Proponents of social-impact investing have scored a victory, with Toronto’s MaRS Discovery District set to announce the creation of a centre that will promote the concept in Canada.
The Centre for Impact Investing will be designed as a national hub for social finance initiatives, which are much further developed in the U.K. and the U.S. than they are in this country.
A number of high-profile Canadians, including former prime minister Paul Martin and Macquarie Capital Markets Canada chairman Stanley Hartt, have been working to change that, and to push the concept in this country.
Social finance means using traditional financing tools in a way that generates not only financial gains, but also social ones.
It includes innovative ideas such as social impact bonds, where private investors help fund not-for-profit projects and the investors are paid a return that comes from the money the projects save government.
For example, last year the U.K. Ministry of Justice teamed with Social Finance, a British organization similar to what the Canadian Centre for Impact Investing hopes to become, to launch the world’s first social-impact bond. The bond issue, of about $8-million, raised money for a pilot program at England’s Peterborough Prison to rehabilitate prisoners. If reoffending drops by more than 7.5 per cent within six years, investors will receive a portion of the money saved by keeping people out of jail, to a maximum return of 13 per cent.
The Centre for Impact Investing that is being announced Thursday in Toronto will be launched with $1.3-million of financing from the Rockefeller Foundation and the J.W. McConnell Family Foundation.
The total Canadian impact-investing market is currently $2-billion, according to MaRS, but is expected to grow to $30-billion in 10 years. Proponents, such as the Canadian Task Force on Social Finance, say governments must make a number of regulatory changes and buy into the concept before it can take off.
A report by J.P. Morgan and the Rockefeller Foundation deemed impact investing to be a new global asset class with the potential to reach $1-trillion globally.
The new centre comes as a number of partners including the MaRS District innovation hub, the Ontario government and TMX Group Inc., are creating a Social Venture Exchange, which will act as an online match-maker for social finance projects and investors.