Upload
social-entrepreneurship
View
793
Download
2
Embed Size (px)
DESCRIPTION
Theory: How is finance being directed to achieve a combination of social and financial returns? What are the key trends and issues being addressed in the development of social capital markets?Practice: What range of organizations are actively engaged in social finance in Canada and overseas? How are investors assessing the tradeoffs between risk, return and impact?http://www.socialentrepreneurship.ca/entr4800
Citation preview
ENTR 4800: Social Entrepreneurship
Class 7: Impact Investing and Social Capital Markets
Monday, November 1, 2010
1
Instructors: Norm Tasevski ([email protected])
Karim Harji ([email protected])
© Norm Tasevski & Karim Harji
© Norm Tasevski & Karim Harji
Agenda
• Kiva.org • What did we learn – Last Week? • Presentation – Serge LeVert Chiasson & Adam
Spence • Overview of Impact Investing & Social Capital
Markets • “Live Case” – Serge & Adam • What did we learn – Today? • Next week
3
© Norm Tasevski & Karim Harji
Last Week – What did we learn?
4
© Norm Tasevski & Karim Harji
Speakers…
5
So, what are we talking about?
6
Social Finance! Impact Investing!
Socially Responsible Investing!
Social Investing!
Mission-Driven Investing! Sustainable & Responsible Investing!
Blended Value!
Value-Based Investing!
Mission-Related Investing!Ethical Investing!
Responsible Investing!
Program-Related Investing!
Triple-Bottom-Line!
Environmental, Social and Governance Screening!
Donations!
Charitable Giving!
Venture Philanthropy!
© Norm Tasevski & Karim Harji
The Looking-Glass World of Nonprofit Money
7
• Price covers cost and eventually produces profits, or else the business folds
Full article available at: http://nonprofitfinancefund.org/files/docs/2010/NPQSpring05.pdf
• The consumer buys the product
• Cash is liquid • Price is determined by producers’ supply and consumers’
ability and willingness to pay • Any profits will drop to the bottom line and are then
available for enlarging or improving the business • Investment in infrastructure during growth is necessary
for efficiency and profitability • Overhead is a regular cost of doing business, and varies
with the business type and stage of development
F F F F F F F
© Norm Tasevski & Karim Harji
The Spectrum of Markets
FINANCIAL CAPITAL MARKETS
Financial Return
Financial Performance Measurement
• Debt • Equity
• Retail (mutual funds, online brokers) • Institutional (Exchanges, Alternative
Trading Systems)
About 5%
FINANCIAL CAPITAL
MARKETS
$50 Trillion
SOCIALLY RESPONSIBLE
INVESTING Social Screening and Shareholder Advocacy
$7 Trillion
RETURN
MEASUREMENT
PLATFORMS
INVESTMENT TYPE
AVERAGE TRANSACTION
COST
MARKET SIZE
IMPACT INVESTING MARKETS
Financial + Social Return
Financial + Social Measurement
• Debt • Equity
• Retail (online micro finance) • Institutional (Impact Funds,
emerging platforms)
About 10%
$5 Billion
PHILANTHROPY (GIVING MARKETS)
Social Return
Social Performance Measurement
• Grants
• Retail (offline channels, online giving, Donor Advised Funds)
• Institutional (Foundations)
About 30%
$300 Billion
SOCIAL CAPITAL MARKETS / MARKETS FOR GOOD
© Norm Tasevski & Karim Harji
Social Finance Continuum
9 Jed Emerson (2003) “The Blended Value Map: Tracking the Intersects and Opportunities of Economic, Social and Environmental Value Creation ”
Organization Type
Primary Goal
Capital
Charge for Products and
Services
Traditional Non-Profit
Social Enterprise (Non-Profit & For-
Profit)
Socially Responsible Corporate
Traditional Corporate
Non-financial mission (social and/
or environmental value)
Social mission with minimum
expectation of financial return
Profit driven with social and/or
environmental objectives
Profit driven (economic value)
Donations and Grants
Below-market capital, or mix of donations and
market-capital rate
Market-rate capital (including SRI investments)
Market-rate capital
Beneficiaries pay nothing
Subsidized rates or mix of full payers
and those who pay nothing
Market-rate prices Market-rate prices
Purely Philanthropic Purely Commercial
© Norm Tasevski & Karim Harji
The Social Capital Market
10
Socially Responsible Investment
Commercial Investors
Venture Philanthropists
Foundations
Taxpayers
Supply
Non-Profits
Social Enterprises
Social Purpose Businesses
Co-Operatives
Entrepreneurs
Social Economy Organizations
Demand
Credit Unions
Social Stock Exchanges
Community Loan Funds
Rating Agencies
Associations
Intermediaries
© Norm Tasevski & Karim Harji
Social Finance Across Canada
11
© Norm Tasevski & Karim Harji
Serge LeVert Chiasson
12
© Norm Tasevski & Karim Harji
Cash
13 Source: F.B. Heron Foundation and Jessica Shortall (2009): “Introduction to Understanding and Accessing Social Investment”
Supply of Finance
Grant Support
-100% -90% to -10% 0% 1% to 7% 8% +
Private Equity Subordinated
Loans Senior Loans Cash
Lower risk Higher risk Higher risk Lower risk
Guarantees
Fixed Income Public Equity Private Equity
Grants “Soft” Investments Capital-protected investments
Commercial-return investments
Social returns only Very soft debt
Mix of grants and other capital
Willing to lose some money
“Blended return” equity
Soft debt
Willing to take below-market return
Market-rate debt
Equity
Full commercial returns
Social benefit can be a requirement
© Norm Tasevski & Karim Harji
MORE DEBT-LIKE
14 Source: Alex Nicholls and Cathy Pharoah (2008) “The Landscape of Social Investment”, http://www.sbs.ox.ac.uk/centres/skoll/research/Pages/landscapeofsocialinvestment.aspx
Financing Options – Over the Social Entrepreneurship “Life Cycle”
IDEA DEVELOPMENT PROOF OF CONCEPT START-UP SCALE REPLICATION EXIT
GRANTS
MORE EQUITY-LIKE
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
© Norm Tasevski & Karim Harji
DEBT EQUITY
$0 $500,000 $1 million $10 million $100 million
OTTAWA COMMUNITY LOAN FUND (Up to $15k)
INVESTECO (Up to $2 mil)
TSX CLEANTECH CLUSTER ($10 - $100+ mil Deals)
RENEWAL FUND (Up to $2 million)
ACCESS COMMUNITY CAPITAL (Up to $5k)
CAPE FUND ($1 - 7.5 million)
VANCITY CAPITAL CORPORATION ($50k to $10 mil)
CAIC: ENTERPRISE (Up to $50k)
CAIC: MORT. (Up to $500k)
SCP (Up to $300k)
Source: Social Venture Exchange (SVX)
Supply: Major Players
© Norm Tasevski & Karim Harji
16
Aligning Supply and Demand
Source: Alex Nicholls and Cathy Pharoah (2008) “The Landscape of Social Investment”, http://www.sbs.ox.ac.uk/centres/skoll/research/Pages/landscapeofsocialinvestment.aspx
© Norm Tasevski & Karim Harji
Adam Spence
17
© Norm Tasevski & Karim Harji
Why Intermediation Matters
• Scale = reduce transaction and search costs • Investment readiness of ventures • Common language and industry standards • Risk assessment tools • Assessing social value creation
18
Who will build (and pay) for these intermediaries?
© Norm Tasevski & Karim Harji
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!
19 Adapted from: Causeway, SiG, Volans (2009) “Building The Case for Social Finance in Canada”
Public Service Alliance of Canada
• Invested $2m to create the fund
• CommiQed to responsible invesRng
• Market rate of return in a “vehicle” that fulfilled fiduciary responsibility
Alterna Savings Credit Union
• Structured an investment vehicle to provide market rate of return as well as direct social impact
• Provides operaRonal / admin. support
OQawa Community Loan Fund
• Non-‐profit responsible for screening projects that are • Affordable to those most in need
• Affordable in the long-‐term
• Constructed by unionized workers
Carleton Centre for Community InnovaRon
• Intermediary that helped to align the interests of the groups
• Suggested alternaRve models drawing on research and experience from the US and UK
Break
20
© Norm Tasevski & Karim Harji
“Live Case”
• What is the investor perspective? • Is your idea a good candidate for investment? • What can you improve on to pitch to investors?
21
© Norm Tasevski & Karim Harji
What did we learn?
22
© Norm Tasevski & Karim Harji
Next Week
• Jon Packer, Idea Workshop
• Deliverable: Have Questions Ready!!
• Readings
23