Panel to call for ‘fund of funds’ in Liberals’ social finance plan: Documents

The panel’s report will form the foundation of a forthcoming 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 around Alberta.

Governments find social finance schemes attractive because the financial 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 MicroEntreprendre, a Quebec non-profit 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 countries like the United Kingdom 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.

“One of their biggest challenges in trying to invent, be innovative, (or) start new programs in their communities is having access to capital, or dollars to invest,” said Bruce MacDonald, president and CEO of Imagine Canada, a national charity that advocates for the sector.

“Something like a social finance fund goes a ways to help addressing that concern.”

Federal officials have also been told regulatory and tax rules act as stumbling blocks for charities and non-profits who want to try a social financing arrangement, but fear doing so could jeopardize their tax-exempt status.

There are also fears of a different kind on social finance: Briefing notes for senior officials identified concerns that social finance “is a euphemism for privatization of social services.”

The Liberals’ soon-to-be-released strategy is expected to address both concerns.

— Follow @jpress on Twitter.

Jordan Press, The Canadian Press

by Canadian Press

Panel to call for ‘fund of funds’ in Liberals’ social finance plan: Documents

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