Presented by Tim Draimin

1. Social Innovation and
Social Finance
Tim Draimin
CEO, Tides Canada Foundation;
Chair, Causeway
Philanthropic Foundations of Canada (PFC), October 22-23, 2007 – Montreal

2. Social Innovation is great…
But how is it funded?
• For reaching scale, social innovation development
goes through various phases…
• For durability, funding needs to be resilient,
sustainable…
• For achieving impact…
• Current nonprofit external funding sources (charitable
donations and Gs+Cs) face challenges
• Less visible option is business model based: a social
enterprise or hybrid (part nonprofit, part enterprise)
• Challenge becomes: How to finance enterprising
nonprofits?
How can Social Finance provide a solution?

3. Social finance is…
finance with a social or
environmental mission
Or,
Social finance is a sustainable
approach to managing money that
delivers social, environmental
dividends and economic return
through social enterprises operating
in the non-profit or public benefit
universe.

4. Social Finance Exists Across A
Broad Continuum…
HIGH INVOLVEMENT
Venture Venture
philanthropy capital
COMMERCIAL
CHARITABLE
Traditional grant
making Bank lending
LOW INVOLVEMENT
Adapted from Margaret Bolton, 2003

5. Social finance’s most visible example is
MICROFINANCE…

6. What is The Profile of Canada’s
Growing Nonprofit Sector?
• $120 Billion annual expenditures
• Economically larger than either the retail trade
or mining, oil & gas industry (2003)
• Nearly 8% of Canada’s GDP
• 1.5 M workers + 0.5 M volunteers; 9.2 % of
economically active population
• NP Sector is 2nd largest in world per capita
• NP sector growing faster than business
Source: Imagine Canada

7. NONPROFITS DEPEND ON
FEW SOURCES OF INCOME
All Organizations Core Nonprofit Sector:
40% provincial, Excluding Hospitals,
7% federal Colleges & Universities
100% 24% provincial,
100% 9% federal
36%
75% 49% 75%
21% goods & services,
16% membership fees
50% 50%
43%
35% 11% individuals,
25% 25% 3% corporations
17%
13%
3% 0%
4%
0%
Government Earned Income Donations and Grants Other
Source: CRA and Imagine Canada

8. The Thin Base of Support

9. Growing Donations and
Declining Donors:
$1,400
1984 to 2005 30%
29%
$1,200
28%
27%
$1,000
Donors as a %
of Taxfilers 26%
$800 25%
Average Donation ($)
24%
$600
23%
$400 22%
4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5
198 198 198 198 198 198 199 199 199 199 199 199 199 199 199 199 200 200 200 200 200 200
Donations % of Taxfilers
Source: CRA compiled by Imagine Canada
Courtesy Michael Hall @ Imagine Canada

10. “Population aging is a worldwide phenomenon that will
affect all G-7 countries”
Courtesy Arthur Wood + Ashoka SFS

11. “The projected decline in the employment-to-population ratio will
gradually become a hindrance to growth in living standards beyond
2010”
Courtesy Arthur Wood + Ashoka SFS

12. “Population aging will be a key challenge facing the
Canadian economy over the coming decades”
Courtesy Arthur Wood + Ashoka SFS

13. Do Funding Trends Mean
The Current Model Is Hitting a Wall?

14. Social enterprise is…
A business with primarily social
(and/or environmental) objectives
whose surpluses are principally
reinvested for that purpose in the
business or in the community, rather
than being driven by the need to
maximise profit for shareholders and
owners...

15. Social enterprise across Canada
ECF: Aboriginal
Social Financial The
Enterprise Institutions challenge:
Fund Build robust
Innercity capital
Renovations market
Great Bear
Chantier de
Rainforest
l’economie
sociale
FCES
Ecotrust
Canada
CED
Investment
Funds
Vancity
Community
Social
Ownership Capital
Solutions
Partners

16. Social financial for public benefit
• The flow of financial capital
to human need uses:
– Affordable Housing
– Social Enterprise Sources
– Support for working families
– Health & Home Care Intermediaries
– Community Development
– Social Economy
– Clean Technology Mechanisms
– Microfinance
– Fair Trade Recipients
– Green Building
– Education
Uses
– Bottom of the Pyramid
(source: market sector listing adapted
from www.xigi.net)

17. Social finance examples
• 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 Québec
• 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 created 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
• Debt mechanisms
– Millions in loans to community finance institutions and social enterprises by
Vancity, Citizens Bank and Calvert Foundation’s Community Investment Note,
• Using public policy & tax system
– PLAN (Planned Lifetime Advocacy Network) promoted Registered Disability Savings
Plan (RDSP), families are incentivized to save for disabled children who will survive them

18. Social Finance & Foundations
• Mission Related Investing (MRI): Canadian
foundations create finance facility for
conservation in partnership with chartered bank
• Program Related Investment (PRI): Canadian
foundations make loans to charities to expand
social enterprises
• Fdn Grants can join with private sector loans to
enable community initiatives
• Fdn Grants matched by government grants
complimented by private sector investment
(Great Bear Rainforest)

19. Collaborative approaches and blended returns
• Growing social and environmental
pressures +
government and market failure =
the conditions for social innovation
Projected
Income Government Business
New
Social Finance
Hybrid
Expanding Space
Earned Income
Existing Charity &
Earned Income Non-profit
Gvrnt Gs & Cs
Charitable
Donations
Courtesy CAUSEWAY

20. Expanding the Product Range Entry of banks
Social Breaking with Capital
Investing down legal Market
Ventures structure CIC Instruments
& L3C
PRI / LLC
Minus 100% IRR Plus 5% (and
beyond) IRR
“Not For profit”
Foundation “For Profit”
Grant model Iterations of
Venture Capital
models
THE IMPORTANCE OF COLLABORATION AND CHANGE
To solve the problems on a systemic basis requires:
Collaboration from the social sector
Creation / Evolving of Intermediaries to create Collaborative behaviour
Foundations – Leverage Capital, Increase Innovation but HOW to draw in more
Private capital
Governments to change legislation – Tax treatment and Legal structures
Banks to bring their skills to bear
Courtesy Arthur Wood + Ashoka SFS

21. How does capital flow? TAX Individuals INVEST
Government Organizations
 From the source
 Financial Entities
- managing other’s money
DIRECT
Community Interest
Companies
s
Social
te ri ty
B . Bu us.
e s es
e
ris
i n si n
En ha
B
rp
s
C
es e
Into an organization
Ar ity
R os
ci of
s. ar
c. urp
p
us
So m
Bu C h
al
So P
c.
So
Commercial
Adapted from : John Kingston , Venturesome
Operations
 use in either
For Programs
Assets
Courtesy: CAUSEWAY

22. The good news is that…
 Many Canadian foundations and financial institutions are
already involved with social finance type initiatives
 Canada can accelerate the adoption of social finance by
learning from and borrowing proven models from US and UK
 We know what we require to make the transition to a robust
social finance marketplace:
New conversation among finance, government and nonprofits about
the potential to scale up innovative social enterprise and social finance
New capital market instruments involving the range of financial
institutions: banks, credit unions, pension funds, mutual funds, etc.
Public policy that a) creates incentives for capital to expand into
social finance, b) borrows international best practices in charity
regulations that enable nonprofits to operate successfully in the
growing hybrid space
Strengthening the capacity of nonprofits and their social enterprises

23. Causeway
Is a new national collaboration
accelerating development of a social
finance market place for financing
social innovation serving public
benefit

24. Thank You
For more information about CAUSEWAY
http://causeway-sff.wikispaces.com/
and Social Finance visit:
www.tidescanada.org
For more information on the charity sector visit:
www.imaginecanada.ca