For anyone in the social impact world, it might be difficult to remember a time when social finance and impact investing weren’t household terms — but in the grand scheme, these are fairly new concepts with room for growth and change.
In fact, it was only ten years ago that SiG (Social Innovation Generation) spearheaded the implementation of a Task Force on Social Finance, to look at international examples of social finance and budding Canadian examples, and map out a way to scale this new sector with governments, philanthropy, and private sector.
In partnership with MaRS for Impact Week 2020, and to mark the 10-year anniversary of the Task Force on Social Finance, we spoke with twelve of today’s leaders in social finance and impact investing about what the next 10 years will bring. All the leaders we spoke to said they see social finance moving into the mainstream over the next decade — but each had a slightly different take on how the sector will get there:
Bonnie Foley-Wong | Equality Fund
COVID-19 has altered the trajectory of social finance, says Bonnie Foley-Wong. In the next few years the sector will see “lots of uncertainty and what I call ‘little negotiations everywhere’ as we renegotiate how we do things… what is essential, how we connect, how we work.”
Like others, she’s seen some momentum toward mainstreaming social finance: “I’m thinking about the larger asset holders that have moved in the direction of integrating purpose and impact. I’m thinking about the Business Roundtable’s stance on the purpose of a corporation, BlackRock’s annual CEO letters, Brookfield Asset Management hiring Mark Carney to lead their ESG and impact investing business.”
In terms of problems social finance will work to solve in the next ten years, gender inequity will continue to be top of mind, Foley-Wong says. 2020 has proven that social and economic systems disadvantage women and nonbinary people. “Gender-lens investing helps interrupt the reinforcing loops that create barriers for women, and it is on the rise. We’ll increasingly see more diverse leadership, with social finance as a field and industry leading in this regard (fingers crossed).”
Eric Wetlaufer | TMX Group
Eric Wetlaufer is confident social finance will hit the mainstream by 2030. “The momentum is there and it will happen,” he says. “Successes will be bigger and better known, and the players not involved will have to race to catch up. It will attract more talent and more capital. The language to describe it, the products themselves, the distribution channels and access will all be tailored to support social finance and impact investing. There will be continued healthy skepticism around the quality of products and providers, but as measurement frameworks improve, so will the required transparency to assure the investor they are getting what they’ve been promised.”
And the events of 2020 might have accelerated this shift, he says. “If it wasn’t obvious enough before this year, 2020 has more greatly highlighted the weaknesses of the short-term shareholder-primacy model of capitalism… Momentum for ESG and Impact Investing has increased, as leading thinkers in the private sector have joined the chorus of leaders in other sectors calling for a more inclusive more human approach, which is exactly what social finance is all about.”
Erica Marie Glueck | Tapestry Capital
“In ten years, our hope at Tapestry is that social finance becomes more accessible — not only for those who intend on making an impact with their investment decisions but also for organizations that seek to raise capital for their social purpose businesses,” Erica Marie Glueck says. And she has a particular vehicle in mind: “To us, the community bond is the vehicle that offers the most accessibility.”
Glueck adds that 2020 has amplified the issues social finance is intended to solve. “However,” she says, “this year has also highlighted the often-undervalued power of community-based knowledge and mobilization. We should not take for granted the rich pockets of wisdom and data that exist in our communities. They can and should inform social finance strategies and solutions,” both now and over the next decade.
James Chan | VERGE Capital
James Chan is one of those optimists who sees the social finance world expanding so much in the next decade that it merges with (or overtakes) traditional finance. “I think (and I hope) that social finance will become much more democratized, more accessible, and more mainstream in the next ten years, to the point where it just becomes ‘finance,’” he says. “The popularity of self-directed online platforms [like Wealthsimple] offering socially responsible or impact investments will continue to grow, but the biggest difference will come from a new generation of wealth management and financial advisors who understand the needs and wants of impact investors, and are able to confidently recommend an impact-oriented portfolio that is still properly diversified, still generates a competitive rate of return, but also produces a net positive contribution to society.”
The events of 2020 — a pandemic, a global racial reckoning — are accelerating the systemic, cognitive shift underpinning social finance’s move into the mainstream, he said. “People are seeing huge corporations take advantage of publicly-funded wage subsidies, loans, and other measures meant to support struggling businesses, and then turn around and pay out increased dividends to shareholders… I think people realize the economic system we have is not the one we need.”
Jay-Ann Gilfoy | Vancity Community Investment Bank
“The events of 2020 – such as the COVID-19 pandemic and the racial justice movement – have acted as a catalyst for change. Organizations are waking up to the fact that our society – and the way we do business – needs to become more inclusive, sustainable, and resilient,” said Jay-Ann Gilfoy, CEO of Vancity Community Investment Bank. “This has been reflected in the financial services industry where we have seen an acceleration towards social finance. Over the next ten years, I expect all financial institutions to begin mobilizing private capital for public good and taking more significant steps to provide greater access to capital for underserved communities. I have high hopes for the future, and believe that in the next decade we will see social finance recognized as the only way to do business.”
Jeff Cyr | Raven Indigenous Capital Partners
Jeff Cyr also sees social finance going mainstream by 2030. “Hopefully, in ten years, social finance is as common as doing an RRSP,” he says.
And that will be underpinned by a fundamental shift in how we think about business: “COVID has taught us that we need to build a deeper resiliency in what we invest in… it’s changing the lens through which we look at enterprises,” he says. “It’s teaching the due diligence process to look deeper at: where is the community resilience? I don’t think a lot of businesses will do well in a post-COVID era who don’t have deep community connectedness and a deep sense of responsibility.”
How will we get there? Over the next decade, Cyr says, we’ll see “a proliferation of social finance vehicles that have been built and driven by the communities, so that they reflect community priorities and community needs — and are run by communities who have been marginalized in finance.” He sees Indigenous communities, communities of colour, and newcomer communities taking leadership in social finance.
Jeremy Douglas | Ocean Wise
Like Cyr, Jeremy Douglas says social finance will be community-led in ten years’ time. “If you want to develop solutions for those people who you’re trying to serve with these investments,” he says, “those people should be involved as expert stakeholders. Now, I see so many more organizations paying attention to that… I hope the momentum continues.” He says the shift will be similar to the one that’s taken place in the international development and humanitarian aid sectors: away from the paternalistic approach of importing outside solutions into communities, and toward an approach that cedes control and leadership to those with the community knowledge.
And in general, Douglas agrees that social finance and traditional finance will lose the hard boundary that separates them now, with social finance becoming the standard. But “the biggest challenge of that will be: how do you actually verify the environmental and social outcomes?” He calls for a publicly accessible forum for verifying environmental and social impacts of institutions’ investments. “Otherwise,” as social finance becomes the norm and the widespread expectation, “it could easily get into greenwashing.”
Lana Selbee | Yukonstruct
Social finance and impact investing will be household names by 2030, says Lana Selbee. “People are going to understand what it is. They’re going to understand the advantages of it. Even in the general public, there is going to be a much higher demand for investments to be making an impact,” she says. She points to the way the public conversation about business for good has grown in recent years, with mechanisms like the B Corp certification growing in popularity, too. And this is still early days, she says. “No one even seems to fully know what a social enterprise is, but the next ten years will bring a ton of clarity.”
Furthermore, she says, “it is irresponsible to start a business, at this point, that doesn’t consider: ‘What impact are we making?’ Because the conversation, globally, is changing. We are facing really, really tough issues. As more and more capital is moving toward solving these big problems we’re facing — that’s where the capital is going. That’s not going to stop. That’s going to increase.” Investors and entrepreneurs should get on board now, she says.
Lesley Marks | BMO
Lesley Marks agrees that social finance will accelerate overall over the next decade, with more people in public and private spheres showing leadership on this front. She sees three specific trends that will continue to develop: “Governments will continue to develop their social finance commitments in recognition of the important role that they play. Some governments are more advanced in their investment in social finance, while others will need to play catch-up with investment; greater interest is developing in the corporate sector, where impact investing is becoming a part of many of the larger corporations’ strategies; and family office clients are also looking at impact investing as having growing importance in their overall investment strategy.”
But it may take some time for some governments to catch up, she says. “Governments around the world have had to allocate greater funds to fiscal expenditures during the pandemic, while being faced at the same time with lower revenue from the tax base. This will likely cause a decrease in investment by governments in social finance while they work to repair their balance sheets. The onus will then shift to the private sector to make up for this decline in expected spend by government.”
Nathan Cohen-Fournier | Chagnon Foundation
“The last ten years were marked by the birth, or the rebirth, of a new wave of social finance, and I think that over the next decade we’re going to see that wave strengthen, and take even more shape and form in more structural ways,” says Nathan Cohen-Fournier. We’ll see “the world of social finance being much more embedded in a diversity of organizations, not only philanthropy or the traditional social finance actors, but also more private players.” Cohen-Fournier points to Telus’s recent announcement of a $100 million social impact fund. “That’s an illustration of things to come: more institutional players putting more money in the field.”
But, he says, “with that, it’s going to bring a greater fragmentation of the social finance landscape, in the sense that with more players comes also a more diverse range of expectations — whether that be in terms of return, in terms of impact, in terms of impact measurement.” Now, he says, there’s a smaller group of players who are in general agreement on these principles. “It’s going to require the sector to be even more tactical in terms of how it wants to organize itself.”
Sagal Dualeh | Canadian Women’s Foundation
“Over the next ten years, one hope and imagining of social finance is to truly centre gender equality and inclusion,” says Sagal Dualeh. “The economic security of women in Canada has been disproportionately impacted by the events of 2020 to an extent that threatens equality gains. It’s disproportionately impacted women and deepened inequalities for diverse women, and two-spirit, trans and non-binary people. Women accounted for almost two thirds of early job losses, despite making up half the paid workforce. Risks of violence increased and calls to crisis lines surged and this continues. Demands of caregiving, homeschooling, and work skyrocketed. As we rebuild from the pandemic, we can’t accept a new normal where people are worse off than before. We could instead reset ‘normal’ by also putting gender equality at the centre of the social finance sector.”
Dualeh says she also hopes “that we continue to question our assumptions and eliminate bias in economic thinking. That we also continue to highlight that social enterprises, entrepreneurs, charities and non-profits are the backbone of the social economy. And that we find ways for stronger partnerships within the social finance community.”
Vicki Saunders | SheEO
Vicki Saunders agrees that social finance won’t need its differentiator by 2030. “Binaries like social finance versus regular finance will disappear, as we collectively demand that all capital be put to the highest and best use for social and environmental stability and flourishing,” she says. She also says a “win-win narrative” that weighs profit equally with social and environmental benefit will “be questioned and discredited” in favour of more nuanced perspectives on social finance.
The social finance world will also embrace the interconnectedness of our economy and social systems, she says. “2020 has shown us that we can’t treat things in isolation. Gender equity, racial equity, economic inequality, climate peril — all of these are conjoined problems that need to employ a multi-solving approach.”