After ten years in the making, the $755 million Social Finance Fund is officially in motion, marking a significant milestone in impact investing. Designed as a 16-year initiative, the program carries high expectations for driving positive social and economic change.

While it is too soon to assess the effects of the initial investments, the management of the fund is well underway. We spoke with the three wholesalers overseeing the capital distribution to discuss the progress so far and the processes shaping the rollout of this ambitious financial program.

Q: What is your job as an SFF wholesaler?

Kelly Gauthier, Realize Capital Partners: We primarily provide repayable capital to funds, also called social finance intermediaries (SFIs), who invest it in social purpose organizations (SPOs). SFIs are financial entities making social investments. They could be credit unions, community loan funds or private equity firms. They pool capital from individuals, foundations, and institutions.

A small portion of our investments goes into community and direct investments.

Derek Ballantyne, Boann Social Impact: We also help expand the social capital market by creating  “investability”. We make support intermediaries to make them more investable to attract capital outside of the SFF envelope.

Q: What is the 2-for-1 rule?

Derek: For every dollar contributed by the SFF, the federal government expects a minimum of $2 of private investment.

Q: How are you doing with this rule?

Kelly: It’s been a tricky market over the last months. Capital moves pretty slowly and conservatively. Our three organizations are working hard to attract big investors. However, our SFF investments won’t do all the convincing; it takes partnerships, conversations, and engagement.

Q: What is your most compelling argument for social finance right now?

Derek: It expands the economy by reaching areas where capital has not historically gone. Financing Black entrepreneurs creates wealth among Black communities, which can help alleviate some of the challenges those communities face.

If we finance climate technology, we grow new segments of the economy, creating new jobs and capital.

Social finance contributes to economic diversification and expansion. Quebec has framed it this way for decades. However, it has never been as evident in the rest of Canada. Hopefully, it is changing.

Q: Is investing in large and established SFIs the best way to grow the social finance market?

Derek: Established SFIs provide stability to our portfolio. Large SFIs also offer an attractive investment threshold to large institutional investors.

However, you also develop a market by widening its scope. That is why we support and invest in first-time and emerging SFIs.

First-time fund managers are more likely to pursue mandates having high social equity quotients. They often focus on social equity and themes not necessarily represented among established fund managers. 

Q: How did you pick your first investments?

Stéphanie Guico (Le Fonds de finance sociale Cap Finance): We invested in SFIs covering basic needs. In May 2023, le Fonds de finance sociale Cap Finance was attributed $80 million. In 2024, we announced five investments, covering 52 per cent of this amount.

For example, we invested in the Aboriginal Savings Corporation of Canada. This fund tackles the infrastructure deficit for First Nations communities.

We also invested in Cuisine Collective Hochelaga Maisonneuve (CCHM).  The capital contributed to opening a grocery store with a solidarity pricing policy. Customers pay according to their capacity.

Q: The SFF includes non-repayable capital. What have you used it for?

Kelly: It is mainly for investment readiness. Realize Capital Partners has worked with six new funds to bring new products.

However, it is not just a volume game; it’s an impact game. We’re not just trying to bring many new funds to the market. We’re working with proponents and people interested in areas where we see gaps.

The grant also develops the funds’ impact management and measurement skills.

Derek: We used part of it to create a dynamic information portal where newcomers and experts can find basic and newsy information about SFF.

We also support new fund managers until their fund is running. They usually have enough money to get goin, but not enough to finish the development. We have bridged that gap for about 10 funds. We get them going until they attract other capital and can launch.

Q: The lack of investment opportunities for social finance has been a persistent narrative. Is it true?

Kelly: The government’s recurrent concern over the ten-year process leading to the SFF launch was whether wholesalers would make risky investments because there were insufficient SFIs to choose from. We do not observe that. Our pipeline is over 200, and we make eight to ten investments yearly.

Derek: Just like Kelly, we were surprised by the richness of the investment opportunities. The SFF helped identify and bolster existing SFIs that were under our radar.

However, for emerging funds, it’s a different story. They are struggling with structural and conjunctural barriers to overcome. All funds start negatively and stay this way until you complete your financing and collect revenues. On top of it, more funds are chasing less capital right now. Investors are holding back because of economic uncertainty.

Stéphanie: Twice a month, I organize information sessions about the SFF. My groups include SPOs, SFIs, and people who want to start SFIs. I know where to send SPOs for support, and we have internal resources for existing SFIs. But we’re still looking for ways to help future SFIs get started. Incubators and accelerators are full of entrepreneurial coaches and mentors. Where do you find an SFI coach? We’re still looking.

Q: What was more challenging than expected?

Stéphanie: SFF created expectations among individuals and groups who would never have considered raising capital. However, they have valuable insights into the gaps that need to be filled in their community.

Even though we are a small team of three, we meet everyone who contacts us, regardless of their journey. We want to dispel the perception that finance is for people in suits.

Every month, I discuss social finance with groups with varying levels of financial literacy. I have to adapt and often return to the basics. 

Above all, I realized my job is also to keep the flame burning and hope alive among those who have the potential to launch SFIs and SPOs in the long run.

Kelly: Making people understand the timeline. The SFF is a 16-year program. After two years, we have some indications that some things are working better than others. But it is still early. That is not what the fund managers raising money want to hear from me. They are enthusiastic and sometimes impatient. I have a tremendous amount of empathy for them. We need that enthusiasm to be maintained and all these folks to continue what they’re trying to build.

Q: What needs to be addressed over the following months?

Derek: Sometimes, the highest-impact investing projects have the most fragile financial frameworks. To stabilize these intermediaries, we must create one or two ecosystemic instruments.

Kelly: We must get the next layer and the impact-curious investors off the bench. To achieve that, foundations and other impact investors must stay the course. They must continue deploying capital in partnership with us, beside us, and into funds.

Stéphanie: We want to attract investors who are less familiar with the social finance sector but share many of our values and priorities. I can give the example of fund manager Addenda, who invested $500,000 in the recent community bond issue of the social economy enterprise TAQ. We’re keeping a close eye on this precedent.

Q: What is your message to the SFIs that are impatient in getting financing?

Kelly: Half of our capital has already been deployed. We must ensure we save enough to continue deploying it over the next three to five years. We’re pacing our investments to the market-building work. Let’s learn from the Impact Readiness Program and not have folks rush to be ready sooner than they were just because of the program’s timing. So, expect us to slow down slightly to ensure we play out right.

We will also become more intentional about filling gaps. We might see great strategies, but if we already have too much affordable housing, we’ll look for different themes, geography, or asset classes.

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