The Global Risks Report, released by the World Economic Forum earlier this year, cites the top risks facing us today — a daunting list. Damage to the environment, from climate change and our failure to act on it, is the main danger, while the COVID-19 pandemic, which has killed more than two million people worldwide, has highlighted the risk of infectious diseases. The pandemic has also increased societal risks such as poverty and threatens to cripple economies.
We cannot react to these global problems with complacency, by throwing money at them or with top-down or siloed solutions. We need bold community-based, sustainable and comprehensive approaches with far-reaching results. And we need them now.
It’s time we harnessed social innovation and social finance as a solution to these very real global risks. Social innovation and social finance provide an economic “triple play” — mobilizing investment and creating jobs while also addressing social inequities and environmental degradation.
Social innovation involves developing outside-the-box solutions to collective problems in support of social progress. It requires collaboration among community leaders, non-profits, charities, cooperatives, government and the private sector.
Social finance is a tool that enables social innovation. It is an approach to investing that provides measurable social and environmental benefits, mobilizing private and philanthropic capital for the public good. Social finance creates opportunities for investors to finance socially beneficial projects and for community organizations to access new sources of capital.
Many countries around the world are looking to social finance. Portugal, Japan, the United Kingdom and the European Union have established social finance funds, and social procurement initiatives have been successfully tested by Scotland, France, Finland and Australia.
The United Nations’ Sustainable Development Goals are a call to action to promote prosperity while protecting people and the planet, and corporations are increasingly putting an emphasis on ESG (environmental, social, governance) practices and socially responsible investing.
Here in Canada, social innovation and social finance have proven their value in helping to solve problems. The national Table of Impact Investment Practitioners and Québec’s CAP Finance represent dozens of funds across the country with more than $1-billion in assets and a record of investing in improving seniors care, ensuring food security, increasing access to affordable housing and supporting women entrepreneurs.
In 2006, the Government of Canada provided $22.8-million in seed funding to the Fiducie du Chantier de l’économie sociale in Québec, which offers financial products to support the capitalization of social economy enterprises. This leveraged an additional $30-million to launch the fund and over the next decade 212 investments were made, creating or maintaining 3,183 jobs and mobilizing an additional $374-million.
The impacts of COVID-19 have highlighted gaps in our social systems and have spurred innovative ideas about ways to build a better economy. The federal government has an opportunity to step up and enable these ideas to flourish.
A landmark report authored before the pandemic by the Social Innovation and Social Finance Co-Creation Steering Group, an advisory group of leaders in the community, philanthropic, financial and research sectors that were responsible for helping to develop a social innovation and social finance strategy with the Government of Canada, offers 12 critical recommendations. It calls for the creation of a social finance fund that would help meet the financing needs of organizations that work on positive social outcomes.
Just after the report was released, Ottawa announced a $755-million Social Finance Fund and a $50-million Investment Readiness Program. However, the Social Finance Fund has yet to be rolled out and, after a successful two-year pilot, the Investment Readiness Program is set to expire this month.
The federal government’s last full budget, in 2019, made promises on the Social Finance Fund that need to be kept. The upcoming budget provides an opportunity to once again prioritize Social Innovation and Social Finance in the face of an unprecedented need.
As we look for solutions to our most pressing existential crises — such as climate change and global pandemics and the social, environmental and economic havoc they wreak — social innovation and social finance should be in our toolkit.
It’s time for Canada to invest in social innovation and social finance, for all of our futures.
Photo courtesy of iStock
