Liberals’ plan connects private investors, social programs
OTTAWA — A government-struck expert panel will push the Liberals to craft a new spending tool to fund an experimental pillar in federal social policy to better connect private investors — and their money — with groups that deliver social programs.
Newly released documents prepared for the two ministers in charge of the federal government’s social finance strategy said the panel will call for the creation of a “fund of funds” to calm investors skittish about the risk involved. Federal spending to “capitalize a social finance fund, injecting significant funds into the marketplace,” would help “those confronting ‘wicked’ problems,” which can cover a range of social and environmental issues that a civil society group is trying to solve.
The Canadian Press obtained a copy of the March presentation for Social Development Minister Jean-Yves Duclos and Labour Minister Patty Hajdu under the access to information law.
The panel’s report will form the foundation of a social finance strategy. There are hopes in the sector that the Liberals will infuse financial help into existing funds rather than create a parallel spending structure.
“If you’d like to put money into this sector, don’t reinvent the wheel. Decide what you want to accomplish and we can make things happen,” said Jane Bisbee, executive director of the Edmonton-based Social Enterprise Fund, which provides financing to socially-oriented ventures.
Governments find social finance schemes attractive because the risk for programs is shifted from taxpayers to investors, who underwrite experimental ways of delivering social programs. There are thousands of examples of social financing in Canada, including Micro Entreprend re, a Quebec nonprofit singled out in the March presentation for providing microloans to new Canadians to help build their businesses. Another is Vancouver’s Resilient Capital Program that helps mission-based businesses tackle social and environmental problems.
Adam Jagelewski, executive lead at the MaRS Centre for Impact Investing in Toronto, said federal spending could leverage billions in private-sector financing for public service goals and turn smaller-scale funds into larger lenders based on examples in the U.K. and U.S.
“Government is an important stakeholder and an important player in the impact investing market,” Jagelewski said.
“Canada does, though, have a lot of entrepreneurs and great enterprising minds that are waiting for their opportunity. And a government contribution like a social finance fund could be the way to unlock their potential.”
The March presentation noted some other hurdles hampering social investors: “mispriced risk that creates high transactions costs,” few organizations or people who can connect “sources of investment capital and projects,” and a “lack of specialized knowledge among traditional lenders” about how to fund socially focused enterprises. Federal spending would act as a catalyst to free up capital for charities and non-profits who find it difficult to deal with traditional lenders.