Advancing the Task Force recommendations by JoannaReynolds


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									May 2011
Mobilizing Private Capital for Public Good

Canadian Task Force on Social Finance

                                              Investment Fund. This fund would
Task Force                                    support existing regional funds to reach
                                              scale and catalyze the formation of new
recommendations and                           funds. Provincial governments should
                                              also create Impact Investment Funds
specific follow-up on                         where these do not currently exist.

each for the                                  Establish the Canada Impact Investing
Government of                                 Fund. To mobilize additional capital, we
                                              recommend a public investment of $20M per
Canada                                        year (for five years) in first loss capital, to be
                                              matched by private, institutional and
                                              foundation investors in a fund-of-funds
                                              structure. The federal government should
                                              allocate the first $20M to kick-start
Recommendation #1                             the deployment of social investment capital
Maximize foundations impact                   in Canada.
through mission-related                       Provincial/territorial governments can
investing (MRI).                              establish their own new regional impact
                                              investment funds. For example, the
To maximize their impact in fulfilling their   Government of British Columbia has
mission, Canadaʼs public and private          invested $2M as first-loss reserves to
foundations should invest at least 10% of     leverage the development of a thematic
their capital in mission-related              social enterprise investment fund, in
investments (MRI) by 2020 and report          partnership with Vancity and the Vancouver
annually to the public on their activity.     Foundation.

Regulatory and fiduciary clarification —        In Quebec, the Réseau dʼinvestissement
The Canada Revenue Agency should clarify      social du Québec was created in 1997 with
its formal guidance to foundations to         matching contributions from the Quebec
eliminate any misperception or uncertainty    government and the private sector. It has
around whether foundations are                since invested $11.6M in 292 social
discouraged from making mission and           enterprises, leveraging over $147M in total
program related investments. Their            investment.
guidance should clearly state that MRI is a
legitimate means of achieving charitable      The Ontario government should proceed
goals.                                        with establishing the Ontario Social Venture
                                              Capital Fund to address current unmet
                                              demand for social venture capital for
Recommendation #2                             innovative social enterprises.
Mobilize new capital for impact
                                              Other provincial/territorial governments
investing.                                    should seek ways to mobilize capital to
                                              create new, and expand existing, regional
To mobilize new capital for impact
investing in Canada, the federal
government should partner with private,
institutional and philanthropic investors
to establish the Canada Impact

May 2011
Mobilizing Private Capital for Public Good

Canadian Task Force on Social Finance

                                                All levels of government involved in the
Recommendation #3                               creation of renewable energy generation
Create bond like instruments.                   infrastructure should aim to pilot a Green
                                                Bond to accelerate Canadaʼs transition to a
To channel private capital into effective       more sus- tainable energy platform.
social and environmental interventions,
investors, intermediaries, social
enterprises and policy makers should            Recommendation #4
work together to develop new bond and           Mobilize pension fund assets
bond-like instruments. This could require
regulatory change to allow the issuing of       To explore the opportunity of mobilizing
certain new instruments and government          the assets of pension funds in support of
incentives to kick-start the flow of private     impact investing, Canada's federal and
capital.                                        provincial governments are encouraged
                                                to mandate pension funds to disclose
Social Impact Bonds Federal government          responsible investing practices, clarify
departments, which have an interest in the      fiduciary duty in this respect and provide
development of prevention strategies            incentives to mitigate perceived
propelled by SIBs, should fund a partnership    investment risk.
of interested social enterprises to set up a
technical group made up of sector and           Each level of government should enter
financial experts (and informed by advisors      into discussions with potential invest-
from government) to pilot the Social Impact     ment managers, investment advisors and
Bond in various jurisdictions. These pilots     pension funds, to explore what is needed
would share related research, tools and         and how best to structure incentives to both
approaches with each other.                     leverage pension fund investment and build
                                                regional or national investment management
Green Bond All levels of government             and advisory capabilities.
involved in the creation of renewable energy
generation infrastructure should aim to pilot
a Green Bond to accelerate Canadaʼs             Recommendation #5
transition to a more sustainable energy         Modernize regulatory
Community Bonds Provincial/territorial
governments should establish clear              To ensure charities and non-profits are
legislation and oversight                       positioned to undertake revenue
mechanisms to govern the public sale            generating activities in support of their
of Community Bonds by non-profit                missions, regulators and policy makers
organizations. This may take different          need to modernize their frameworks.
forms, depending on the jurisdiction, but       Policy makers should also explore the
                                                need for new hybrid corporate forms for
regulations should take into account the
                                                social enterprises.
relative capacity of non-profits compared
to larger bond issuers, the importance of
                                                The Department of Finance should move
a level playing field with respect to RRSP
                                                to amend the Income Tax Act to establish
eligibility, and the desire to engage           a profits “destination test” treatment of
individual community members as                 related business, to serve as the primary
investors.                                      regulatory mechanism for social enterprises.

May 2011
Mobilizing Private Capital for Public Good

Canadian Task Force on Social Finance

Canadaʼs federal and provincial govern-         this Task Force. This initiative
ments should review existing legislation        should be accomplished for inclusion in
and regulations governing charities, non-       2012 federal and provincial budgets.
profits and co-operatives, to remove
other outstanding barriers to social            The Working Group should comprise
enterprise activities (e.g. clarifying the      representatives from the investment
asset lock).                                    community; the charitable, non-profit, and
                                                co-operative sectors; social purpose
The federal government should take the          business; Finance Canada; Industry
lead in establishing a consultative             Canada; and interested provincial
process to examine the need for a new           governments.
class of hybrid corporation
                                                Given that the social-hire policy initiative
                                                might involve various jurisdictions, a
Consideration should be given to the            separate specialized working group could be
relative merits of 1) amending the              required.
Canada Business Corporations Act (and
its provincial counterparts), allowing for
                                                The Working Group should be
the creation of a ʻcommunity enterprise         announced in the 2011 federal budget
companyʼ within the for-profit corporate         and report by fall of 2011 to permit
framework; or 2) creating an entirely new       inclusion of its recommendations in the
corporate regime for social enterprises at      2012 federal and provincial budgets.
the federal and provincial levels. This could
build on work already undertaken by the BC
Centre for Social Enterprise and SiG@MaRS       Recommendation #7
on options for a new “Community Enterprise
Corporation” that would combine elements
                                                Investment pipeline
from different approaches, including legally-
binding public benefit objectives, community     To strengthen the business capabilities
ownership of assets, and capped dividends       of charities, non-profits and other forms
to investors.                                   of social enterprises, the eligibility
                                                criteria of government sponsored
Provincial governments should consider          business development programs
amending other relevant legislation and         targeting small and medium enterprises
regulations where necessary to obtain an        should be expanded to explicitly include
approach consistent with an application of      the range of social enterprises.
the destination test.
                                                Building on Imagine Canadaʼs 2011 pre-
                                                budget recommendation to the Finance
Recommendation #6                               Committee, federal and provincial govern-
Establish a tax working group                   ments should expand eligibility for SME
                                                business and financing support
To encourage private investors to               programs to include the spectrum of
provide lower-cost and patient capital          social enterprises (charities, non-profits,
that social enterprises need to maximize        co-operatives, and social purpose
their social and environmental impact, a        businesses). In all other respects, social
Tax Working Group should be                     enterprises should be subject to the same
established. This federal-provincial,           eligibility requirements and criteria as other
private-public Working Group should             businesses.
develop and adapt proven tax-incentive
models, including the three identified by

May 2011
Mobilizing Private Capital for Public Good

Canadian Task Force on Social Finance

Local Canada Business Service Centres
and other local business information and
service providers should identify special-
ized social enterprise business services
delivered in their region and integrate
them into their information and referral

CFDCs should work to build the know-
ledge and capacity of local Community
Futures Boards to understand and meet
the needs of social enterprises.

The federal government should provide
targeted funding to designated regional
hub organizations to facilitate coordination
and knowledge exchange among organiza-
tions providing business advisory and finan-
cing supports for social enterprises, to build
a more effective national network.

Regional organizations should designate
leadership to coordinate a collaborative
assessment of the capacity of different
business and finance support services for
social enterprises, and propose ways to
move toward a more comprehensive and
effective system of support in their region.


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