How can we bring the ingredients of social finance, which is about how to do good with money, to the work of building better cities in Canada?
Cities for People is cooking up a feast of articles on the intersection of social finance and cities. Here's a taste of what you can expect over the next few months.
Introducing social finance
Social finance is an approach to mobilizing private capital that delivers both a social as well as economic return. It is an umbrella term that covers the various tools and models of achieving a positive social impact with private, public and social capital and financial innovation. As a way of leveraging the market and advancing economies to serve the interests of people and build shared prosperity, it fits right in the New Economies stream. (Learn more about Cities for People's New Economies theme with this introductory blog post.)
There are many applications of this simple idea: strategic philanthropy, loans for non-profits, investments in social-purpose businesses, microfinance, green bonds, socially responsible investments, and social procurement, to name but a few.
Recent research indicates that over $10.6bn was invested around the world in social finance in 2013, with approximately $46bn in assets under management (JP Morgan and Global Impact Investing Network, 2014). In Canada alone, an estimated $5.3bn is available in social finance assets under management (Purpose Capital and MaRS Centre for Impact Investing, 2014).
It may already be apparent that social finance is a very broad field, something that weaves through all the work that we do. This blog series focuses on the intersection of social finance and cities - exploring how social finance addresses some of our greatest urban challenges and opportunities, including reducing inequality. Here are some of the questions that guide our inquiry:
Identification: Who are the private and philanthropic funders that are investing in cities? Where are the social entrepreneurs who care about the urban future? What kinds of models have been tried, and where?
We will explore examples such as the new Ours to Own campaign from the Calvert Social Investment Foundation, which supports crowdfunding for businesses in specific cities in America. A Canadian example is Vancity’s Community Branch Grants program, in which branches make small grants to local initiatives. Another is the federally endowed Green Municipal Fund, which supports municipal environmental projects.
Opportunities: Which sectors present the greatest opportunities for sustainable urban prosperity and social finance, and which organizations are best positioned to identify and make the most of them?
Is it possible to make blended value investments in water and waste? Does the sharing economy represent a growing niche - how do we finance tool libraries and collaborative consumption to shift away from a culture of ownership? Recently, the Reinvestment Fund announced a commitment to bring $100m to healthy food businesses in underserved communities, with a significant serving of data analysis to support a better focus.
Challenges: Is it possible to develop a strong investment pipeline and portfolio with a limited geographic scope? What are the barriers faced by non-profits and social enterprises focusing on cities?
Social finance and impact investing is rooted in the idea that every investment has a social and environmental impact. In Canada, this has manifested itself in many different ways, from the social economy in Quebec to socially responsible and impact investing initiatives from major banks. Foundations have both supported a social finance ecosystem and explored mission-related investing, while credit unions tap into their community roots and flex their corporate social responsibility muscle.
Canada is also a country in which more than 80% of the population lives in cities, as well as a legacy of thinking about them, from trendsetters like Jane Jacobs to leaders such as the Global City Indicators Facility. There's a clear opportunity for driving investments in urban areas to reward us both financially and socially for generations to come.
Join us as we highlight and discuss the challenges and opportunities around funding work that has ‘better cities’ baked into it, and please share your recipes for better place-based good. We look forward to your contributions.
To learn more about social finance and impact investing, the Guide to Social Finance is a great entry point, while Impact Investing in Canada: State of the Nation is the most comprehensive and recent report on the field.
Bite-sized question #1: Does this mean that what happens outside cities doesn’t matter?
Absolutely not. However, the twin phenomena of rural-urban migration and urbanization necessitate a serious effort at marshaling social finance for cities. In addition, most ‘development’ dollars, especially outside major urban clusters, are already targeted towards improving rural livelihoods and communities.
Bite-sized question #2: Is this all new? How come no one thought of this before?
Social finance has a long history and draws upon initiatives around the world. Its current popularity represents a framing that has helped catalyze the sector and usher in an innovative new approach. As Arthur Wood noted, citing the Medici-fueled Renaissance, “money can make you rich and powerful but philanthropy can make you immortal.”
Photo credit: ecstaticist on Flickr