Impact investing aims to generate financial returns while also creating positive social and environmental impacts. The global impact investing market is estimated at $50 billion currently but projected to grow significantly in coming years. In Canada, the market is estimated at $2 billion currently across community investment funds, foundations, and impact investment deals. There is potential for further growth as social ventures in Ontario have an estimated $170 million in capital needs, while institutional investors show interest in impact investment products. However, gaps remain around intermediation between investors and ventures, impact measurement standards, and support for funds and ventures.

1. AN INTRODUCTION TO IMPACT INVESTING Update, v.1.2 Slideshare Version January 2011

2. SUMMARY WHAT IS IMPACT INVESTING? GLOBAL MARKETPLACE LOCAL MARKETPLACE MARKET POTENTIAL

3. What is impact investing?

4. WHAT IS IMPACT INVESTING? Impact investments aim to solve social or environmental challenges while generating financial return. Impact investing includes investments that range from producing a return of principal capital to offering market-rate or even market-beating financial returns.

5. WHAT IS IMPACT INVESTING? Related terms/synonyms: community investing, program-related investments and mission-related investments (MRIs and PRIs are a sub-class of impact investments); not necessarily “new” Demonstrable social and/or environmental impact Not SRI (socially responsible investing) or negative screening “Although impact investing could be categorized as a type of "socially responsible investing," it contrasts with negative screening, which focuses primarily on avoiding investments in "bad" or "harmful" companies - impact investors actively seek to place capital in businesses and funds that can harness the positive power of enterprise.”

6. WHAT IS IMPACT INVESTING?

7. What is the global marketplace for impact investing?

11. GLOBAL MARKETPLACE New York City Acquisition Fund (Debt) Purpose: support the development of 30,000 low income housing units in New York City Target ventures: for-profit and non-profit affordable housing developers Fund size: $230 million Investment size and term (ventures): Up to $7.5 mil (new build) or $15 mil (acquisition); lending period of up to three years Partners/Investors: Collaboration with the City of New York, major foundations (ie. Ford Foundation, Rockefeller Foundation), and private/community investment groups (ie. JP Morgan Chase Bank) Financial return (investor): variable interest rate currently indexed to prime (minus 40 – 60 basis points)

12. Serviam Gardens: $3.6 million loan an 83-unit complex for low-income seniors in the Bronx.

13. GLOBAL MARKETPLACE Calvert Community Investment Notes (Debt) Purpose: make loans to highly effective organizations that: develop or rehabilitate affordable homes, Finance small businesses, provide essential community services, and/or create jobs. Fund size: $200 million portfolio Target ventures: community development intermediaries, affordable housing, social enterprises and micro enterprises in US and around the world. Investment size and term (ventures): $50k to $2.5 mil; lending period of one to five years Investors: retail investors (min. of $20 online or $1,000 in-person) Financial return: variable (0.5 – 2 per cent)

14. Wood Street Urban Farm: $250k loan through Chicago Community Loan Fund for facility construction.

15. GLOBAL MARKETPLACE Ignia Fund I, LP (Equity) Purpose: empowers entrepreneurship and generates social impact at the base of the socioeconomic pyramid (BoP) in Latin America Target ventures: sectors that have a disproportionate impact on the lives of the poor, such as health care, nutrition, housing, education, and basic utilities. Fund size: $102 million (USD) Investment size and term (ventures): $2 – 10 mil per venture; 12 year term for exit Investors: global and multilateral institutions and high net worth individuals (accredited investors) Financial return: target rate of return (IRR) is 25 – 30 per cent

16. Finestrella: $4 mil equity investment in regional mobile phone company focused on low-income customers.

17. What does the impact investing marketplace look like in Canada?

18. LOCAL MARKETPLACE LOCAL MARKETPLACE Current market size estimated at ~$2 billion (including community investment, foundations, etc.) Potential market size: unknown 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.

19. LOCAL MARKETPLACE GRAPH: DEAL SIZE FOR COMMUNITY/ MISSION-RELATED INVESTMENTS FOR SELECTED CANADIAN FOUNDATIONS, 2010 Foundations Recent study reported that nine Can. foundations had $32 million community/mission investing assets in their endowments, representing four (4) per cent of their total assets.

20. LOCAL MARKETPLACE DEBT EQUITY CHANTIER TRUST ($50k to $1.5 mil) VANCITY CAPITAL CORPORATION ($50k to $10 mil) CAIC: MORT. (Up to $500k) CLEANTECH VCs TAF ($25 k - $750k) SCP (Up to $300k) INVESTECO CAIC: ENTERPRISE (Up to $50k) RENEWAL2 TMX GROUP INC. (NEX, Cleantech Cluster, etc) ($2 - $100+ mil Deals) ACCESS COMMUNITY CAPITAL (Up to $5k) CAPE FUND ($1 - 7.5 million) OTTAWA COMMUNITY LOAN FUND (Up to $15k) $0 $500,000 $1 million $10 million $100 million

21. LOCAL MARKETPLACE Canadian Alternative Investment Cooperative (CAIC) Purpose: building alternative economic structures that are supportive of worker cooperatives, disadvantaged peoples, and the environment. Target ventures: non-profits or charitable organizations, affordable housing initiatives, worker cooperatives, and social enterprises. They target these focus areas through the provision of mortgages and loan financing. Fund size: $7 million Investment size and term: up to $50k loans & $500k mortgages Investors: 48 co-op members, including organizations across the country such as Montreal City Mission (Quebec), Catholic Health Association (Ontario) and Sisters of Service (Ontario). Financial return: mortgages (5 per cent) and loans (8-9 per cent)

22. LOCAL MARKETPLACE FIGURE: CASE STUDIES OF IMPACT INVESTING DEALS IN CANADA PRIVATE EQUITY Rowe Farms (~$4 mil) DEBT VIA LOANS Planet Bean Coffee ($250k) Atira Property Management ($150k) DEBT VIA BONDS CSI Bond ($1.8 mil) TCHC Bond ($450 mil) Skydragon Centre Bond ($100k) $0 $500,000 $1 million $10 million $100 million+

23. What is the local potential for impact investing?

24. MARKET POTENTIAL GRAPH: DEFINED CAPITAL NEED FOR TARGET SOCIAL VENTURES IN ONTARIO 50 per cent of capital need Total capital need amongst the cohort is estimated at ~$170 million.

25. MARKET POTENTIAL KEY FACTS: VENTURES Capital demand: Capital demand for sampled social ventures equals $170 million Access to capital: Social ventures reported that access to capital was their primary resource need: social enterprises (78%) and social purpose businesses (80%) Impact of capital: 81 per cent of respondents stated that they could more effectively achieve their mission with improved access to capital for growth, infrastructure or working capital Capital demand type: 54 per cent of social purpose businesses stated that they would be willing to issue public/private equity. 70 per cent of social purpose businesses would be interested in taking on debt, whereas 48 per cent of social enterprises were interested in taking on debt.

26. MARKET POTENTIAL FIGURE: SAMPLE VENTURES WITH CAPITAL DEMAND

27. MARKET POTENTIAL KEY FACTS: INVESTORS Target: institutional and accredited investors (foundations, asset managers, and wealth managers) Interest in impact investing: 75 per cent would consider impact investments with market return, and 31 per cent would consider investments with modest or below market return Barriers: 75 per cent of asset owners reported the lack of internal expertise to drive investments in impact investing as the most important barrier. 80 per cent of asset owners report that perceived viability of investees is a barrier to investing. Lack of knowledge about impact investing and lack of internal resources to identify such investments also represent a challenge for 58 per cent of the asset owners.

28. MARKET POTENTIAL GRAPH: INSTITUTIONAL INVESTOR INTEREST IN SELECTED IMPACT INVESTING PRODUCTS

29. MARKET POTENTIAL SUMMARY: SUPPLY & DEMAND Social ventures have demand for capital. Non-profit and for-profit social ventures are interested in debt and equity investments. Social ventures have limited access to capital. There is an available supply of capital for social ventures. There is a strong base of existing impact investing activity.

30. MARKET POTENTIAL GAPS Intermediation: There is no trusted, structured marketplace to facilitate private deals for funds or individual ventures. Capital demand does not align with existing supply: There is significant demand for capital amongst social ventures resulting in a regional gap in supply in Ontario. Deal design: Social ventures and investors are unfamiliar with existing and emerging means of structuring impact investing deals. Financial expertise: Ventures do not have efficient and effective access to relevant expertise to increase their ability to acquire capital.

31. MARKET POTENTIAL GAPS Impact measurement: A commonly understood and accepted system of impact measurement has not been applied to ventures or funds. Market readiness: A significant cohort of social ventures, particularly non-profits, require additional supports before they are able to absorb capital. Identification and due diligence: Venture identification, filtering, and research are costly and time consuming for investors and funds. Impact fund support: Local impact funds require support to access additional capital for investment and/or identify venture prospects.