Social Capital Markets Conference 2009:

A Review of Advancements, Trends & Key Participants

September 15th, 2009

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Contents

2. Enabling a Social Finance Environment

3. Creating a Supply of Capital

4. Creating Competitive Demand

1. Introduction to Social Capital Markets 20091. Introduction to Social Capital Markets 2009

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5. Canadian Delegation at SoCap 2009: Key Takeaways

Introduction to SoCap 2009

• Conference title: “Intersection of Money and Meaning” • 900+ participants representing 32 countries • 40 panels and over 150 speakers• Roughly 50% overall participation growth since SoCap 2008• Diverse representation:

– Government– Private/Public Foundations– Entrepreneurs – Intermediaries– Non Profits– Fortune 500 companies including banks, investments companies and

various industries

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Contents

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2. Enabling a Social Finance Environment 2. Enabling a Social Finance Environment

3. Creating a Supply of Capital

4. Creating Competitive Demand

1. Introduction to Social Capital Markets 2009

5. Canadian Delegation at SoCap 2009: Key Takeaways

Enabling a Social Finance EnvironmentEngagement with Government

• Challenge: Government needs to play a role raising the profile of social innovation by working with leaders to bring new architecture to the industry in order to achieve growth, continuity and uniformity

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Key Advancement ContextWhite House Office of Social Innovation and Civic Participation

Focused government department committed to developing social innovation and its marketplace in the US

Various regional government offices of social innovation

After the announcement of a dedicated Office of Social Innovation in the Federal government, many local and community government offices have followed suit with the creation of social leadership positions

$50mm Social Innovation Fund

The Government has allocated $50mm in its budget for Social Innovation. It intends to disperse the money through intermediaries tasked with leveraging the money through support from foundations and other private investment. The target is 3:1 government-to-private investment contribution

Enabling a Social Finance EnvironmentEngagement with Government

• Opportunity: Government has the ability to induce systemic change

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Key Trends ContextGovernment as an ally 10 years ago, dreamed of venture philanthropy, maybe an

academic program for social entrepreneurship. Now, Government is regarded as a partner to advance social innovation (Vanessa Kirsch-New Profit)

From Government as an outsourcer to Government as an enabler

The historical role of Government was an initiator and deliverer, but with Reagan things began to move to an outsource model. Now, we are seeing a shift to role of Government being an enabler (Andrew Wolk, Root Cause)

Top down & bottom up approach

Leadership and guidance demonstrated from Government, however, innovation, policy advocacy, and large scale change is intended to be catalyzed on the ground

Enabling a Social Finance EnvironmentEngagement with Government• Leadership: The sector needs political leaders to champion social change

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Key People/Organizations

Description

US Federal Government Demonstrated initial commitment from President Obama to leadership in social innovation

Sonal Shah (Office of Social Innovation)

Sonal is the new Director of the Office of Social Innovation and Deputy Assistant to the President. She has both social and finance experience founding Indicorps and a leadership role at Goldman Sachs. The goal of the office is to catalyze and foster partnerships that lead innovation and leverage expertise., however, the 4 person office can not do it all….

Andrew Wolk (Root Capital)

Andrew is a leading advocate for governmental reform focusing on social innovation in the areas of:-Leadership -Targeted spending -Enable growth, enable change-Incentives

Contents

2. Enabling a Social Finance Environment

3. Creating a Supply of Capital3. Creating a Supply of Capital

4. Creating Competitive Demand

1. Introduction to Social Capital Markets 2009

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5. Canadian Delegation at SoCap 2009: Key Takeaways

Creating a Supply of CapitalEngagement with Mainstream FinanceChallenge:• The social capital market is not yet efficient. Need to tap into capital markets

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Key Advancement ContextSocial capital hybrid fund development

“Gearing up” - Subordinated 1st lost equity contribution (0-low return on investment) is used to attract senior capital (at a higher return) to advance deal making. Ex. Deutsche Bank Eye Fund

Global Impact Investment Network (GIIN)

Group of investors and intermediaries interested in investing to generate social/environmental and financial returns. Dedicated to incubating activities that can accelerate the impact investing industry’s maturation and capitalization

Resilient, profitable and scalable businesses with high value propositions

Profit=Growth=ChangeSocial enterprise or social purpose business need to generate profit to attract additional capital to support growth and scale. (Alvaro Rodriguez-Arregui IGNIA)

Creating a Supply of CapitalEngagement with Mainstream Finance• Opportunity: Need to think about philanthropy as an investment class

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Key Trends Context

Humanizing capital Tailoring finance structures, relationships and partnerships that produce better deals for low-income/disadvantaged people (i.e. tiered pricing) (David Green – Ashoka)

Philanthropy vs. Investment capital

The discrepancy between philanthropy and investment capital is disappearing. Social-minded corporations and high net worth individuals are looking for: - sustainable business/funding models for investment ; - opportunities where philanthropic “capital” is used to leverage other pools of capital - longer investment periods and investment partnering

Donor-advised funds Donor-advised funds provide a hybrid philanthropy opportunity: -Investment minimums are getting smaller -Investment risk and fiduciary duty lower than commercial -- investments

Creating a Supply of CapitalEngagement with Mainstream Finance• Leadership: A Network of multi-functional stakeholder groups

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Key People/Organizations

Description

Tim Freundlich (Calvert) Tim is the Director of Strategic Development for the Calvert Foundation. He has significant experience designing new financial instruments in the community development and social investment sector. ( how is he helping? What is he doing? – might use as an appendix)

Big 4 Accounting

PriwaterhouseCoopers and Deloitte have been lead advisors in the creation of a standard taxonomy and shared metrics platform for social investment. Their goals is to model impact reporting after IFRS/GAAP reporting standards.

Amit Bouri (GIIN) Amit is the Director of Strategy & Development for the Global Impact Investing Network. His goal is to work with fund managers, investors, and government to increase the proliferation and take-up of impact investing

Contents

2. Enabling a Social Finance Environment

3. Creating a Supply of Capital

4. Creating Competitive Demand 4. Creating Competitive Demand

5. Canadian Day: Key Takeaways

1. Introduction to Social Capital Markets 2009

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Creating Competitive DemandImpact and Outcome MeasurementChallenges:• In general, blended value organizations struggle to value their competencies

and book value. This precludes investment and resources to scale projects• Potential Solution: Defining impact as form of business deal evaluation

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Key Advancement ContextA common language A single taxonomy called IRIS has been created by a collaboration

of foundations, practitioners, investors, and advisory groups as a framework for measurement. The taxonomy has been leveraged to create a common set of standards for the field of social finance.

Tools Google and Salesforce.com platforms have been used to develop a portfolio data management tool specific to the social sector, called Pulse. Efforts are recognized as work in progress however there has been early buy-in and take-up

Theory in practice A newly established network called Global Impact Investment Network set out to advance impact investment has embraced IRIS as its methodology to evaluate investment opportunities.

Creating Competitive DemandImpact and Outcome MeasurementOpportunities: • Flow capital to non profits that demonstrate value and effective use of

investment dollars• Keep metrics and social analysis aligned to mission to assist investees and

help investors understand their social impact

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Key Trends ContextMetrics evolution We have reached a critical point in the discussion about

metrics. Time was, metrics were optional, elusive, or unknown. Now they are plentiful, pervasive, and dynamic. That calls for a different discussion than we've had in the past (Lucy Bernholz)

Demonstrate value for money

Endowments and capital pools have significantly decreased and wealth generation is down, underperforming non profits will no longer be supported to limp along

Metrics: flexible and co-creative

Investors are establishing relationships with investees and are acknowledging that support is needed to carry out measurement. Metrics are expected to be designed to guide management decisions, not duplicate or increase efforts

Creating Competitive DemandImpact and Outcome MeasurementLeadership: • As impact investment increases, so does impact measurement scrutiny and

fragmentation between players in the sector• Must set aside personal agendas for collective goals of shared vision

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Key People/Organizations

Description

Antony Bugg-LevineCarla Javitz

Thinking:Bugg-Levine (Rockefeller/Columbia University): Metrics as evaluation criteria for impact investing Javitz (Roberts Enterprise Development Fund (REDF)): Investment and social impact measurement (SROI)

PulseSocial Venture Technology Group (Svt)

Tools:Pulse – collaborative social metrics tool integrated with IRIS Svt – Impact Dashboard for social investment portfolio

GIIN/IRISDeloitte/PwCSalesforce.com

Action:GIIN/IRIS convened stakeholders to develop network, taxonomy and standards with Deloitte and PwC. Salesforce.com developed platform and application for use

Contents

2. Enabling a Social Finance Environment

3. Creating a Supply of Capital

4. Creating Competitive Demand

5. Canadian Delegation at SoCap 2009: Key Takeaways5. Canadian Delegation at SoCap 2009: Key Takeaways

1. Introduction to Social Capital Markets 2009

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Canadian Day Pre-Conference Kick-off hosted by

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What does this Mean for Canada?Brainstorming Opportunities

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What does this Mean for Canada? Key Takeaways and Next Steps

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Takeaway Next StepParticipation is increasing in the emerging social finance movement

1. Create work groups to address opportunities2. Utilize socialfinance.ca as shared web platform

Policy change is critical 1. Organize a group of Canadian leaders to champion a task force mandated to create a framework and tactical recommendations for policy change

Social finance is response to important dynamics of change

1. Within non-profit world, the inexorable movement towards more diversified, sustainable and resilient business models

2. Within for-profit world, the imperative that capital necessarily be expected to produce social and/or environmental dividends as well as financial returns

For more information on Social Innovation Generation or Causeway, please contact:

Tim Draimin Adam JagelewskiExecutive Director, SiG Program Coordinatortim@sigeneration.ca adam.jagelewski@socialfinance.ca

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