The document summarizes a meeting agenda for Social Finance Ontario that will discuss the policy context of social finance, social enterprise frameworks, social finance tools and models, and whether social finance can meet emerging needs in the nonprofit sector. It then provides examples of social finance policies and models from jurisdictions like the UK, US, Canada, Quebec, and Nova Scotia that utilize tools like tax credits, community investment funds, and hybrid corporate structures to enable social finance.

1. Social Finance
Ontario

4. Agenda 12:30-4:30pm
 Introductions - Lynn
 Social Finance Policy Context - Joanna
 BREAK
 Social Enterprise Framework – Tonya
 BREAK
 Social Finance Tools & Models – Joanna
 Discussion - Allyson

5. Survey Monkey says….
 Exploration of whether social finance can
meet the current and emerging needs for the
nonprofits sector.
 Can we create an enabling environment for
social finance in Ontario?
 Explore policy and social finance models for
adaptation in Ontario.

6. Outline
 What is social finance?
 Policy Context: UK, US, Canada.

7. Social finance is…
sustainable finance with a social or
environmental goal.
Social finance aims to leverage existing
capital to attract new investment for public
benefit

8. Taking root in a hybrid universe
BUSINESS
GOVERNMENT
Hybrid Space
CHARITIES&
NON-
PROFITS
Licensed under a Creative
Commons Attribution-
8
Noncommercial-Share Alike 2.5
Canada License

9. Ying and Yang:
social enterprise & social finance
• Community NPO’s are innovatively
developing new enterprising
models.
• Social finance ( loans and quasi-
equity financing) is needed to start-
up, operate and expand enterprising
components.

10. Who is involved?
People looking for capital:
 social enterprises, community nonprofits, charities,
social entrepreneurs.
People supplying capital:
 retail investors who invest in a finance product.
e.g. RDSP or SRI mutual fund through a bank or
credit union.
 institutional investors e.g. pension funds,
foundations or labour funds.
Advocates:
 networks & organizations, individual champions,
academia, think tanks, government.
Service Providers:
 legal, accountants, product supply, finance
institutions.

11. Fraser Valley Centre for
Social Enterprise
Économie solidaire de l’Ontario
Social Enterprise
SRI in the Rockies
Community
Haween
Power Fund
Social Investment
Eco Trust Social Capital
Organization
Partners Carleton
CCA Center for
CED-NET Community
Plan
Innovation
Alterna
institute
VanCity PfC Chantier de
Resilient Capital
l’economie
Edmonton Social Sociale
Enterprise Fund Ontario Non –Profit Network
Causeway
SiG@MaRS
Eva’s print shop
Ashoka
Somali Business
Development

12. Enabling public policy
UK and US
Government Bodies
 Office of the 3rd Sector
 US office of innovation
 US Community Reinvestment Act

13. Office of the 3rd Sector
 Created in 2006
 Lead to policy changes and streamlined
funding to the voluntary sector.
 As well as grants, there are other sources of
investment:
 Social investment
 Risk Capital Fund for Social Enterprise
 Unclaimed Assets
 Adventure Capital Fund

14. Office of 3rd Sector:
Social Investment
 Social investment is investment made for a
social purpose organizations.
 grants, loans, equity investments or other
emerging forms to enable social enterprises, to
develop their operations and be
 Examples of social investors include:
 Adventure Capital Fund
 Community Ventures
 Charity Bank
 Futurebuilders England
 Triodos
 Unity Trust Bank
 Venturesome
 Bridges Community Ventures

15. Office of 3rd Sector:
Risk Capital Fund for Social Enterprise
Risk Capital Fund for Social Enterprise
The Office of the Third Sector's £10m risk capital investment fund aims
to improve social enterprises’ access to private and independent
investment.
Supports enterprise in the stage between start-up and growing their
business.
They established a fund manager, “Capital for Enterprise Limited”
to manage funds for risk capital investment.

16. Office of 3rd Sector:
Unclaimed Assets
Unclaimed Assets
 Allows money in dormant accounts to be
reinvested in youth programs
 Protects consumers' rights to reclaim their
money at any time.
 “Dormant Bank and Building Society
Accounts Bill, 2007.

17. Office of 3rd Sector:
Adventure Capital Fund
Adventure Capital Fund
Launched in December 2002 with the aim of
delivering a new form of long-term
investment into community enterprises.
Aims to fill the investment gap that faces
community enterprise, and to increase
investment readiness of community
organizations who want to move to
enterprise.

18. What is stirring in the US?
ISSUE:
 Provides $7B a year in R&D tax credits but,
 a disconnect exists for nonprofits and charities with
limits to their activities.
 Therefore no market place for innovation in the
nonprofit sector.
IN RESPONSE:
 Obama and Biden will create a Social Investment
Fund Network, a gov’t supported corporation (like
the CBC)
 Social Entrepreneurship Agency for Nonprofits

19. Community Reinvestment
Act,1977
 to reduce discriminatory credit practices
against low-income neighborhoods, a practice
known as redlining.
 to encourage regulated financial institutions to
meet the credit needs of the local communities
in which they are chartered, consistent with
safe and sound operation.
 CRA has helped community organizations win
increased investments, charitable
contributions, branches, and access to loans
and financial services. More than $1 trillion
dollars has been committed to community
investments; the polices and practices of
financial services have significantly changed;

20. Enabling public policy
Canada
 Nova Scotia CEDIF
 Manitoba Tax Credit
 New Media Tax Credit

21. Nova Scotia Community Economic
Development Investment Funds
 Since 2000, 51 Community Economic
Development Investment Funds (CEDIFs)
have been established in Nova Scotia.
 These CEDIFs have been established as a
result of the Nova Scotia Equity Tax Credit, a
tax credit specifically developed by the
provincial government to stimulate investment
in Nova Scotia’s small businesses, co-
operatives and CED organizations.
 CEDIFs raise funds by issuing shares to
individual investors and then invest that capital
in local businesses.
 The enterprises that CEDIFs invest in may or
may not have social objectives in addition to
economic objectives.

22. Nova Scotia: the Equity Tax Credit
 CEDIFs are one of two vehicles through which
investors can access the ETC. Individual
investors can also benefit from the ETC
through purchasing shares directly from eligible
businesses.
 CEDIFs sole means for raising capital through
the ETC is through the issuance of shares to
individual investors.
 The main incentive of the ETC is a 30% tax
credit calculated at 30% of the investment to a
maximum annual investment of $50,000 (the
maximum annual tax credit is therefore
$15,000).
 Investors are required to hold the investment
for a minimum of 5 years.

23. Nova Scotia: Community Economic
Development Investment Funds
Eligibility
either a corporation or co-operative.
cannot be a registered charity, non-taxable,
or not-for-profit.
A further stipulation is that the organization
must have at least six directors elected from
their defined community.

24. Nova Scotia: Community Economic
Development Investment Funds
Return on Investment
 The provincial government also offers a partial
guarantee on funds invested in CEDIFS.
 If a CEDIF becomes insolvent within four
years of a purchase of eligible shares, the
province will compensate the individual
investor at 20% of their initial investment .
 Funds invested in CEDIFs have been
recognized as pre-approved holdings for a self-
directed RRSP by the federal government.
 Some below market rate return.

25. Manitoba CED Tax Credit
 9 community enterprises have been
approved. Province has not received any
CEDIF applications.
 565 individuals have received tax credits for
investing in community enterprises.
 Collective investment is $1,865,000

26. Manitoba CED Tax Credit
Criteria
An eligible community enterprise can participate
in the CED Tax Credit through a CEDIF, or
through direct investment by an individual
investor.
Not have gross assets in excess of $25 M
Not have net assets in excess of $10 M
Must employ no more than 200 employees.
25% of total wages must be paid to Manitobans.
Must receive a sponsorship endorsement from a
community development organization.

27. Ontario:
Interactive Digital Media Tax Credit
 Eligible Ontario labour expenditures.
 Eligible marketing and distribution expenses.
 By a qualifying corporation with respect to
interactive digital media products.
 Corporations that are exempt from tax do
not qualify.
 Corporations that are labour sponsored
venture capital do not qualify.

28. Ontario: Poverty Reduction Strategy
“Social enterprises are a unique business
model capitalizing on the skill of low-income
Ontarians.”
 Will create an Social Policy Institute
 Sustainable Procurement Strategy, 2009.
Pilot projects will be launched through
Ministry of Children and Youth for local
courier and printing services.
 Conduct a feasibility study for an Ontario
Social Investment Exchange.
 Explore a Community Interest Company
model.

29. Finance products
Hybrid Companies
 Community Interest Companies
 Low Profit Limited Liability
Community Investment Funds
 Fiducie, Chantier de l’economie sociale
 Ontario Social Venture Fund
Program Related Investments
 Endowments and US examples
Ontario Social Investment Exchange
 Working group
Affordable Housing Models
Options for Homes
Alterna Community Alliance Housing Fund

30. Community Interest
Companies (UK)
 Tailored for social enterprise
 Asset lock
 Community interest test
 Payment of directors
 Equity finance
 Cannot be a charity
 2225 CIC since its inception in 2005, as of June
2008

31. Types of CIC in the UK
 Manufacturing 49
 Electricity, Gas and Water Supply 18
 Construction Wholesale, Retail; Certain Repair 66
 Hotels and Restaurants 38
 Transport, Storage & Communication 53
 Financial Intermediation 19
 Real Estate, Renting & Business 377
 Public Administration & Defence 19
 Education 402
 Health and Social Work 308
 Other Social & Personal Services 667

32. Low profit limited liability
company L3C
The challenge put before the New York based
Mannweiler Foundation was how to
“access the vast pools of market-driven wealth
to make socially responsible investments in
… non profit areas”,
Robert Lang CEO Mannweiler Foundation

33. L3C is different from the CIC
 Based on an existing legal structure called the LLC.
 Can have hybrid ownership allowing each partner to
be taxed separately according to their own situation.
 Unlike a corporation, flexibility of the operating
agreement allows members (rather than owners) to
receive profits proportion to their investment or to the
agreement.
 Eligible to receive Program Related Investments.
 Can have layered investments.
 No asset lock and no dividend cap.

34. Quebec:
Fiducie, Chantier de l’economie sociale.
 Started in 2006 with $52 million for investments in Quebec’s
social economy (community controlled) businesses.
 Since beginning its operations in February of 2007, the trust
has already made investments in 12 social enterprises
totaling 4.5 M.
 The trust invests in market-driven or market-supplemented
social enterprises that are operated by non-profit
organizations and co-operatives.

35. Quebec:
Fiducie, Chantier de l’economie sociale.
 1/3 of the first 12 projects have been start-
ups while the remaining 2/3 are expansions.
 Each of the 12 social enterprises to receive
financing derives between 60-75% of their
total revenue from market revenues.
 Enterprises generate the additional 25-40%
of their income from of other sources
including government subsidies,
contributions from foundations, and
fundraising activities.

36. Quebec:
Fiducie, Chantier de l’economie sociale.
Eligibility
 the trust’s loan must not represent more
than 35% of the total project-related costs.
 Provincial gov’t agencies and those that
deliver gov’t programs are not eligible.
 Housing cooperatives are not eligible

37. Quebec:
Fiducie, Chantier de l’economie sociale.
Financial Product Offerings
 two patient capital loan products with 15-
year capital repayment moratoriums.
 The amount of the loans range from $50,000
to $1.5 M, and the average loan at present is
approximately $350,000.
 Operations Patient Capital & Real Estate
Patient Capital

38. Quebec:
Fiducie, Chantier de l’economie sociale.
Return on Investment
 The Government of Canada’s contribution (Canada
Economic Development) is non-repayable.
 The other three partners (Fonds de solidarité FTQ,
Fondaction CSN, Government of Québec) each received
a debenture in exchange for their investment.
 The debenture product offered to the three institutional
investors is scheduled for repayment at the end of a 15
year period.
 The rate of return for the debenture product is the
principal plus interest equal to that paid on a Government
of Canada Bond (greater than 10 year) plus 2%.
 At present, the debenture product pays a rate of return of
roughly 6.35%. (Charest, 2008)

39. Ontario: Social Venture Fund
 2008 Ontario Budget recognized social
entrepreneurs as an innovative way to
advance social goals.
 Allocation was made to pilot social venture
investing in Ontario.
 Proposed $20 million investment vehicle
managed by MaRD Discovery District on
behalf of MRI
 Delay was announced in October 2008 as
part of a “Spending Restraint”.

40. Canada:
Community Investment Funds
 Edmonton Social Enterprise Fund
 Toronto Enterprise Fund
 Enterprising Non-Profits: BC and Ontario
 Meritas (2% of assets to community
development investing = $1million)
 Resilient Capital
 Great Bear Rainforest Fund

41. Program related investments
 In Canada, private foundation endowments
are estimated at $10 billion and universities
at $11 billion.
 Blended value investments that are directly
aligned with program objectives of the
foundation.
 Take form of loans, guarantees, equity
investments and recoverable grants.
 Foundations in Canada can only make PRI
investments into charities. This limits social
enterprise.
 Public policy is required for deals to work.

42. Ontario Social Investment Exchange
“moves beyond SRI”
Vision
 Broad Vision: Improved social (and environmental) outcomes
Mission
 Efficiency: increase efficiency of existing financial capital (it’s ability to
generate social capital)
 New financial capital: attract new financial capital for social firms
 Screening/valuation/assessment: assess the social impact of non-
profit firms
 Intermediary: act as an intermediary for social investors and social
firms (investees)
Focus Areas
 food security
 energy poverty
 low-income housing
 community economic development
 microfinance
 environment and conservation
 first nations
 etc.

43. Alterna Community Alliance
Housing Fund
 $2 million investment by the pension fund of Public
Service Alliance of Canada.
 Alterna Savings Credit Union acted as the financial
intermediary and partnered with the Ottawa Community
Loan Fund.
 Carleton Centre for Community Innovation 3ci acted as
intermediary.
 Long-term 5-year GIC rate of return to provide low cost
financing for 2nd mortgage and primary mortgages.
 Bridge financing for affordable ownership developments.
 Interim financing to cover the costs of construction
overruns,
 Pre-development financing to assist community groups in
developing housing proposal.

44. SRI in Canada
 $433 billion in SRI pension assets in 2006.
 Institutional investors are coming under
pressure from stakeholder advocacy to
invest in SRI.
 That Alterna example can be used to
leverage other capital pools.
 Although, the infrastructure to scale such
opportunities does not yet exist in Canada.

45. Affordable Housing Models
Options for Homes
 private affordable housing developer with
1500 units. Innovative down-payment
arrangement that provides assistance to
buyers.
 The model is being considered by CMHC to
increase stock of privately financed
affordable housing in Canada.
 Home Ownership Alternatives

46. Discussion:
Ontario options
 Low hanging fruit
 Inter-governmental working group with nonprofits
 Community involvement
 Public endorsements
 Partnerships, co-production, collaboration
 Capacity and skill building initiatives
 Use what has been announced in the Poverty Reduction
Strategy
 Procurement Strategy
 Ontario Social Venture Fund
 New permissive roles for foundations
 Identify and develop intermediaries
 Identify Platforms e.g. affordable housing & infrastructure
spending
 Make our mark
 Develop strong accountability frameworks
 Engage business community and SRI community

47. Ontario Strategies…
sustainable and effective framework
 Low hanging fruit
 Inter-governmental working group with nonprofits
 Community involvement
 Public endorsements
 Partnerships, co-production, collaboration
 Capacity and skill building initiatives
 Use what has been announced in the Poverty
Reduction Strategy
 Procurement Strategy
 Ontario Social Venture Fund
 New permissive roles for foundations
 Identify and develop intermediaries
 Identify Platforms e.g. affordable housing &
infrastructure spending
 Make our mark
 Develop strong accountability frameworks
 Engage business community and SRI community

48. Potential Leverage Points
Policy
 Corporate Structure
 Tax
Products
 Social venture capital
 Specialized investment products
 Issues with substantial assets
 Affordable Housing
 Community revitalization (infrastructure)
 Energy and efficiency

49. Canadian Opportunities
 New legislation was tabled as Bill-C4 and died when
the Parliament was prorogued.
 Bill-C4 is amodernization to improve governance,
accountability, and administration of existing non-
profits and charities that incorporate federally.
 Not specific to enable community nonprofits.

50. Cautions
 “off-loading” of government responsibility.
 Values disconnect with the private and
financial sectors. How can civil society
organizations retain their values and culture
once they have entered into partnership with
the private sector?
 Are we abandoning collective provision of
public goods if we consider financial models
other than current delivery?

51. Barriers, just a few of them
 Ontario Charitable Gifts Act, prohibits
charities from owning more than 10%
interest in any business
 Co-ops are not allowed to issue investment
shares, in some provinces.
 Limits on capital retention to be used on
infrastructure and management.
 We have no national charities act.
 Outdated Canada Corporations Act. No
action since 1917!

52. References
 Baldwin Andrea, “Creativity, Social Benefit & Job Creations, Martin Prosperity
Institute: February 2009
 Bridge Richard, Corriveau Stacey, “Legislative Innovations and Social
Enterprise: Structural Lessons for Canada” BC Centre for Social Enterprise:
February 2009
 Chernoff Alex, “Creating Capital Pools to Support Social Enterprise Development
in Manitoba”, August, 2008
 Community Reinvestment Act, http://www.policylink.org/EDTK/CRA/
 Hebb Tessa, “Program Related Investments in a Canadian Context”,
PowerPoint, 2007
 Lloyd Stephen, 2008 presentation at the Social Finance Forum. Available on
Vimeo
 Fraser Valley Centre for Social Enterprise, “Analysis of L3C and CIC Social
Enterprise”, October 2008
 Wolk Andrew, “Advancing Social Entrepreneurship: recommendations for policy
makers and government agencies”, The Aspen Institute: April 2008

53. Questions to ask
 Can people who receive social assistance earn a
living wage from a social enterprise that brings
them out of poverty?
 Is there potential for enough impact for the
community nonprofit sector? Can public policy
enable the nonprofit sector to attract enough
capital that diversifies our funding streams