Question Period Note: SOCIAL INNOVATION AND SOCIAL FINANCE STRATEGY

What is the Government of Canada doing to support social innovation and social finance in Canada?

Social innovation is about developing new solutions to social or economic challenges. It can improve people’s quality of life through collaborating with new partners, testing creative ideas and measuring their impact. It often involves collaboration across different levels of government, charities, the not-for-profit and private sectors to act on a common social issue.

• Social finance is a tool that seeks to mobilize private capital for the public good. It creates opportunities for investors to finance projects that benefit society and for community organizations to access new sources of funds.

• In June 2017, the Government of Canada appointed a diverse group of 17 individuals to form the Social Innovation/Social Finance Co-Creation Steering Group that would guide the development of a Social Innovation and Social Finance Strategy for Canada. The Steering Group engaged with hundreds of Canadian individuals and organizations, and delivered its final report in August 2018, which included 12 recommendations for growing social innovation and social finance in Canada.

• In the 2018 Fall Economic Statement and in Budget 2019, the Government of Canada committed to establish the foundational elements of Canada’s first-ever Social Innovation and Social Finance Strategy, including a $50 million Investment Readiness Program, a $755 million Social Finance Fund, and a Social Innovation Advisory Council to support the implementation of the Strategy.

In June 2017, the Government appointed a Co-Creation Steering Group to inform the development of and make recommendations on a Social Innovation and Social Finance Strategy for Canada. Over the course of a year, the Co-Creation Steering Group engaged with hundreds of Canadian individuals and organizations at more than 50 consultation and engagement sessions. These sessions included community organizations, non-profit organizations, charities, foundations, co-operatives and mutuals, social enterprises, unions, umbrella groups, individual social innovators, and members of the general public.
Targeted engagement was undertaken with groups including Indigenous leadership and communities, youth, organizations serving women, and official language minority communities.
In August 2018, the final report of the Steering Group was released, and included 12 recommendations:
1. Anchor commitment and long-term policy action toward social innovation and social finance in Canada through legislation
2. Establish and fund a multi-sectoral Social Innovation Council to advise the federal government
3. Create a permanent Office for Social Innovation
4. Improve social purpose organizations’ access to federal innovation, business development and skills training programs
5. Establish a multi-departmental Social Innovation Ecosystem Program
6. Launch a Social Finance Fund
7. Ensure federal funding practices support and enable social innovation
8. Incorporate social procurement guidelines, tools and training opportunities into the Government’s focus on a cohesive sustainable procurement plan
9. Address the legal and regulatory issues impeding charities and non-profits from engaging in social innovation, social finance, and social enterprise
10. Initiate a series of controlled regulatory experiments, or “sandboxes,” to explore and experiment with new regulatory models
11. Establish a Social Innovation Evidence Development and Knowledge Sharing Initiative
12. Coordinate a national social innovation and social finance awareness campaign.
In the 2018 Fall Economic Statement (FES), the Government proposed to make available up to $755 million on a cash basis over the next ten years, starting in 2020-2021, to establish a Social Finance Fund that would help charitable, non-profit and other social purpose organizations access new financing, and to help connect them with private investors looking to invest in projects that will drive positive social change.

Additionally, the Government proposed to invest $50 million over two years in an Investment and Readiness (IR) stream, for social purpose organizations to improve their ability to successfully participate in the social finance market.

Budget 2019 announced additional details on the Social Finance Fund:
• Funding will be managed through professional investment managers with expertise in social impact reporting and a proven ability to promote inclusive growth and diversity in the social finance market, to be selected through a competitive selection process.
• The fund manager(s) will invest in existing or emerging social finance intermediary organizations that have leveraged private or philanthropic capital for co-investment.
• The fund manager(s) will be required to leverage a minimum of two dollars of non-government capital for every dollar of federal investment, with the exception of investments for Indigenous-led or Indigenous-owned funds.

Additionally, under the Social Finance Fund:
• A minimum of $100 million will be allocated towards projects that support greater gender equality—leveraging existing philanthropic and private sector funds towards this purpose in order to help them reduce the social and economic barriers faced by diverse groups of Canadians of all genders, and
• A $50 million investment will be made in the newly proposed Indigenous Growth Fund.

The Government is currently designing and securing the necessary authorities for the Social Finance Fund.

On June 12, 2019, the Government announced two foundational steps that support its commitment to implementing Canada’s Social Innovation and Social Finance Strategy: the new Investment Readiness Program (formerly called the Investment and Readiness Stream), and a call for applications for a Social Innovation Advisory Council.

The Investment Readiness Program ($50M over two years starting in 2019-2020) is providing social purpose organizations with funding and supports required to build their capacity, participate in the social finance market (i.e. secure a repayable investment), and acquire technical, legal or business skills required to improve their organizational preparedness for revenue generation and investment opportunities. Funding agreements are currently in place with 24 organizations who are working to implement the program.

The Social Innovation Advisory Council, in turn, will provide technical and sectoral expertise to inform the early implementation and further development of a federal Social Innovation and Social Finance strategy. The Council will also provide an important perspective from within the stakeholder community, as well as monitor progress and emerging issues in relation to the Social Innovation and Social Finance Strategy. A call for applications has been completed, and applications are being assessed for Ministerial decision on the composition of the Council.

Examples of Social Enterprises / Social Finance

1. Aki Energy is an Indigenous-led social enterprise working to develop and implement sustainable energy and food solutions in Manitoba First Nations. Using innovative financial models, Aki has made the installation of geothermal technology more affordable for communities, focusing on transitioning households to geothermal power systems and away from grid-electric systems. Aki secured social finance partnerships in 2016 and developed community-driven outcomes contracts that now help finance Aki’s operations. Aki has invested over $4M directly in Indigenous communities. Funding from the Social Finance Fund would help Aki grow and replicate their success in other Indigenous communities.

2. ÉAU Acquaponic Farms is a for-profit social enterprise with advanced technologies dedicated to developing innovative and efficient aquaponics food production systems to support community food autonomy. Aquapo farms help people living in regions without water and urban neighborhoods where fresh produce is not easily available. The Social Finance Fund could help ÉAU expand its research and development activities and also scale its impact in Canada and internationally.

3. Windmill Microlending is Canada’s largest and most successful microlending program for immigrants and refugees. These loans help skilled immigrants pay for professional exams, training, assessments, professional association fees, books and materials, living allowance and other expenses related to obtaining the required credentials or training. Given the higher annual number of newcomers to Canada, opportunities under the Social Finance Fund could help Windmill expand its reach and meet newcomers’ accreditation and training needs.

• Social innovation is about developing new solutions to social or economic challenges. It can improve people’s quality of life through collaborating with new partners, testing creative ideas and measuring their impact. It often involves collaboration across different levels of government, charities, the not-for-profit and private sectors to act on a common social issue.

• Social finance is a tool that seeks to mobilize private capital for the public good. It creates opportunities for investors to finance projects that benefit society and for community organizations to access new sources of funds.

• In June 2017, the Government of Canada appointed a diverse group of 17 individuals to form the Social Innovation/Social Finance Co-Creation Steering Group that would guide the development of a Social Innovation and Social Finance Strategy for Canada. The Steering Group engaged with hundreds of Canadian individuals and organizations, and delivered its final report in August 2018, which included 12 recommendations for growing social innovation and social finance in Canada.

• In the 2018 Fall Economic Statement and in Budget 2019, the Government of Canada committed to establish the foundational elements of Canada’s first-ever Social Innovation and Social Finance Strategy, including a $50 million Investment Readiness Program, a $755 million Social Finance Fund, and a Social Innovation Advisory Council to support the implementation of the Strategy

Examples of Social Enterprises / Social Finance

1. Aki Energy is an Indigenous-led social enterprise working to develop and implement sustainable energy and food solutions in Manitoba First Nations. Using innovative financial models, Aki has made the installation of geothermal technology more affordable for communities, focusing on transitioning households to geothermal power systems and away from grid-electric systems. Aki secured social finance partnerships in 2016 and developed community-driven outcomes contracts that now help finance Aki’s operations. Aki has invested over $4M directly in Indigenous communities. Funding from the Social Finance Fund would help Aki grow and replicate their success in other Indigenous communities.

2. ÉAU Acquaponic Farms is a for-profit social enterprise with advanced technologies dedicated to developing innovative and efficient aquaponics food production systems to support community food autonomy. Aquapo farms help people living in regions without water and urban neighborhoods where fresh produce is not easily available. The Social Finance Fund could help ÉAU expand its research and development activities and also scale its impact in Canada and internationally.

3. Windmill Microlending is Canada’s largest and most successful microlending program for immigrants and refugees. These loans help skilled immigrants pay for professional exams, training, assessments, professional association fees, books and materials, living allowance and other expenses related to obtaining the required credentials or training. Given the higher annual number of newcomers to Canada, opportunities under the Social Finance Fund could help Windmill expand its reach and meet newcomers’ accreditation and training needs.

“We are thrilled to be coming to the table in a unique partnership with government and other actors in the sector to work differently and creatively. The Investment Readiness Program will help a wide range of organizations to seed and grow their social enterprises and be better positioned to flourish as the federal government’s social finance strategy continues to roll out. This will help grow impact investment momentum on the part of community foundations and other sectors.” Andrew Chunilall, Community Foundations of Canada CEO – news release, June 12, 2019)

“The creation of a Social Finance Fund is an important first step towards a social innovation and social finance strategy for Canada that will accelerate innovative solutions to our most complex social challenges. We welcome the government’s commitment to strengthening social investment and readiness” (Michael Toye, CCEDNet Executive Director – November 22, 2018)

“The Chantier de l’économie sociale supports the economic statement tabled today by Canada’s Minister of Finance Bill Morneau. Specifically, the Chantier is pleased with both the announcement of concrete measures and the willingness to pursue efforts to promote a global social innovation and social finance strategy. … The focus on women, in particular women entrepreneurs and those wishing to be, is also welcome. On that point, it is worth remembering that collective entrepreneurship is a route favoured by many women, and it is therefore important to ensure that social economy businesses can benefit from all of these measures.” (Chantier de l’économie sociale – news release, November 21, 2018)

"We in the charitable sector believe Canada can better address its most pressing challenges when innovation is sparked among all sectors — public, private and charitable," said Community Foundations of Canada CEO, Andrew Chunilall. "The Social Finance Fund will attract increased investment to help vulnerable people and to solve pressing challenges like climate change, housing affordability, technological disruption of jobs, and other national and local priorities." (Community Foundations of Canada, Imagine Canada, MaRS, McConnell Foundation, Philanthropic Foundations of Canada, United Way Centraide Canada - Joint Press Release, November 22, 2018)

“In Canada and around the world, social finance and social innovation are evolving rapidly and becoming increasingly networked. We have arrived at a threshold moment when we must take the work to another level of scale. Building on Canada’s existing strengths, and learning from the experiences of others, affords us an opportunity to transform our challenges into opportunities for inclusive growth.” (Stephen Huddart and Tim Draimin, Stanford Social Innovation Review, Winter 2018)