Imagine a day when:
A non-profit organization can access a financial institution that is specifically designed to serve the community-based sector. At this location, an organization could receive bridge financing that will enable its programs to continue to operate between funding cycles, it could secure patient capital loans that will facilitate the purchase of property for community benefit, or it could post a community bond to raise investment capital for the development of infrastructure projects in its home community.
A charity or non-profit organization can confidently operate a profit-generating venture that does not put its special legal status at risk. This enterprising non-profit can use business methods to attract investment capital, enabling it to operate or expand a social enterprise in which the profits are channeled back into the organization to complement its other revenue sources, and support the organization’s core mission.
Social entrepreneurs who have an idea that will solve a social or environmental problem can access affordable investment capital and grants that will allow their multiple bottom line business to grow. Beyond simply examining the financial bottom line potential, social financiers will consider the unique needs and planned social or ecological impacts of the venture when making decisions to extend finance to the enterprise.
Here are only some examples of initiatives, tools and products that will help build Canada's social finance marketplace.
Canadian Task Force on Social Finance
In November 2010, the Canadian Task Force on Social Finance released its report, Mobilizing Private Capital for Public Good. This report responds to the needs of both the emerging for-profit social purpose business sector and the enterprising activities of charities, non-profits, and co-operatives. Setting out seven key actions that Canada needs to undertake, in parallel, to mobilize new sources of capital, create an enabling tax and regulatory environment, and build a pipeline of investment ready social enterprises.
The SVX will be a local, impact first market connecting social ventures, impact funds, and impact investors in order to catalyze new debt and equity investment capital for local ventures that have demonstrable social and/or environmental impact, including nonprofits, co-operatives, and for-profit corporations. The project is an initiative of SiG at MaRS, in collaboration with TMX Group Inc., and supported by the Government of Ontario, Torys LLP, Causeway Social Finance, Imagine Canada, and many other partners.
The SVX will provide an online market platform with venture listings, fund listings, service provider listings, and a resource centre to facilitate effective impact investments; allow investors to share due diligence, collaborate on deals, identify high quality investment opportunities, and access screened investment opportunities and ventures with detailed information reducing the burden of due diligence; and provide ventures with increased access to capital and financial expertise.
What is a Social Venture Exchange?
A social venture exchange (also known as a social stock market or ethical stock market) is an emerging global concept, best defined as a regulated financial market that provides a platform for the flow of capital from impact investors to social ventures in the form of shares, bonds, and/or other financial products.
In order to be listed on the exchange, the financial products must meet established financial benchmarks in addition to social and/or environmental standards.
There are many models under development in other countries, including:
Community Investment Note
What is a Community Investment Note?
The Calvert Social Investment Foundation is the originator of the Community Investment Note. This lending portfolio is approximately $175 million, with loans extended across multiple sectors, including microfinance, agriculture, and community housing.
When an individual or organization invests in a Community Investment Note, the capital is pooled and placed in a professionally managed portfolio of affordable loans which are dispersed to more than 230 leading non-profit organizations and social enterprises working to alleviate poverty, create jobs, and protect the environment.
Since Community Investment Notes are consistent with U.S. guidelines for Program-Related Investing, many foundations have purchased them to support their own programs.
Additionally, the Calvert Foundation Giving Fund, a socially responsible donor-advised fund, provides private equity for social enterprises though a global portfolio of approximately $30 million.
Fund of Fund
La Fiducie du Chantier de l'économie sociale Trust (Fiducie) is a fund that provides long-term capital investment in social economy enterprises in Quebec.
This $52.8 million patient capital (quasi-equity) fund offers loans ranging from $50,000 to $1.5 million, with 15-year capital repayment terms, to support social enterprise working capital requirements, and real estate investments.
Social Impact Bonds (SIB’s)
Click here to read an excellent blog on the topic of Social Impact Bonds, by Adam Jagelewski, which also links to Adam’s informative HRSDC-commissioned paper on the potential use of SIB’s in Canada, plus a seminal UK report on intended uses for the tool.
THE WHAT, WHY, WHO, AND MOST IMPORTANTLY, THE HOW OF SOCIAL FINANCE IN CANADA.
Visit the MaRS Entrepreneur's Toolkit >>
Fill out the MaRS Discovery Document >>
Learn about SiG @ MaRS >>
The contents of Your Guide to Social Finance is general in nature, current only as of the date of publication and is provided for informational purposes only. It is not intended to provide professional investment or financing advice. Please consult a certified professional before making any decision regarding your investments and financing.