Social Finance Fund (SFF): background

From: Employment and Social Development Canada

On this page

Objectives

The objectives of the Social Finance Fund (SFF) are to:

  • attract new private sector investment into the social finance market
  • support the growth of social finance intermediaries (SFIs)
  • ensure funds reach equity-deserving groups across a variety of different regions and sectors
  • enhance social equity practices in the social finance ecosystem
  • increase the capacity of social purpose organizations to generate social and/or environmental impacts by improving access to affordable and flexible financing
  • support existing social finance ecosystems and the emergence of a vibrant, self-sustaining social finance market, and
  • advance progress towards the UN's Sustainable Development Goals and its commitments in support of Indigenous Reconciliation

Selected fund managers

The following fund managers were selected following an open and competitive call for expressions of interest:

  • Boann Social Impact L.P. was created as a partnership between the Table of Impact Investment Practitioners (TIIP) and BC Non-Profit Housing Association, The Co-operative Housing Federation of BC, The Co-operative Housing Federation of Canada and Community Impact Investments
  • 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

Core participants of the network involved are:

  • Réseau d'investissement social du Québec
  • Fiducie du Chantier de l'économie sociale
  • Fondaction
  • Filaction
  • Fonds de solidarité FTQ
  • MicroEntreprendre

Realize Capital Partners Inc. is a collaboration between the impact investment management and advisory firm Rally Assets, and the early-stage venture capital fund manager Relay Ventures.

Please visit the SFF Hub to learn more about each fund manager.

Fund manager selection process

In August 2021, Employment and Social Development Canada (ESDC) launched an open and competitive call for expressions of interest, seeking one or more social finance fund managers to implement the Social Finance Fund (SFF). This was an opportunity for organizations to apply to become fund managers to deliver the Fund over the next 16 years. The call was open from August 12, 2021, to September 29, 2021.

Fund managers were assessed on the following requirements:

  • alignment with the SFF priorities
  • ability to deliver on the proposed investment strategy
  • impact measurement and management framework
  • financial stewardship, and
  • integration of a social equity lens

In March 2022, following a rigorous selection process, the Minister of Families, Children and Social Development invited three fund managers to move to stage two of the selection process. At this stage, fund managers submitted detailed plans outlining their proposed governance and investment strategies, including their plan to ensure the social equity investment targets are met. ESDC worked in close collaboration with fund managers over the next year to negotiate the terms of their contribution agreements.

External expertise

In designing the Social Finance Fund (SFF), Employment and Social Development Canada (ESDC) looked to the recommendations of the Social Innovation Social Finance Co-Creation Steering Group as well as the Senate Study, "The Federal Role in a Social Finance Fund". In order to take it from idea to reality, ESDC benefited from several external experts.

Read more about the recommendations of the Social Innovation Social Finance Co-Creation Steering Group.

Technical Design Group

In 2019, ESDC established a Technical Design Group composed of investment specialists from the private sector to provide technical advice on the design of the SFF to:

  • help balance program objectives with the Government's fiduciary responsibilities
  • create the right incentive structure for partner organizations (fund managers), and
  • make the SFF workable and understandable to the private sector financial/investment world

Technical Assessment Group

In 2021, ESDC established a Technical Assessment Group to provide strategic and technical advice on the screening of Expressions-of-Interest. The Group reviewed all submissions and assessed them for their experience and capacity in the sector, the relevance of their organization's mandate to program priorities, their financial accountability processes, and more.

Learn more about the Technical Assessment Group.

Financial advisory services

Deloitte Canada provided financial advisory services, supported the financial due diligence of the fund managers' investment strategies and advised on the development of funding agreements with selected fund managers.

Legal services

ESDC also contracted an external legal agent, Miller Thomson LLP, through Justice Canada, for fund formation expertise to support the negotiation of agreements that would best protect the Government of Canada's responsibility as a steward of public resources, while also ensuring that those agreements empower fund managers to meet the SFF's program objectives.

The Pilot Social Equity Lens Investment (SELI) Coding System

The Pilot Social Equity Lens Investment (SELI) Coding System is a taxonomy that will enable the government to track progress towards the SFF's social equity and gender equality investment targets to ensure equity-deserving groups are accessing the Fund's flexible and affordable financing. It will improve social equity practices in the social finance ecosystem and promote activities which advance Canada's progress toward its commitments in support of Indigenous Reconciliation.

The SELI Coding System was developed through engagement with over 60 key stakeholders from the Social Innovation and Social Finance ecosystem working to advance social equity, incorporates expertise from the Criterion Institute and SVX, and is aligned with internationally recognized practices, such as the 2X Criteria.

Learn more about the Pilot SELI Coding System by visiting the SFF Hub.

Impact measurement and management

Impact measurement and management will ensure that investors and investees can track and report on how social finance investments generate social and/or environmental impacts alongside financial returns. The Social Finance Fund aims to support and strengthen impact measurement and management practices within the social finance ecosystem.

Fund managers are collaborating with social finance intermediaries and social purpose organizations to define the impact goals of their investments, to use evidence and impact data in investment decisions and to manage the impact performance of investments.

A framework will be established to develop a core data standard to align data collection and sharing between social purpose organizations and social finance investors, while establishing a flexible reporting framework and limiting reporting burdens. The framework will integrate key social equity considerations, including the collection of disaggregated data, to meaningfully assess the needs of equity-deserving groups and capture progress made in removing barriers to access to capital. To develop the core data standard, key stakeholders, experts and software providers are engaged in establishing the framework.

Available funding

The Social Finance Fund (SFF) is a repayable program. Final repayment of funds to the Government of Canada are expected within 16 years following the program launch. The SFF is a $755M program to be deployed over the next 10 years. Fund managers are receiving both conditionally repayable contributions and non-repayable contributions.

  • Conditionally repayable contributions: Used for investment activities, to invest in social finance intermediaries (SFIs) and in rare cases, directly into social purpose organizations (SPOs)
  • Non-repayable contributions: Up to 10% of total funding request to cover expenses such as administrative costs, reducing transactional costs of high-impact deals and ecosystem-building activities such as providing technical support to new and emerging SFIs

In recognition of economic reconciliation as an important step toward Indigenous reconciliation, $50 million of the $755 million SFF 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 SFF will be deployed by the fund managers into the social finance ecosystem.

The SFF has access to $400 million from the available $705 million, over a period of 5 fiscal years (2023 to 2027). Employment and Social Development Canada (ESDC) must return to the Treasury Board of Canada for approval to access the remaining funding allocated to the program ($305M).

Table 1: Available program funding 2023 to 2027
2023 2024 2025 2026 2027 Total
$110,000,000

Accelerated deployment of $220 million to support post-COVID-19 recovery
$110,000,000

Accelerated deployment of $220 million to support post-COVID-19 recovery
$60,000,000 $60,000,000 $60,000,000 $400,000,000

Accessing funding

Social finance intermediaries (SFIs) interested in accessing funds will deal directly with the selected fund managers. In most cases, social purpose organizations (SPOs) will apply for funding directly through an SFI.

To learn more, visit the SFF Hub

Page details

Date modified: