Impact Investing & Social Finance

Introduction to Impact Investing & Social Finance

In the January 2011 edition of the Harvard Business Review, Mark Kramer and Michael Porter made a splash when they wrote an article entitled, “Creating Shared Value”. Kramer and Porter offer:

“…the principle of shared value involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not on the margin of what companies do but at the center.”

Creating Shared Value was the first big leap by mainstream economists into the growing world of social finance and impact investing. An acknowledgement that for-profit companies could, and indeed, should transform the way they do business to ensure both financial and social success.

Impact investing and social finance refer to a sustainable approach for managing money that creates positive social and environmental outcomes as well as economic return through capital investments in traditional businesses, non-profits and social enterprises.

Dip into Impact Investing & Social Finance

To best explain how impact investing and social finance work and why they matter to Canada, watch this video with Tim Draimin, Executive Director, SiG National.

*missing video, won’t load so not sure which one*

In November 2010, SiG helped release the report Mobilizing Private Capital for Public Good from the Canadian Task Force on Social Finance, which outlines “seven actions that Canada needs to undertake, in parallel, to mobilize new sources of capital, create an enabling tax and regulatory environment and build a pipeline of investment-ready social enterprises.” Below is an embedded copy of the final report.

*missing report*

Impact investing and social finance are not necessarily new concepts. For decades, if not centuries, creative thinkers have attempted to leverage the tools of investment to affect greater social and environmental outcomes. In the last several years, however, attention and interest in this topic have grown substantially.

For entrepreneurs looking to tap into the interest in impact investing and social finance, the MaRS Centre for Impact Investing maintains a Guide to Social Finance.

One form of impact investing and social finance that has attracted much attention is the social impact bond, a concept developed by Sir Ronald Cohen of Social Finance UK. In February 2011, Adam Jagelewski published an article for Policy Horizons Canada entitled, Social Impact Bonds: A Practical Social Innovation. Below is the article in its entirety.

For more information, Dive into Impact Investing and Social Finance as well as to and the MaRS Centre for Impact Investing.

Dive into Impact Investing & Social Finance

One of the primary sources of the current momentum in Canadian impact investing and social finance can be traced back to a 2009 “study tour” to the United Kingdom. Led by SiG, the study tour examined the history of social finance in the U.K. and exposed a number of Canadian policy makers and community sector leaders to the field. The document embedded below is the report from the tour.

Shortly after the U.K. Study Tour, Tim Brodhead, formerly the President of the J. W. McConnell Family Foundation reflected on the economic crisis of 2008 and summed up his thoughts on how impact investing, social finance and other innovations could lead to a dramatic evolution of the community sector. His article appeared in the Winter 2010 issue of The Philanthropist.

Building on the growing interest in impact investing and social finance and in an effort to map the size and demand for debt financing in the non-profit sector, SiG supported a census of Ontario-based non-profits and charities.  The findings of the 2011 Social Finance Census are embedded below.

Any deep dive into the field of impact investing and social finance quickly reveals that impact measurement and metrics are critical. Without broadly accepted and applicable tools for impact measurement, the innovations in capital investment for social change are unlikely to enter the mainstream. Impact investors want – and need – to know how their investments are performing – socially, environmentally and financially. SiG@MaRS has compiled a report that outlines the landscape of impact measurement in Canada and globally. The report embedded below is essential reading for anyone looking to become intimately familiar with the field of impact investing and social finance.

In addition to the resources we’ve presented here, there are many more resources on the topic to be found online. Below are two recent and prominent publications to add to your reading list.

We also recommend that visitors to this site follow the #impinv hashtag on Twitter, consider attending a Social Capital Markets event and order a copy of Jed Emerson and Antony Bugg-Levine’s book Impact Investing: Transforming How We Make Money While Making a Difference.

Finally, just a reminder that our latest social finance and impact investing research and happenings can be found on the MaRS Centre for Impact Investing site.

Note: A complete list of all SiG educational resources can be found in our publicly-available document library. We hope you’ve found this pathway to learning in impact investing and social finance helpful.