The document provides background on social enterprise and social finance. It explores the motivation for these activities, including addressing complex social problems with constrained government finances. Various models are examined, such as housing funds, community loan funds, and social impact bonds. Case studies of the New York City Acquisition Fund and social enterprises like Friends Catering Company and St. John's Bakery are also summarized.

1. EXPLORING SOCIAL FINANCE
& SOCIAL ENTERPRISE
Social Enterprise Speaker Event
Community Living Hamilton I Liuna Station, Hamilton
June 13th, 2012

2. OBJECTIVES

3. OBJECTIVES
1. Provide background on our work
2. Examine the motivation for social enterprise and social
finance activities
3. Build greater understanding of social enterprise and social
finance
4. Explore social enterprise and social finance models
5. Review pathways for further engagement

4. ABOUT

6. ADVICE & MENTORSHIP EDUCATION
1200 clients since 2006 85 Entrepreneurship educational
700 active clients events programmed or delivered in
9,000 hours of mentorship provided 2010
in 2010 8,000 attendees at events in 2010
1.5M page views at marsdd.com in
2010
INSIGHT ACCESS TO CAPITAL
900 completed market research $108M capital raised by MaRS clients
requests for over 800 companies and from angel and venture capital
entrepreneurs in 2010 investors and government in 2010
$13.4M in free market research 600 new jobs created in Canada by
provided MaRS portfolio companies in 2010
13 market intelligence reports
produced in 2010 covering topics such
as consumer digital health, water and
clinical trials

7. ABOUT
Social Innovation Generation (SiG) at MaRS
 Provides advisory supports, convenes stakeholders, and accelerates
social innovation initiatives
 Advisory supports provided to social entrepreneurs (for-profit and
non-profit) including legal, business planning, IP, impact
assessment, and financing advice
 Over 500 clients over the past four years
 Looking ahead: Leading initiatives over the next phase of
development will be focused on advisory services, Centre for
Impact Investing and the MaRS Solutions Lab

8. Concept paper written for in
2007, adopted as government
policy in 2008.
MaRS officially
Social Finance Forum 2011
opens in fall First Social Impact
SiG@MaRS starts. Initiates first hosts 400 delegates and
2005. Bond pilot launched
Social Finance Forum. celebrates Centre opening.
Pre-2007 2007 2008 2009 2010 2011 2012
Market
grows by
$284M
Term “impact year over
Canada shows investing” coined; year.
impact investing Canadian Task RBC announces
Rockefeller Force on Social
leadership with B Lab officially Foundation starts impact investing
founding of Finance launches strategy.
opens in 2006. impact investing
Vancity in 1946, in December
strategy. 2010.
Sarona in 1954,
CAIC in 1984, and
le Chantier in
1997.

9. ABOUT
MaRS Centre for Impact Investing (CII)
• hub of social finance excellence, serving as a neutral collaboration
platform for private, community, and government sectors to work together,
co-create new financial products and services, as well as develop talent
and forward-looking public policies to grow the asset class.
• recognized resource for Ontario and become the leadership hub on
impact investing for Canada, building on our experience in the field of
innovation and our work to date on the Task Force on Social Finance.
• resource and partner for local, national, and global leaders in impact
investing and mainstream finance, from Social Finance UK to the Global
Impact Investing Network (GIIN).
• focus on catalyzing the next phase of evolution, from uncoordinated
innovation to marketplace building, and position Canada for success in a
fast evolving field globally.

10. ABOUT
Pillar Description Strategic Initiatives
Research and • Advancing the recommendations of the
Task Force on Social Finance, including
Public Policy legislative reforms and tax regulations.
Impact • Developing and deploying best practice
tools and models for measuring impact in
Measurement nonprofit and for profit impact ventures.
Market and Product • Catalyzing funds, connect investors and
ventures and developing innovative tools
Development (i.e. Social Impact Bonds).
Education and • Educating and engaging prospective
Engagement talent, ventures, and investors.
Pg 10

11. Pg 11

12. ABOUT
Objectives & Measures
Initial Impact: 2011-2012
 Deals: $30M in new impact
investing deals in Canada;
$5M Community
 Products: Supportive Investing Fund
development of five new impact
investing products;
$1M Community
 Talent: Recruit and retain 100 Housing Bond
highly skilled volunteers;
 Ventures: 100 ventures
receiving financing or adopting $20-40M Social
impact metrics; and Finance Strategy
 Policy: Successful advancement
of the public policy $20M Impact
recommendations of the Task Investing Strategy
Force. Pg 12

13. ABOUT
KEY FUNDERS
STRATEGIC PARTNERS
Pg 13

14. MOTIVATION

15. MOTIVATION
Why does social enterprise and social
finance matter to you?

16. MOTIVATION
Complex challenges:
We are faced with seemingly intractable
social and environmental problems at a
global, national, and local level.

17. Present Paradigm

18. Emerging Paradigm

19. MOTIVATION
Constrained finances:
Government revenues constrained due to
modest economic growth and budget
pressures (deficit and rising core costs like
health care). Donations constrained and
showing evidence of decline.

21. MOTIVATION
Donations,
Grants,
Contributions
(Gs&Cs) to
non-profits
under stress.
Source: Statistics Canada

22. MOTIVATION
Growing movement:
Growing number of charities, non-profits,
co-ops and for-profit companies building
business models and turning to investors
for financing to launch and scale up
innovative new programs, become
sustainable, and stimulate economic
growth.

23. MOTIVATION
Funder and investor interest:
Growing number of funders and investors
are interested in financing sustainable
business models and investments that
generate impact alongside financial
return.

24. Professor Michael Porter
Bishop William Lawrence
University Professor
at Harvard Business School

25. In recent years business increasingly has been viewed
as a major cause of social, environmental, and
economic problems. Companies are widely perceived
to be prospering at the expense of the broader
community...The solution lies in the principle of shared
value, which involves creating economic value in a way
that also creates value for society by addressing its
needs and challenges…The purpose of the corporation
must be redefined as creating shared value, not just
profit per se. This will drive the next wave of
innovation and productivity growth in the global
economy.

26. The concept of shared value recognizes that societal
needs, not just conventional economic needs, define
markets. It also recognizes that social harms or
weaknesses frequently create internal costs for firms—
such as wasted energy or raw materials, costly accidents,
and the need for remedial training to compensate for
inadequacies in education. And addressing societal
harms and constraints does not necessarily raise costs
for firms, because they can innovate through using new
technologies, operating methods, and management
approaches—and as a result, increase their productivity
and expand their markets.

27. MOTIVATION
Opportunity:
Social enterprise and social finance
strategies present an opportunity to
leverage your assets and effectively
complement existing work to support
community housing development,
provide opportunity, and reduce poverty.

28. DEFINITIONS & BACKGROUND

29. BACKGROUND
FIGURE: SOCIAL VENTURE CONTINUUM

30. BACKGROUND
Social enterprises are revenue-generating social
and/or environmental enterprises (whether run as a
project, or as a separately incorporated entity) that are
owned and operated by nonprofits or charities. They
have the dual purpose of the dual purpose of
generating income by selling a product or service in
the marketplace and creating a social, environmental
or cultural value.

31. BACKGROUND
FACTS & EXAMPLES
 Ontario has a mature and growing social
enterprise sector:
 Almost half of all Ontario nonprofits
are engaged in social enterprise
activity
 One in five social enterprises has
been operating for over 25 years
 One third of nonprofit organizations
without social enterprises plan on
starting one in the next two years
 Examples of social enterprises include
Goodwill Industries, Habitat for
Humanity’s Restore, Centre for Social
Innovation, Me to We

32. BACKGROUND
CHARACTERISTICS
Effective social enterprises:
 are clearly aligned with the mission of the parent
nonprofit;
 have a simple and valuable product or service offering;
 focus on the desired impact for workers and customers;
 receive long-term financial & technical support from
capacity-building institutions.

33. BACKGROUND
BENEFITS
There are also many key benefits of social enterprise activity:
 Increase the financial sustainability of an organization;
 Enhance the core mission and impact of the nonprofit
organization;
 Provide employment opportunities, particularly for
marginalized populations.

34. BACKGROUND
CHALLENGES
Social enterprises face challenges including: access to capital, lack of
enabling supports, and uncertainty regarding laws and regulations
100%
90% 86%
80% 76%
70%
60% 58%
55% 54%
50%
39%
40%
30%
20%
10%
0%
Validating Internal Business Access to Legal & Legal & Financial
Market Demand Resources Development & Capital Regulatory Expertise
& Investor Buy- Risk Assessment Concerns
In

35. BACKGROUND
ADDITIONAL CHALLENGES
 Operational: hiring and training, authenticity, fit
 Balance: Investor demands, profitability and patient capital
 Philosophical: basic service delivery by government or private
sector
 Impact measurement

36. BACKGROUND
Social enterprise is not for every
organization.
It presents an opportunity for an exciting and
important hybridization of the work of social good
organizations, but it may be reckless for some
organizations to start a business or enterprising activity
that forces them to drift from their core mission and
ability to achieve positive impact.

37. BACKGROUND
Social finance is an investment
Profits
approach which aims 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
Planet People
even market-beating financial
returns.
Synonyms: Impact investing, community investing, and mission-related investing.

38. BACKGROUND
Social Finance Marketplace
 Current market size in Canada estimated at ~$2 billion, projected to grow to
$30 billion over next ten years
 Global impact investing marketplace is estimated at $50 billion, projected to
grow to $400 billion over next ten years
 Funds: Over $250 million in funds (and foundation investments) with proven
track record; 30 funds operating or in development
 Deals: There is measurable (private) impact deal activity in Ontario mostly
focused on debt instruments. In total, there are over 200 “living” deals in
place across the country.
 Key sectors: Clean technology, sustainable agriculture, microfinance and
affordable housing
 Strong interest amongst governments and institutional investors,
particularly foundations, HNWIs, and wealth managers (Recent investor
survey: 70% interested in public housing bonds)

42. Energy efficiency
Prime + 2%
Poverty reduction
Social housing units
Impact + Return
8%
Carbon reduction
Jobs for marginalized 1% p.a. over three years
populations

43. Recommendations to
Canadian Task Force on Social Finance
Catalyze a Sector
Capital Mobilization Enabling Tax & Investment Pipeline
Regulatory Environment
1. Mission Related 1. Pension Fund 1. Business
Investing Assets Development
Programs
2. Impact Investing 2. Regulatory
Funds Frameworks
3. Impact Investing 3. Tax Incentives
Products

44. MODELS

45. MODELS
 Housing funds
 Community loan funds
 Social enterprise business models
 Social enterprise incubation spaces and institutions
 Social impact bonds

46. Case Study:
New York City Acquisition Fund

47. MODELS
 Motivation: formed in 2006 to address the shortage of affordable
housing in New York City
 Goal: support the development of 30,000 low income housing units
in New York City
 Target ventures: for-profit and non-profit affordable housing
developers who refurbish existing units or build new housing
 Fund size: ~$200 million
 Investment size and term: Up to $7.5 mil (new build) or $15 mil
(acquisition); lending period of up to three years
 Interest rate: variable interest rate currently indexed to prime
(minus 40 – 60 basis points)
 Impact: $151M invested and 4,384 units created or preserved

48. MODELS
 Partners/Investors: Collaboration with the City of New York, major
foundations (ie. Ford Foundation, Rockefeller Foundation), and
private investment groups (ie. JP Morgan Chase Bank)
 Layered: Bank consortium provides senior debt as lending capital
while other investors provides guarantees in the form of low-
interest subordinated loans

49. Example Recipient:
Serviam Gardens (Fordham
Bedham Housing Corporation)
243-unit green, affordable
housing development for low-
and moderate-income seniors
Purpose: Acquisition and
predevelopment financing for 10
unit complex rehabilitation and
73 unit construction
Deal: $3.6 million loan
Term: 36 months

50. Community Loan Fund:
Ottawa Community Loan Fund (OCLF)
OCLF turns investments and donations
into accessible financing to fuel
innovation, expand opportunities and
improve lives.
Financed by: Grant capital and
investment capital
Target: Small business, youth
enterprises, training
Terms: Variable (12 months – 5 years;
Prime plus 6%)
Loan Size: $5,000 - $15,000
Impact: Poverty
reduction, employment creation
Success: Over $1M in capital mobilized

51. Toronto Enterprise Fund (TEF)
 Mission: support social
enterprises that employ people
who are socially marginalized
 Supports: grant funding and
technical assistance
 Portfolio: Currently fund 13
social enterprises; enterprises
had total sales of over $3M in
2010
 Impact: 82 per cent said of
participants that their job skills
had improved, 74 per cent said
their self esteem had gone up,
and 60 per cent said their health
had improved. 2,096 participants
have been trained and/or
employed by TEF funded
enterprises since 2000.

52. Friends Catering Company
Food services social enterprise of
the Fred Victor Centre:
 aim: to train, mentor and offer
jobs to people who have not
worked for a long time, who
lack the confidence to seek
work or who have some mental
or physical limitations
 employs 3-5 Fred Victor clients
 trainees worked more than
2,250 hours in 2010-11 and
filled 261 catering orders
 training space for the Career
Directions in Hospitality
program offered in conjunction
with Fred Victor’s Employment
and Training Services
 Partners: United Way and
foundations like McCutcheon
Foundation.

53. St. John’s Bakery
Food services social enterprise of
St. John the Compassionate
Mission
 aim: to provide exceptional
breads and sweets that use the
finest ingredients and no
preservatives, and a nourishing
environment that responds to
the needs of all those who
contribute to the creation of
these products
 employs people who have been
outside the labour
market, offering them training
and opportunity for permanent
employment
 received $350,000 in TEF
financing for technical assistance
and working capital
 Revenues grown from $81,000 in
2004 to $740,000 in 2009

54. Centre for Social Innovation (CSI)
Non-profit social enterprise that
creates community
workspaces, incubates emerging
enterprises, and develops new
models and methods with world-
changing potential
 Mission: to catalyze social
innovation in Toronto and
around the world
 Target ventures: nonprofits and
social purpose businesses
targeting
economic, environmental, social
and cultural challenges
 Home to over 250 organizations
and projects in two Centres in
Toronto

55.  School for Social Entrepreneurs (SSE-O)

56. MODELS
Social Impact Bond (SIB)
Social Impact Bonds (SIBs) employ private investment capital to
pay for early intervention programs delivered by nonprofit
service providers
Social Impact Bonds monetize social outcomes by capturing the
value between the cost of prevention now and the price of
remediation in the future
The government pays investors their principal and a rate of
return only if programs achieve predefined results

57. MODELS
Service providers Deliver evidenced
based
interventions/social
services
Investors
Intermediary
Coordinates
relationships, measu
res outcomes
Provides upfront
funding to delivery
agents via
Government Contracts with intermediary, receive
intermediary for s percentage of cost
preventative savings to
services government
Treatment Population Cost savings
generated if
outcomes are
achieved

58. PATHWAYS

59. How can you engage in effective social
enterprise and social finance activity in
Hamilton?

60. PATHWAYS
As a community:
 Coordinate Efforts: Develop a social enterprise working group
and/or embed social enterprise/social finance initiatives into
existing plans and strategies. Ensure all stakeholders, from tenants
to housing providers to local politicians, are engaged in the
conversation.
 Profile Success: Profile existing social enterprise and social finance.
 Identify Leaders: Identify organizations or institutions that can take
leadership to fund, coordinate, build capacity, and deploy
initiatives.
 Take Action: Execute strategies that build community resilience.

61. PATHWAYS
Process
As a nonprofit organization:
 Discuss: Discuss the opportunity with your staff and board.
 Connect: Meet with community partners and practitioners to learn
more about how you might engage in social enterprise or social
finance activities.
 Explore: Develop potential options and determine feasibility.
 Resource: Acquire the necessary human resources, technical
supports, and financial support for an appropriate strategy.
 Deploy: Deploy a strategy that aligns with your core mission.

62. PATHWAYS
Supportive Activities
 Board development and literacy: There are a growing number of
organizations looking for a deeper level of understanding of the financial
operations of their organization and others, as well as opportunities in
social finance and their associated risks and regulatory implications.
 Financial fitness tests: There are organizations like the Community
Forward Fund that can test your organization’s financial fitness.
 Enterprise feasibility: For those organizations interested in adding new
enterprising activity or additional capacity, there are opportunities to work
with paid & pro-bono advisors on financial feasibility.
 Performance Management: In an era of fiscal restraint and outcomes-
based financing, performance management in the social sector is
increasing relevant for: operational improvements, funders, benchmarking
for evidence and performance-based contracts.

63. PATHWAYS
Other Initiatives
Stakeholders can consider certain initiatives:
 Foundations: Develop a comprehensive social finance strategy,
which would include setting aside a portion of your assets for
impact investments. Consider setting aside grant funding for
technical assistance for social enterprise activities.
 Local Government: Consider means of supporting social finance
investments (e.g. loan guarantees) and encourage business
centres/advisory services to provide support to social
entrepreneurs.

64. Thank You
www.socialfinance.ca/taskforce
http://impactinvesting.marsdd.com
aspence@marsdd.com

65. QUESTIONS