Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Cancel Anytime
Enjoy Unlimited Digital Access
Get full access to
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

Yung Wu is CEO of the MaRS Discovery District and Stephen Huddart is president and CEO of the McConnell Foundation.

Reaction to the government’s fall economic statement focused on the tax incentives to make Canada better for business. Less noticed, but of greater long-term consequence, was a major new strategy to make business work better for Canadians.

Buried deep in his speech, Finance Minister Bill Morneau announced the Social Finance Fund, a $755-million investment to kickstart Canada’s social-finance market. In a few dozen words, he catapulted Canada to the top of a list of countries including Britain, Portugal and Japan that are already investing in this new kind of capitalism.

Story continues below advertisement

Social finance fills the wide-open space between business and philanthropy. It challenges the notion that financial profit and social purpose are mutually exclusive by creating new business models and investment vehicles that aim to create a measurable social or environmental benefit while also making a financial return. In the shorthand of the industry, this is called creating “impact.”

This new funding model fundamentally resets the terms of the relationship between governments, charities and businesses. Much government funding is done through grants and contracts. Now some of the public purse will be invested in projects, funds and social enterprises with the expectation of advancing priorities on social or environmental causes, while at the same time making a financial return to recycle back into the fund. This new approach expands the innovation economy and creates space for new types of organization and investment to emerge. Major entities such as RBC, Desjardins, Heart & Stroke and Vancity are already experimenting in the field.

The list of opportunities for the fund is long and varied: It could be used to stem the rise in diet-related chronic disease, finance affordable-housing projects or support Indigenous entrepreneurs. Clean technologies – set to expand to a $2.5-trillion global market by 2022 – are another area where impact drives financial return. Take energy-efficiency building retrofits, which Efficiency Canada estimates could get the country 25 per cent of the way to its carbon emission-reduction targets. They create savings on electricity bills that can generate a long-term return for investors who finance the up-front costs.

Social-finance advocates have been pushing hard for public-sector investment to accelerate the industry. It was a key recommendation of the government-appointed Social Innovation and Social Finance Strategy Co-Creation Steering Group, which released its report, “Inclusive Innovation,” in August. Fundamentally, this is about putting capital to work on solving social issues – not, as some fear, privatizing the public sector. It is essential to the success of this approach that community and regional interests are represented and fully engaged in the process.

Calls for a more ethically driven capitalism are echoing across the Western world. Whether it’s Google workers protesting their employer’s involvement with the U.S. military, pension funds divesting from fossil fuels or the push to get more women and minorities into senior positions, the message is the same: values matter. Consumers, workers and investors increasingly want to deal with companies whose ethical compass aligns with their own.

Getting the right structure and governance in place poses challenges, not least of which will be determining what counts as a social-purpose project or business. “Lives changed” isn’t a metric that fits neatly into a spreadsheet, and so robust rules will be needed to screen out projects and companies that adopt the trappings of social finance without generating real impact. It is also important that the new fund be held at arm’s length from government. One example to follow could be Britain, which created a purpose-built body called Big Society Capital in 2011. Since then, Big Society has invested £456-million ($775.8-million) and brought in a further £805-million ($1.4-billion) in co-investments, mostly from the private sector.

It’s now essential that entrepreneurs, investors, non-profits and businesspeople step up with innovative ideas to tackle social and environmental issues. With this in mind, in his statement, Mr. Morneau set aside a further $50-million to help prepare much of the Canadian business and non-profit communities that are still unfamiliar with the concept of social finance. That may turn out to be the most impactful spending in the budget.

Story continues below advertisement

Make no mistake, the consequences of this move will be felt far beyond the social sector. The real power of this fund will be to nudge the centre of gravity toward a new, sustainable economic model that benefits all Canadians.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies