$800,000 student-led impact investing fund adds new chapters in Ottawa and Victoria
Why It Matters
Business degrees are the most sought-after post-secondary education in Canada. But if students graduate without learning about how business can be a force for good, Canada risks having a corporate class that only orients toward profit.
This story is part of the Future of Good editorial fellowship covering the social impact world’s rapidly changing funding models, supported by Community Foundations of Canada and United Way Centraide Canada.
Last week, seven post-secondary students in Ottawa and Victoria began their careers as impact investors.
The students are the co-leads of two new chapters of the National Social Value Fund, a pan-Canadian non-profit impact investing fund that supports post-secondary students to invest in social enterprises and social purpose businesses across the country.
“Growing up, at the age I am, we’ve been told that, [because of] climate change, the world’s going to end. And it’s kind of been a little bit depressing,” says Lucas Darke, a fourth-year business student at the University of Victoria, and a co-founder of the new Victoria NSVF chapter. “But now that I’m becoming an adult, it’s time for me to go, ‘What can I do to help with the skills that I have?’
“I’m not a scientist. I’m not a climate change expert. But I do have a love for business, finance and investing. How can I help the world [through] sustainability?” he says.
It’s that motivation that prompted Darke to respond to a posting in a school newsletter, calling on students to join NSVF and help build a Victoria chapter. And across the country, he’s far from the only student to be enticed into the project.
Since the launch of NSVF in 2017, more than 100 students have participated as chapter leads, raising over $800,000 from impact investors in seven Canadian cities, and investing in nine, locally-rooted social purpose businesses and social enterprises.
It’s the brainchild of Steve Petterson, a graduate of University of British Columbia’s business program, based on a big problem he identified during his studies.
“In school, I saw a lot of students who were also interested in impact investing, but the vast majority — I’d say 99 percent — ended up down a more traditional business route afterwards,” he says. “And so we [asked], what would happen if we started a fund that gives students the opportunity to actually become tangibly involved in impact investing at a much earlier stage in their career?”
NSVF was the result.
In Canada, business and administration programs top enrollment across all subjects at post-secondary institutions — beating out arts and humanities, healthcare and the trades, according to StatsCan. But just a small fraction of those students advance into social enterprise or social finance careers.
It’s a statistic that NSVF is working to change, but it hasn’t always been an easy ride.
Throwing students into the ‘fire of ambiguity’
After Petterson graduated in 2017, he launched the inaugural chapter of the National Social Value Fund, based in Vancouver. With the support of mentors and faculty, he recruited eight students to join the initial founding team.
A local impact investor, Helder Ventures, provided the group with mentorship and $100,000 in seed capital, which students were responsible for investing in local social enterprises and social purpose businesses.
“We didn’t want to develop something where students were just doing a little bit of research and due diligence and the final decision making came to a few old white guys,” says Petterson. Instead, NSVF’s orientation was to put students in the driver’s seat on all of the big decisions — the fund’s objectives, the interest rate they’d charge, the criteria for investment, and how they’d evaluate potential investees.
With all of these decisions to make, students were thrown into the “fire of ambiguity,” says Petterson. As a result, the first months were rocky for the Vancouver chapter. In weekly meetings with Petterson, students would ask what he thought of particular ventures — whether he believed they’d make a good investment for the fund. But Petterson and the fund’s advisors wouldn’t provide an answer. “We’d turn it back to them and say, ‘Well, what do you think about it? You need to form your own opinion before we share ours,’” he says.
Within a couple of months, UBC students got the hang of it, ultimately growing the fund to $185,000 by the end of the first year and investing in three local social enterprises, according to Petterson.
Since then, things have continued to progress well, he says, both in terms of student learning and fund performance.
Petterson estimates that about half of all of the students who have participated in the program have landed jobs post-graduation that have an explicit social or environmental focus, including gigs at impact investing funds.
Alongside, the non-profit impact investing fund has had strong financial performance and social impact too.
An investment in vegan meat provides a good ‘proof point’
In 2020, the Vancouver chapter realized a whopping 15x return on a $50,000 equity investment into Very Good Butchers, a plant-based meat company, following the social enterprise’s initial public offering (IPO).
The Vancouver chapter has also made investments in ChopValue, a social purpose business that makes upcycled home and office furniture out of chopsticks, and Open Ocean Robotics, a company that has developed a solar-powered unmanned ocean vessel that can turn sea data into insights about climate change, illegal fishing, and shipping routes.
Petterson says that the vegan meat investment is a very good “proof point,” suggesting that through NSVF they aim to test the hypothesis that student teams may be able to perform on-par or better than angel investors on social impact or financial return.
“Angels are going to have a lot more experience with investments than students, but they’re also very susceptible to confirmation bias, of hearing [about a potential investment from their friends] and getting excited,” he says.
Petterson says that the NSVF structure — of having a group of students make decisions together — could potentially root out some of that bias, because there will always be dissenting opinions on any student team, giving students the chance for better-than-angel impact over time.
Offering ‘impact-adjusted’ loan terms to incentivize community value
In addition to their investments “impact-forward” high-growth social purpose businesses, students have also begun work to support several enterprises that focus more on community connections and less on national scale.
In 2018, the Vancouver chapter provided a $85,000 loan to CleanStart, a property maintenance employment social enterprise that provides job opportunities to people who self-identify as having barriers to employment.
The investment in the social enterprise is “impact-adjusted,” says Petterson. This means that if CleanStart creates more impact, according to mutually-agreed upon metrics, the interest rate for their loan drops — from 5 percent to as low as 2.5 percent.
“Often investors are not the ones who are willing to take a cut on that, or take a financial hit,” says Petterson. “[But] because this is all about a good student learning experience as well as supporting the community, we’re fine to be the ones to do that.”
It’s the students’ responsibility to identify suitable enterprises for investment. It’s also their responsibility to raise capital from investors. While seed funding was provided to the Vancouver chapter to invest, in each of the subsequent chapters, it’s been on the student teams to start up their own funds from scratch.
In Kingston, students found a willing partner in the local United Way. And in Montreal, the chapter secured a strong partnership with Desjardins.
When it comes to supporting the initiative, investors have two options — donate or invest. If investors donate, they get a tax receipt and their funds go to a NSVF affiliated foundation, whose endowment is managed by the students (overseen by a volunteer board of directors). Alternatively, donors can invest their capital, which either flows to a for-profit company wholly owned by the NSVF non-profit, or directly to a recipient investee social enterprise (the terms of which are detailed in a co-investment agreement).
Petterson says that so far, outside of Vancouver, funding partners have been more keen to donate than invest, though he’s hopeful that in the coming years this will switch as investors see the fund’s “proof points.”
Sketching out their first pitch to investors
Since students in the new Ottawa and Victoria chapters began their volunteer work with NSVF in September, they’ve built camaraderie as a team, learned about impact investing and social finance and have sketched out their chapters’ own “investment theses.”
The coming weeks will bring the first investors’ presentations — the chance to meet with members of the local impact investing community and ask investors to put money on the line.
Darke is hopeful about his chapter’s prospects for raising funds, and is optimistic about NSVF Victoria’s potential to create impact with social enterprises while building awareness about impact investing.
“I think when people hear the word investment, they think of bonds and stocks and derivatives,” he says. “I think that lots of people don’t know about how you can invest with companies that are doing proactive work.
“We want to bring something to the table that is going to make real change. And I think the way things are going out with the team and the ideas we’re coming up with. I think we’ll be able to do it.”
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