New exchange proposes big money for big problems.
By Samson Okalow
CanadianBusiness.com

A new exchange may soon be joining the world of (big) finance alongside the TSX and Dow, but its mantra is the decided opposite of “greed is good.” The Social Venture Exchange is the brainchild of Adam Spence (also executive director of the Ontario Association of Food Banks), working in collaboration with Social Innovation Generation (SiG) at MaRS and the Toronto Stock Exchange. In development for two years, the Exchange seeks to bring investment dollars to non-profit and for-profit social ventures. Spence, 29, says he got the idea while looking for new ways to finance the food bank’s activities and to reduce poverty. Initially, he considered issuing shares but quickly discarded that idea as unworkable and instead turned to social exchange models that are already up and running in places like London and Singapore. The exchange, which Spence concedes is still wrestling with “fundamental questions” and remains uncapitalized, is slated to launch at the end of 2010, with a pilot in the fall. It will operate online and provide opportunities for both retail and institutional investors via debt financing (loans and bonds) as well as grants/donations. We asked Spence six questions and played some ball.

What is the greatest challenge currently facing the Social Venture Exchange and what are you doing about it?

The greatest challenge is being a startup … being able to obtain the right kind of financing for it and to build the right infrastructure with the right partners in place. [The other challenges are] making sure that we have the right infrastructure in terms of social metrics — the determination of whether a venture is doing a social good; we want to make sure we get the right technology in place and make sure we identify and connect with other exchanges that are operating around the world and learn from them. We want to learn the lessons they have in places like London and Singapore. … We’re making sure we have a strong base of research. So we’re profiling potential social investors [and] social ventures that will list on the exchange. Building that base of data is key for the future viability of the exchange and to determine if it’s even possible.

Who else — person or company — do you feel is doing innovative work and in what way?

One of the companies we’ve learned a lot from is Kiva, an online microfinance platform. They’ve done a lot of incredible things. We have followed the work of both of Jessica Flannery and founder Matt Flannery. Within a very short time frame they’ve been able to build that entity from something that was very small into something that has lent over US$100 million to small business entrepreneurs in the developing world.

How would you describe your leadership approach/style?

It’s collaborative. You have to recognize the strengths and abilities other folks have, and what they know that you don’t, and that’s going to add to the team. So it’s making sure that everyone is able to contribute to the best of their ability and providing the direction and vision that’s necessary.

How have public attitudes toward social justice and the role business plays in it, changed over the last 20 years in Canada?

I think things have fundamentally changed. We need great public policy and we need to ensure that government is involved and they’re pushing the agenda that poverty reduction is a strong part of what they need to do, but in addition to that that we need to take approaches outside of government that involve innovation and the [incorporation] of business practice into the charitable sector. If we’re able to do that then we can have a tremendous impact.

If we look around the world socially responsible investing has increased tremendously, and globally it’s believed it will increase to $500 billion in capital over the next 10 years. In the past two to three years there’s been a tremendous amount of activity in the space and that’s shown by people like SiG at MaRS —they’ve really garnered a lot of interest both from the public as well as government.

A couple of former finance ministers have recently said Canada can’t reduce its deficit without tax hikes. Do you agree? And is there any way to make tax increases palatable to the public?

I think the government will likely have to increase revenues both through taxation and other means. I think that’s something the public recognizes.  … And in addition, we’ll also have to look at providing seed funding and alternative funding mechanisms to achieve [policy] aims. So if you look at investments in affordable housing as an example, we don’t in the immediate term have the ability to provide direct government dollars in the billions; however, if government can provide incentive for people to buy affordable housing bonds, then for a very small investment they can have a huge return. In addition to that we also recognize we’re going to have a deficit for a short time and that’s fine because we have to sustain and maintain the services we have.

You’re a basketball fan. If you could assemble your dream team, and it included you, with what other four players would you share the court?

I’d have Chris Bosh, Andrea Bargnani, Damon Stoudamire and Charles Oakley. I gotta go with all Raptors — I have to be a true fan. They’ve had some amazing players. I would definitely have to be the coach on that team so I’d probably have to add a fifth to the lineup.