Canada’s Social Finance Fund: Impact Investment Goes Main Stream

At long last, the Government of Canada has taken a bold step towards equity and impact in investment with its recent announcement of the Social Finance Fund, which will furnish hundreds of millions to encourage social finance activities.

The Social Finance Fund, launched by the Government of Canada, is an innovative financial tool aimed at leveraging private investments to address pressing social and environmental challenges. The fund serves as a catalyst for impact investing by generating positive social and environmental impact alongside financial returns.

The Canadian government has committed $755 million to the fund, which will be deployed over the next ten years. This substantial investment aims to mobilize private capital, foster partnerships between public, private, and philanthropic sectors, and accelerate the growth of innovative social finance solutions across the country.

The key objectives of the Social Finance Fund are to:

Support the development of existing and emerging social finance intermediaries to create a sustainable social finance ecosystem.

Broaden the reach of social finance to underserved populations, sectors and regions, including rural and remote communities and the North.
Enable the sustainable growth of diverse social purpose organizations to increase their social and environmental impact.
Help social purpose organizations innovate and scale effective solutions to complex and enduring socio-economic and environmental challenges.
Enhance social equity practices in the social finance ecosystem.
Advance Canada’s progress toward the United Nations Sustainable Development Goals and its Indigenous Reconciliation Commitments.

To meet these objectives, the fund managers will:

Support existing and emerging social finance intermediaries with affordable and flexible financing, as well as technical and management expertise.
Work with social finance intermediaries to ensure diverse social purpose organizations can access affordable and flexible financing, as well as technical and management expertise.
Work with social finance intermediaries and social purpose organizations to implement robust impact measurement and management approaches to ensure investments contribute to measurable social and environmental impacts.
Leverage new private investment to co-invest in social finance intermediaries and/or to invest in the proposed fund toward the target of leveraging a minimum of $2 of private investment for each $1 of Social Finance Fund contribution.
Incorporate a social equity lens in the design and implementation of investment strategies to remove access to capital barriers faced by equity-deserving groups.
Contribute to the Social Finance Fund’s goal of a minimum of 35% of capital deployed into initiatives promoting greater social equity, including 15% into initiatives promoting greater gender equality.

Through a rigorous, competitive and open process, three fund managers were selected to act as investment managers for the Social Finance Fund:

Boann Social Impact is a new joint venture with the investment fund manager Encasa, and the not-for-profit trust Table of Impact Investment Practitioners, a longstanding community of practice now encompassing over 80 Canadian social finance intermediaries and partners. Boann will receive $154,129,374 in funding for the period of 2022-23 to 2025-26.
Fonds de finance social – CAP Finance is a network of financial institutions and organizations that are working in Quebec and focused on the social economy and solidarity-based finance. Led by the Réseau d’investissement social du Québec and the Fiducie du Chantier de l’économie sociale, nine key investors are involved in the project. Fonds de finance social – CAP Finance will invest specifically in Quebec. CAP Finance will receive $89,808,426 in funding for the period of 2022-23 to 2025-26.
Realize Capital Partners is a collaboration between the impact investment management and advisory firm Rally Assets, and the early-stage venture capital fund manager Relay Ventures. Realize Capital Partners will receive $153,435,625 in funding for the period of 2022-23 to 2025-26.

In recognition of economic reconciliation as an important step toward Indigenous reconciliation, $50 million of the $755 million Social Finance Fund was allocated to the Indigenous Growth Fund, which is an Indigenous-led and self-determined fund managed and distributed by the National Aboriginal Capital Corporation Association.

The remaining $705 million of the Social Finance Fund will be deployed by the fund managers into the social finance ecosystem. The fund managers will receive $400 million over the next five years to invest, and are expected to leverage up to another $800 million in private investment to foster the market’s growth and long-term sustainability.

Fund managers will allocate a minimum of 35% of their investments into initiatives promoting greater social equity, including a minimum of 15% into initiatives promoting greater gender equality. Fonds de finance social – CAP Finance will invest specifically in Quebec, while Boann Social Impact and Realize Capital Partners will invest in the rest of Canada.

We look forward to working with many organizations seeking financing through the intermediaries funded by the Social Finance Fund to not only mitigate the adverse consequences of corporate operations but to propagate positive impact and positive returns for investors.

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This article may contain legal information, but is not intended to be, and may not be relied upon as, legal advice.

Interested in learning more about the Social Finance Fund, eligibility criteria for finance through the funded intermediaries, and alternative corporate forms like benefit companies, B Corporations, Community Contribution Corporations and beyond, get in touch!

James Struthers

[email protected]

236.429.2389