This past week, while Americans were preparing for Thanksgiving, the government of Canada made a landmark commitment to social finance that we should all be thankful for. In its Fall Economic Statement, the federal government earmarked an unprecedented $805 million to advance social and environmental solutions, as part of its broader push to invest in middle class jobs and long term growth.
The $805 million commitment (roughly $600 million USD) includes two initiatives: a proposed $755 million over the next 10 years for the establishment a Social Finance Fund, and $50 million over two years for an Investment and Readiness stream for social purpose organizations.
The new funding could generate up to $2 billion in economic activity and help create and maintain as many as 100,000 jobs over the next decade, according to projections.
According to the Canadian government, the Social Finance Fund will:
– support innovative solutions on a broad range of social challenges through a competitive, transparent and merit-based process
– attract new private sector investment to the social finance sector. It is expected that the Fund would achieve matching funding from other investors
– share both risks and rewards with private investors on any investments
– support only investments that are not yet viable in the commercial market
– help create a self-sustaining social finance market over time that would not require ongoing government support
Both newly created and existing funds, such as community loan funds and Aboriginal Financial Institutions, will be able to access this new capital. Additional details on the Social Finance Fund will be provided in early 2019, as governance and parameters for the fund will be developed further in the coming months.
This investment has been a long time coming.
Canada has decades of history in social finance, from the Desjardins movement in the early 20th century and founding of Vancity in 1946 to more contemporary movements over the past thirty years. Over the past decade, that momentum has built into a national movement with sector building initiatives like the Canadian Task Force on Social Finance in 2010 and most recently, the Social Innovation and Social Finance Strategy Co-Creation Steering Group. In a report released in late August, the Steering Group recommended, among other measures, the creation of a fund to increase access to capital for organizations addressing social and environmental issues, particularly within vulnerable communities.
It was this group, alongside a phalanx of committed public servants and political leaders as well as a growing community of local and national intermediaries that created the momentum and conditions to make this happen.
Special recognition to:
– J.W. McConnell Family Foundation for its longstanding leadership, including recent (and successful!) advocacy efforts to convert interest into action;
– the Social Innovation Generation (SiG) team for laying the groundwork starting a decade ago;
– sector leading organizations including MaRS, VERGE Capital, Upper Canada Social Impact Fund, the Centre for Social Innovation (CSI), Rhiza Capital, Esplanade, Vancity, New Market Fund and more; and
– government leaders in Employment and Social Development Canada (ESDC), the Impact and Innovation Unit of the Privy Council Office, the Ministry of Finance and beyond for navigating this effort through the federal government for many years.
The success of this effort demonstrates yet again that social innovation is powered by great people and partnerships across sectors.
Why does this matter?
This commitment is a market moving action that will:
– help hundreds and perhaps even thousands of entrepreneurs, organizations and funds start, grow and scale their impact at a local, national and global level;
– capitalize necessary infrastructure to finance and support social enterprises, including place-based impact investing funds and support intermediaries in communities and regions across the country;
– place Canada amongst the upper tier of a league of leading nations making major commitments to impact investing, and
– drive positive social and environmental outcomes on issues from poverty and inequality to climate change and youth unemployment.
So what’s next?
The federal government has made a historic investment, but are many more steps to come in the months and year ahead. The federal government will need to work with partners to shape the governance and parameters for the fund. There will be a lot of spadework needed to ensure the fund fits the needs, challenges and opportunities of the Canadian marketplace. It will also be important to learn lessons from similar intermediaries in the UK like Big Society Capital and Social Investment Scotland, and others in early development or operation in Japan, South Korea, and Portugal.
“The complex social, economic and environmental challenges facing our country—homelessness, climate change, youth employment, and the opioid crisis—demand creativity and transformative solutions.”
— Social Innovation and Social Finance Strategy Co-Creation Steering Group
It’s time for financial institutions, advisors, and investors across the country to assume leadership by making impact investing a priority through investments, options, and public action. The federal government’s commitment can be a catalyst for matched investments by major investors, growing the impact and strength of this effort.
It’s also time for all Canadians to make a commitment to impact. We can all review our investment portfolios to see how we can make investments that have a positive social and/or environmental impact. This effort is another opportunity for Canadians to be actively engaged in work that combines the collective power of the community, government, and private sector to drive positive change.
This is not just a major milestone for social finance in Canada. It is a watershed moment for our country as a whole.
Adam Spence is the founder and director of SVX at MaRS. He is also the co-founder of both the MaRS Centre for Impact Investing and the School for Social Entrepreneurs Ontario, and a partner in the newly launched SVX.US.