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10 years of impact investing in Canada

October 30, 2017 By: MaRS Centre for Impact Investing

By Phoebe Stephens.

In 2007, the Rockefeller Foundation first coined the term “impact investing.” That same year, the first Social Finance Forum was held at MaRS. A decade on, it’s time to take stock of how far impact investing has come and where it’s headed in Canada: What are the key milestones? And how is the industry likely to mature?

The trajectory of impact investing in Canada mirrors global trends: it’s building momentum and legitimacy amongst businesses, policymakers and the general public. Nonetheless, the Canadian context is unique and presents its own set of nuances that are worth exploring.

The Canadian Task Force on Social Finance conceived in 2010, added a level of rigor to the industry. However, social finance was gaining traction long before this. The credit union movement had planted the seeds at the turn of the 20th century and its principles inspired the establishment of community futures development corporations and Aboriginal finance institutions. In Nova Scotia, the Community Economic Development Investment Fund – a flexible tax-advantaged government incentive – has invested in local projects for social and ecological return since the 1990s. In Quebec, the Chantier de l’Économie Sociale was created to engage with a robust network of community organizations that act as conduits for impact capital.

Untapped potential

While this history demonstrates a significant appetite for social finance in Canada, that potential remained largely untapped. Recognizing this, the 2010 task force produced seven recommendations to advance social finance in Canada. Key recommendations included:

  • Enable impact investment and social entrepreneurship in the charitable and non-profit sector, in particular by updating the Income Tax Act.
  • Establish an impact investing matching program, paired with appropriate incentives, such as credit enhancements, guarantees and tax advantages.
  • Establish an outcomes payment fund, specifying maximum prices that the government will pay for certain outcomes, allowing the market to respond with innovative solutions.

The common theme among these recommendations is the critical role that government policy plays in shaping this field. Public policy changes in favour of hybrids or social enterprises are frequently identified as a key driver for growth in impact investing. Recognizing this, the Federal government announced the members of the Social Finance Strategy Co-Creation Steering Group in June of this year. The group will work with the Government of Canada to develop a national social innovation and finance strategy to be unveiled in 2018.

Wealth transfer

The 21st century is characterized by unprecedented social and environmental challenges, some of which have been exacerbated by a narrow focus on earning profits. Impact investing holds promise for addressing these challenges and making finance part of the solution. Women and millennials in particular have shown a keen interest in impact investing. Over the next three decades, $30 trillion dollars will be inherited by millennials from their boomer parents.That enormous windfall, the largest inter-generational transfer of wealth in history, will likely spur the growth of impact investing.

The upcoming Social Finance Forum offers an ambitious program of speakers and workshops to explore a wide range of thought provoking topics such as the role of millennials and women in creating a fairer economy, or that of the federal government in encouraging innovation with the recent social finance strategy. This year’s forum marks 10 years of impact investing in Canada and is set to encourage reflection on how far we’ve come as well as spark debate about what the future holds.

Timeline

2007 – First Social Finance Forum held at MaRS.

2008 – Canadian Task Force on Social Finance conceived.

2011 – MaRS Centre for Impact Investing founded.

2012 – RBC Generator Fund launched – first major move by a Canadian financial institution to establish an impact fund.

2013SVX.ca launched to connect socially-minded investors an impact ventures.

2015 – $9.2 billion in impact assets under management in Canada, a 125 per cent increase in two years.

2016 – Canada’s first social impact bond in healthcare is launched by MaRS.

2017 – The Canadian government announces the creation of the Social Innovation and Social Finance Strategy Co-Creation Steering Group.


 
About the author
Phoebe Stephens is a PhD Candidate at the University of Waterloo researching the role of innovative financing mechanisms in scaling up sustainable agriculture models in Ontario. Phoebe has close to a decade of experience in advocacy and communications on sustainability related issues. This includes consulting with Loblaw and Scotiabank on their sustainability reporting and developing public engagement strategies for Oxfam International’s food security and income inequality campaigns.

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