In the past, Canadians relied on governments and non-profits to meet social needs, while leaving markets, private capital and business to deliver financial returns. This binary system is breaking down. Profound societal challenges require us to find new ways to mobilize ingenuity and resources for effective, long-term solutions. A social finance marketplace investing in social, environmental and economic returns.
1. Its Promise and Its Challenges
Tim Draimin !
Executive Director!
Social Innovation Generation (SiG)
April 7th, 2011!
Social Finance Experts !
Speaker Series @ Rotman!
2. Social Innovation Generation!
National initiative of four nodes across the country!
– Tim Draimin, National Executive Director!
• Tim Brodhead, Stephen Huddart, McConnell Foundation - founder
• Frances Westley, University of Waterloo
• Al Etmanski, PLAN Institute
• Allyson Hewitt, MaRS
The primary aim of SiG is to encourage effective methods of addressing
persistent social + ecological problems on a national scale !
SiG convened the Canadian Task Force on Social Finance recognizing
social finance as a social innovation and an indispensable vehicle for
scaling social innovation!
3. Getting Out in Front
Problems!
Social Innovation!
Growing
solutions
delivery
gap!
Traditional problem solving!
4.
5. Who is the non-profit sector?
161,000
registered
2M
employees
$146.6B
(2005)
(7.2%
of
in
revenues;
Chari0es
and
Canada’s
labour
larger
than
the
not-‐for-‐profit
force) retail
and
Organiza0ons
automo0ve
sectors
6. Cross-sector Partnerships
“There is growing understanding that many of our largest
social and economic challenges cannot be addressed by
government alone nor, for that matter, by business or
community organizations by themselves.”!
Tim Brodhead!
President, J.W.McConnell Family Foundation!
7. The need to ! The collaboration !
innovate! imperative!
Building an innovative !
mindset & culture!
8. Barriers to Social Innovation
System doesnʼt value social innovation,
actively discourages it!
Non-profit (NP) income model broken!
NP funders & regulators are risk averse,
leaving little room for experimentation and
failure!
Proven social innovations struggle to be
recognized and go to scale (NP & FP)!
Corporates not yet embracing blended &
shared value approach!
9. Traditional Funding for
Not-For-Profits Under Pressure
Donations, Grants, IMAGINE CANADA reports
Contributions that…”governments are
(Gs&Cs) to non-
cutting spending to reduce
profits under
duress! their deficits. The March 22,
2011 federal budget proposed to
Demand for social reduce department spending by
services is
increasing! at least $4 billion per year by
2014-15 and many provinces are
Social problems
becoming more also anticipating or announcing
complex! cutbacks.”
10. “Charities and non-
profits rely on three
core sources of
revenue: government
funding, philanthropy,
and earned income.
Of these, only earned
income offers any
prospect for growth
over the long-term.”
Earned income up
17% from ’05 to ’08
11. social finance
[soh-shuhl fi-nans, fahy-nans], n.; synonym: impact
investing
Social finance is an investment approach to
solve social or environmental challenges
while generating financial return. This includes
investments that range from producing a return of
principal capital to offering market-rate or even
market-beating financial returns. Social finance
encourages positive social or environmental
solutions at a scale that neither purely
philanthropic supports nor traditional investment
can reach. 11!
12. The
need
to
innovate:
New
models
evolving
o Non-profits diversifying revenue!
o Government changing approach:
commission outcomes vs. providing
services !
o Shift from measuring outputs to outcomes;
new focus on metrics!
13. Peter Drucker, Management Seer
We know that social-sector organizations
need management. But what precisely
management means for the social-sector
organization is just beginning to be studied.
With respect to the management of the
nonprofit organization we are in many
ways pretty much where we were fifty or
sixty years ago with respect to the
management of the business enterprise:
the work is only beginning. (Emphasis added)
The Atlantic Monthly; November, 1994; The Age of Social Transformation;
Volume 274, No. 5; pages 53-80.
14. Social & Financial Return Continuum
Social finance approaches seek to support a spectrum
of organizational business models !
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5(,'%*+>0"%,& !"#$!%& =')%),'%*
:*#)<#<
Source: Adapted from Charities Aid Foundation (CAF) Venturesome, “Financing Big Society: Why social investment matters” (2010).
15. Shifting Values / Growing Awareness
People seeking profit and social purpose !
Shareholders raising the bar !
“Shared Value” gaining recognition!
Philanthropic model fundamentally
changing !
16.
17. Peter Drucker, Visionary
Only if business learns how to convert the major
social challenges facing developed societies today
into novel and profitable business opportunities
can we hope to surmount these challenges in the
future. Government, the agency looked to in recent
decades to solve these problems, cannot be depended
on. The demands on government are increasingly
outrunning the resources it can realistically hope to
raise through taxes. Social needs can be solved only
if their solution in itself creates new capital, profits,
that can then be tapped to initiate the solution for
new social needs.
— The Frontiers of Management (1986)
18. J.P. Morgan
Releases First
US Report on
Impact Investing
November 2010
“…increasing numbers of
investors rejecting the
notion that they face a
binary choice between
investing for maximum
risk-adjusted returns or
donating for social
purpose…”
“…impact investments
are emerging as an
alternative asset class…”
10-year profit
potential… $667bn*
19. Ronald
Cohen’s
Social
Investment
Task Force
2000-to-2010
UNITED KINGDOM
22. Mobilizing Private Capital for Public Good
Canadian Task Force on Social Finance
Social Finance !
The Task Force on Social Finance was conceived by Social
Innovation Generation (SiG) to identify opportunities to
mobilize private capital for public good, within either non-
profit or for-profit enterprises.
Canada’s ability to conceive, build and scale social
innovations will require more capital than available through
philanthropy and government. Canada’s emerging social
finance marketplace will allow public and philanthropic
capital to leverage significantly more private capital to
achieve long-term benefits for Canadians.
“one of the great social innovations of the early 21st C” *
Katherine Fulton, November 2010
23. Mobilizing Private Capital for Public Good
Canadian Task Force on Social Finance
“Our Government will take steps to support
communities in their efforts to tackle local
challenges. It will look to innovative charities
and forward-thinking private-sector companies
to partner on new approaches to !
many social challenges.”!
—2010 Federal Speech from the Throne!
25. Mobilizing Private Capital for Public Good
Canadian Task Force on Social Finance
“It is this notion of making it financially
attractive to solve social issues... [that] is
intriguing a growing number of institutional
investors globally.”!
An Overview of Impact Investing!
Phillips, Hager & North!
Nov. 2010!
26. Task Force Members!
Reeta Roy Tim Brodhead Stanley Hartt
Sam Duboc Bill Young Ilse Treurnicht
Tamara Vrooman Rt. Hon. Paul Martin
Tim Jackson Nancy Neamtan
27. Mobilizing Private Capital for Public Good
Canadian Task Force on Social Finance
Definition: social finance !
(or impact investing) !
Actively placing capital in businesses
and funds that generate social and/or
environmental good and (at least) a
nominal principal to the investor. !
Impact investors seek to harness
market mechanisms to create social or
environmental impact.!
28. Mobilizing Private Capital for Public Good
Canadian Task Force on Social Finance
Task Force addressed 3 challenges !
1. Capital Mobilization!
2. Enabling tax & regulatory
environment !
3. Investment pipeline!
30. Mobilizing Private Capital for Public Good
Canadian Task Force on Social Finance
Social Finance at work!
What is an example of MRI?
1! The investment committee of a Canadian
family foundation decided to provide a loan
from its endowment capital to help a local
non-profit purchase a LEED certified office
building in the area in which they provide
services. The loan is for $3M over 10
years at an interest rate of 6.5%.
32. Mobilizing Private Capital for Public Good
Canadian Task Force on Social Finance
Social Finance at work!
What do we mean by Social Investment Funds?
Social Investment Funds channel capital to
2!
organizations and individuals that have
historically struggled to access mainstream finance.
Réseau d’investissement social du Québec was created in 1997 with
matching contributions from the Quebec government and the private sector. It
has since invested $11.6M in 292 social enterprises, leveraging over $147M in
total investment.
Renewal Partners, a Vancouver- based, private investment fund focused on
social purpose businesses and real estate.
The Cape Fund, a $50M private investment fund with a strong degree of
Aboriginal involvement and connection to Aboriginal communities
33. Investing with a Social Bonus
How large can the Impact Investing market grow to be?!
Monitor Consulting Opportunity Hope Consulting US Market
(2008)! (2010)!
Impact
Investing!
What is the opportunity in Canada? $30 B
34. Impact Investing in Canada & Abroad
CANADA
Impact First Investments Financial First Investments
Social Impact Bond
INTERNATIONAL
Growing number of examples, but nascent; the total pool of capital is still small
36. Mobilizing Private Capital for Public Good
Canadian Task Force on Social Finance
Social Finance at work!
Some examples include:
Community Bonds. The Centre for Social Innovation in Toronto
raised $1.7M for the purchase and renovation of its new building.
Toronto Community Housing raised a $450M bond for the
3!
revitalization of Regent Park
Impact Investing Note. The Ottawa Community Loan Fund is
developing a note aimed at raising $10M for investment in affordable
housing and social enterprise
Social Impact Bonds. A pilot underway in the UK and the US
announced a $7M SIB project.
Green Bonds. Similar to a Community Bond but for the renewable
energy sector. $2.2B US Clean Renewable Energy Bond, $1B Work
Bank Green Fund and $1.5 European Investment Bank Climate
Awareness Bond
37. Centre for Social Innovation
(CSI): $1.8M bond issue for
the acquisition and re-
development of new facility.
40. Mobilizing Private Capital for Public Good
Canadian Task Force on Social Finance
Social Finance at work!
PSAC Staff Pension Fund investment in
Affordable Housing
4! In 2007 the Public Service Alliance of Canada
(PSAC), Canada’s largest federal public service
workers’ union, made a $2M investment in
affordable housing in Ottawa. The first
arrangement of its kind, the investment was made
through an innovative partnership with Alterna
Savings Credit Union, the Ottawa Community
Loan Fund (OCLF),
42. Mowat Centre Recommendations:
Mobilizing Private Capital for Public Good
Canadian Task Force on Social Finance “Federal and provincial-territorial
governments should embrace the
sustainability of Canada’s non-
Social Finance at work! profit sector as an explicit policy
goal
and address problems in the current
5!
policy and regulatory frameworks
governing the sector that are barriers
to this.”
“The federal government should
BC undertake changes to the Income
Ontario Tax Act…to allow charities and
Quebec non-profits more flexibility…to
Nova Scotia
allow enterprising activity as long
Are taking steps to explore ways to modernize as
regulatory frameworks that will encourage and all proceeds are directed to
streamline social enterprise activity.
fulfillment of the organization’s
mission.”
44. Mobilizing Private Capital for Public Good
Canadian Task Force on Social Finance
Social Finance at work!
The Nova Scotia Equity Tax Credit (ETC)
Designed for local small businesses, co-operatives,
6!
and Community Economic Development Investment
Funds (CEDIFs), to address the fact that most RRSP
investments were being made in out-of-province
businesses. Ten years into the program, 48 CEDIFs
are operating in Nova Scotia, with over 4,800
community investors providing $32M in 90 offerings.
Nearly all investors are residents of the communities
in which the businesses are operating and expanding
local employment opportunities.
46. Mobilizing Private Capital for Public Good
Canadian Task Force on Social Finance
Social Finance at work!
Technical and Advisory Supports in
Canada:
Enterprising Non-profits
7!
Capacity Waterloo Region
MaRS Discovery District
BC Centre for Social Enterprise
The Centre for Social Innovation
Academic support systems, plus
Opening access to Canada’s SME support
structures