Thank you, Mr. Chair.
Thank you for inviting me to testify before the committee.
I am Jacques Charest, president of CAP Finance, the Réseau de la finance solidaire et responsable. This network seeks to promote solidarity finance and development capital in Quebec. In my day job, I am the executive director of the Chantier de l'économie sociale Trust, which is an investment fund created specifically for social economy enterprises. I will tell you about that briefly at the end of my presentation. However, I will try to be as quick as possible so that the members of the committee have time to ask me questions.
What is CAP Finance? CAP Finance was created a few years ago, around 2010. It includes the vast majority of financial institutions and funding agencies providing responsible finance in Quebec.
What is responsible finance? The first thing is to determine what we are talking about when we say social finance, responsible finance, development capital, and so on. For our part, we distinguish between development capital and social finance.
Development capital is when financial institutions provide pure venture capital, but with specific socio-economic goals. They clearly want a return on the investment, but they also want to create jobs and contribute to regional and local development. It is governed by associations. The job creation we are talking about is local.
Let's now talk about solidarity finance, which is the focus of our discussion. Solidarity finance attracts financial institutions, non-profit organizations, financial cooperatives and credit unions that invest almost exclusively in social economy enterprises and in local or community development. Their mandate is to provide, among other things, funding and new investment tools to social economy enterprises.
Our organization includes almost all the players. I will not list them here because it would take too much time, but you can see them in our document.
In 2013, together with Professor Margie Mendell and her team, CAP Finance commissioned a study on the subject because the data were insufficient. We wanted to know what the situation was in Quebec and what all the stakeholders in Quebec had invested in development capital and responsible finance.
Let's look at what we call responsible placement. I am not talking about direct business investment, but the purchase of responsible financial products, responsible funds, ethical funds, and so on. In 2010, responsible placement was at $161 billion. In 2013, it was at $274 billion. Responsible investing was at $13 billion in 2010 and $18 billion in 2013.
Let's now look at the assets of the responsible investment component. In Quebec, development capital investment is $17 billion. In 2013, investment in solidarity-based finance, meaning in social economy enterprises and in local development, was $1.4 billion, which is a 40% increase over 2010.
The market is there and there are investments. However, they must be done right. Work needs to be done on both the supply side and the demand side. Being able to invest to such an extent is the result of working on both supply and demand. You need intermediaries for investment funds. We will later talk about possible solutions for the government in this area. It is important to have stakeholders on the ground to work on the supply side just as much as on the demand side of the financing in order to avoid having very good products but no businesses, or the other way around.
So the situation has really gone from placement to investment in businesses. In terms of social finance, it is important to distinguish between what we could refer to as private businesses and non-profit organizations, or collective businesses. One is not better than the other; it is a choice people make. We chose the collective businesses, social economy enterprises, but it is important to make that distinction because not all of them need the same financial tools.
Those in the private sector are quite present. When we want to connect with social economy enterprises, we need to keep a few differences in mind. We need to see what type of financing is possible. We need to see it as a big picture. This is not about meeting the needs of one or the other, but to consider the needs that are specific to each clientele.
How could the Government of Canada contribute to this? I will talk about its contribution to the trust later.
As was mentioned before, it is important to support the intermediaries in the market, either through specialized or central funds, through a fund that could sustain other funds or through credit enhancement funds. The question is whether we need those subsidies. That is the case in some instances. Are we talking about first losses or loan guarantees? That might be the case, but these are solutions that we need to consider to figure out how to facilitate the development of social finance in Quebec.
In addition, we need to make development capital accessible to our stakeholders, meaning the institutional funds, workers' funds, retirement funds, pension funds or foundations and reduce barriers to investment. Mr. Huddart actually referred to that. On our end, we are working with businesses and funds. However, there are problems and barriers, simply because people cannot invest in a limited partnership. So we must try to get around that.
As Cathy Taylor mentioned earlier, the easiest way is if we consider ourselves businesses and cover all the products and investment support measures intended for private businesses. We often see programs that are for businesses in category 1. Why are they not for NPOs or cooperatives? It's because that's the way things are. There are also programs for the capital and the shares of a company, but since there are none for social economy enterprises, we must find an equivalent.
As I mentioned earlier, in some cases, we should establish mixed structures. We should determine how laws can be amended to include joint ventures. We are talking about either type B businesses or fixed assets. We need to see how a third or a fourth type of business can be included and make sure that we are really talking about social finance and social enterprise. Whether they are for-profit or incorporated, fixed assets must remain with the companies.
There are some solutions I would like to mention. I can share two projects with you accepting that I may be talking about my own businesses. The fact remains that they are a fine example.
The Chantier de l'économie sociale Trust was founded at the beginning of 2007 with the help of a government subsidy. Its capital is at $53 million. Initially, the federal government granted a subsidy of about $20 million, which enabled us to obtain $30 million in investments and loans from workers' funds and the Government of Quebec. With that, since 2007, we have been able to invest $45 million in 127 businesses in Quebec. That has generated nearly 2,500 jobs, 400 entry-level jobs and $265 million in investments. In addition, based on our plan, those numbers will double over 15 years. So we are talking about one subsidy that helped get the movement off the ground and added a great deal to the trust. We have made investments across Quebec.
Finally, as one last example, I will tell you about one of our current projects. We have created a fund for NPOs involved in housing to help with renovations. That is under the federal program. Our project is geared toward those who need help to make it to the end of the first mortgage, but who don't have enough money to afford the cost increases. So we have worked with our partners, private investors and tax-advantaged funds. The goal was to raise $31 million and to loan the money to those people, based on the formula that worked for them.
In this case, the arrangements with CMHC work very well. We need to make sure that these new types of financial products are valid as programs and allow us to invest.
With a $31-million project, we will be able to renovate 1,200 housing units. In this case, one program just needed to be changed. In terms of housing, mortgage is not always the best financing option.