studio earth - social finance workshop

Social Finance WorkshopMichael Lewkowitz

Karim HarjiAndrew Dilts

Why?

Growth is Great!

This biggering is buggering

us!

We’ve got issues

• Aging population

• Environmental degredation

• Resource depletion

• Economic and systemic collapse

Why Money?

“Money plays the largest part in

determining the course of history."

- Karl Marx

CAUSEWAY: a national collaboration

“Money is only a tool. It will take you wherever you wish, but it will not

replace you as the driver.”

- Ayn Rand

"Money.

It's a gas."

- Pink Floyd

Social Finance

Source:

Aquilla

n Inve

stmen

ts

SOCIAL FINANCE

Includes intermediaries, funds, mechanisms... and the marketplace that makes it work.

CommercialDebtGrants

Infr

astr

uctu

re

Capital

SocialAngels

SocialVC

“PRI”Debt

PublicMarket SRI

LandscapeDefinition

Evaluation/Certification

Transactional(e.g. Funds)

ExchangePlatform

CalvertPhilanthropicAssets/DAF

AA1000

GRI

RSF Social Finance

Local Exchange

NFF Capital

Partners

Investors’Circle

Aspen Institute

Domini SocialInvestmentsUnderdog

Chicago ClimateExchange

B Lab

Good Capital

SouthShore Bank

Calvert Special Equities - CF CI Notes - Calvert Mutual Funds

New Schools

Xigi.net

BOVESPASocial

Stock Exchange

UK SocialStock Exchange

Fourth Sector Network

Origo

NFFLendingAcumen Fund

Patient CapitalCollaborative Generation

Investments

GenerationFoundation

Ashoka

Deutsche Eye Fund

© Jay Coen Gilbert, Don Shaffer and John Katovich

More intermediaries a sign of new money in the Blended Value Market

Source: GoodCaptial Story Index Presentation and Jay Coen Gilbert, Don Shaffer and John Katovich

Financial Entities- managing other’s money

Capital Flow

SOURCE ->

ORGANIZATION ->

USE ->

Government OrganizationsIndividuals

OperationsPrograms

Assets

INVESTTAX

DIRECT

CAUSEWAY: a national collaboration

Requirements

Return

Sour

ce P

ersp

ectiv

e Use Perspective

Constructive Dynamic

Constrictive Dynamic

Risk

Restric

tions

It begins with a conversation…• Aligning interests to create innovative solutions

CAUSEWAY: a national collaboration

… results in specific products• Venture capital

– Capital regional et coopérative Desjardins (CRCD) is a $500 million venture capital fund created in 2001 by the Desjardins Movement with the help of a provincial tax credit. Individual investors can invest up to $3500 a year in shares with a 50% tax credit. Shares must be kept for a minimum of seven years. Mission: to provide capital, expertise and access to networks for businesses and cooperatives in all Québec’s regions

• Local community development– The Columbus Foundation used $2 million to seed an $18 million low-cost housing fund to build

1,600 new units of affordable housing. • Startup or expansion capital in underserved communities

– Deutsche Bank announced it will create an innovative $20 million investment fund to finance the expansion of eye care hospitals in developing countries. The Eye Fund I will provide loans and guarantees to support the development of affordable, sustainable and accessible eye care for the world's poor while providing a near-market return for investors

• Debt mechanisms– Milestone achievement of $100m in loans to community finance institutions and social

enterprises by Calvert Foundation’s Community Investment Note• Acquisition of assets

– BC Pension Funds – 21 BC-based union and management pension funds pooled $27 M to form Concert Properties in 1989 (originally named VLC) with the objective of financing affordable rental housing in BC, and creating jobs in the unionized construction industry. Today the 100% pension plan owned real estate corporation has $800 million in assets, with a track record of creating 10 million hours of on-site employment for unionized construction workers.

CAUSEWAY: a national collaboration

… and can change whole systems.• Coming together of the great catalysts

–capital + community• Great Bear Rainforest (2 million hectares)

–Start: environmentalists + lumber companies get together–2001: private foundations + BC premier’s office -> 1st nat.–2002/3: determination of ecological value and economic pot.–2007 Outcomes:

• $120 M across 2 funds: $30 M fed, $30 M prov., $60 M private• Provincial government actions

– New ‘ecosystem based’ land management regime (3x PEI)– New park designation for ecological protection

• Collaborations– Collective land-use agreement among prov. gov’t and first nations– North coast first nations collaborating (e.g. joint marketing and distribution of fish)– Shared governance between private, first nations, government

http://www.conservative.ca/EN/1091/105904

Could mobilize > $100B

Micro Finance

MONITOR INSTITUTE 21

The Future ofSocial Capital Markets

Katherine FultonOctober 2008

MONITOR INSTITUTE 22

All Investing$61.90 Trillion

Negatively Screened Funds + Impact Investing$2.71 Trillion

How Big Could it Be?

Impact Investing in 5–10 years?

U.S. Philanthropy$0.31 Trillion

Impact Investing has the potential to grow to ~1% of total managed assets, which could result in ~$600B of capital

channeled towards social and environmental impact

MONITOR INSTITUTE 23

A convergence of actions

Create industry defining funds as a beacon for how to address specific

social issue(s)

Place substantial catalytic, risk-taking capital in mezzanine finance structures

Develop impact investing network

Set the industry standards for social measurement

Lobby for specific policy / regulatory change

CoordinatedLeadership

THAT’S HOW IT COULD TAKE OFF

Canadian Context

• Limiting regulatory framework

• Income Tax Act and charity law significantly constrain flow of capital

• Strong non-profit sector

• $120 B annual expenditures• >7% of Canada’s GDP• Above average growth• 1.5 M workers + 0.5 M volunteers• 2nd largest in world per capita

• Internationally significant

• Resources• Water, energy, forests

• Examples• Great Bear Rainforest

Non-profit income sources

Individual Donations

8%

Gifts5%

Earned Income

35%

Government49%

Corporations

3%

Design Breakouts

Approach

• A change in conversation• A change in flow

Application

• Investments• Products• Systems

Get Involved

www.SocialFinance.ca

Social Finance WorkshopMichael Lewkowitz

Karim HarjiAndrew Dilts