnancial return?
-Is there 3rd party veriﬁcation?
-Is the investment backed by an asset?
-What is the expected social impact?

Next Steps
-Connect with the organization and request an
investor package
-After doing your homework and speaking with
an expert, ﬁll out the forms and write a cheque
-Sleep well, knowing that you’re making money
and a difference

THANK YOU
SustainableEconomist.com

Impact investment fair

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