About the Social Innovation and Social Finance Strategy
Social Purpose Organizations (SPOs) play a key role in tackling socio-economic and environmental challenges. These challenges include addressing food insecurity, the lack of affordable housing, and the transition to a low-carbon economy. SPOs include charities, non-profits, social enterprises, co-operatives and businesses with a social mission.
SPOs are important economic contributors. They are also key to Canada’s advancement of the United Nations’ 2030 Agenda and its Sustainable Development Goals. That is why the Government of Canada has established the Social Innovation and Social Finance (SI/SF) Strategy. The SI/SF Strategy helps SPOs access flexible financing opportunities that enable them to grow and enhance their impacts.
There are 3 foundational elements to the SI/SF Strategy: the Investment Readiness Program, the Social Finance Fund, and the Social Innovation Advisory Council. The Government of Canada announced these initiatives in response to the recommendations of the SI/SF Strategy Co-Creation Steering Group.
Investment Readiness Program
The Investment Readiness Program (IRP) is a 2-year $50 million program (2021 to 2023) designed to help advance SI/SF in Canada. As announced in Budget 2021, the Government of Canada has renewed the IRP based on the success of the pilot program that took place between 2019 and 2021.
The pilot program supported over 680 SPOs in capacity-building activities through 24 delivery partners who worked to implement the program.
The renewed IRP will continue to advance SI/SF in Canada. It will strengthen the SI/SF ecosystem. It will support SPOs to build their capacity to access social finance. The program will expand support to organizations led by or serving equity-deserving groups, such as (among others):
- Indigenous peoples
- low-income people
- Black Canadians and other racialized peoples
- people with disabilities
- members of the LGBTQ2+ community
- official language minority communities
- recent immigrants and refugees
The IRP supports the Government of Canada’s goal to increase inclusion and opportunities for participation of Canadians in their communities.
Social Finance Fund
The Social Finance Fund (SFF) is a $755 million initiative that seeks to accelerate the growth of Canada’s social finance market.
The Department of Employment and Social Development Canada (ESDC) will provide repayable contributions to a small number of investment managers known as wholesalers. The SFF will also provide a smaller portion of non-repayable funds for activities that support the wholesalers’ use of repayable funds and the SFF’s goals.
Wholesalers will invest in existing or emerging social finance intermediaries, such as credit unions, community loan funds, and private equity firms. Social finance intermediaries will then invest in a range of diverse SPOs. Types of investments may include, loans, equity investments, or acting as a guarantor (co-signing a loan agreement).
Wholesalers and social finance intermediaries will use SFF funds to leverage private capital and invest in a diverse range of social purpose organizations. ESDC will select wholesalers through a competitive, merit-based process.
Budget 2021 announced the acceleration of the SFF. The announcement included $220 million for deployment in the first two years of the program (2021 to 2022 and 2022 to 2023) and, the use of Conditionally Repayable Contributions (CRCs). CRCs are a repayable funding tool used by the Government that allows for flexibility and risk-taking. For the SFF, this will support funds to reach underserved and diverse segments of the social purpose sector. This includes SPOs led by or serving equity-deserving groups.
SFF funding will contribute to the growth of a sustainable social finance market in Canada.
Social Innovation Advisory Council
The Social Innovation Advisory Council (SIAC) will be a ministerial advisory group of 15 members, including leaders, practitioners, and experts from across the not-for-profit and private sectors. The SIAC will provide strategic advice and subject matter expertise to support the implementation of the SI/SF Strategy.
About social innovation and social finance
Social innovation refers to a response to a social or environmental problem, which, once adopted, results in better solutions than existing approaches. Social innovations have a transformative impact and improve organizations, communities, regions, or systems. Social innovation can include:
- new, more effective social programs
- the use of new technologies
- the growth of social enterprises
Social enterprises are businesses that pursue a social or environmental mission.
Social finance is the practice of making investments intended to create social or environmental impact in addition to financial returns. Social finance is a tool that seeks to mobilize private capital for the public good. Canada’s social finance market is a major source of financing for SPOs engaging in social innovation. Examples of social finance investments include:
- acting as a guarantor (co-signing a loan agreement) to allow a non-profit to secure a mortgage to finance a building to house social entrepreneurs
- a loan to a charity in the employment sector to expand its business and hire more people living in poverty
- an equity investment (purchasing shares) in a food services cooperative to open a new location and reach more customers
- an equity investment in a company to develop software that helps more people graduate from school
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