Social finance includes all of the practices shown above (move your mouse over the figures). You are likely familiar with ‘socially responsible investing’, ‘ethical investing’, and ‘corporate responsible investing’. These practices may focus on avoidance (also called negative screening) of investment in companies that have harmful health, cultural, social, or environmental impacts. Other investors may encourage improved corporate practices related to the environment, social performance, or governance (also known as ‘ESG’). While these practices are part of the social finance spectrum, this guide focuses on venture philanthropy, impact investing, blended value investment funds, mission related investing, and micro-lending.
Venture philanthropy is a combination of long-term investment practices and venture capital models applied to the voluntary sector, in which a financial investment is made to a non-profit organization in order to build capacity, produce deliverables, and create social return
Impact investors seek to invest for ‘blended value returns’. Impact investing represents an electrifying shift in investor focus from the traditional ‘single’ (financial) bottom line return on investment to one of multiple bottom lines, which include financial, plus social or environmental impacts… and sometimes a blend of all three.
Blended value investment funds
Blended value investment funds employ financial instruments that are similar to typical private equity firms, although quasi-equity structures are often used to provide return in organizations that can’t issue share capital (i.e. charities and non-profits).
Mission-related investing is undertaken by forward-thinking foundations which make repayable investments that contribute to the foundation’s purpose, meet its fiduciary duty, and allow a return on the investment that can then be redirected to another recipient. In contrast to a grant, the mission-related investment is repayable, with no or low interest, and when repaid, can be lent out again by the foundation, for additional community impact.
Micro-lending refers to loans under $25,000 made to entrepreneurs who typically cannot access traditional forms of commercial financing for their businesses. These loans are generally paired with business training and technical assistance.
THE WHAT, WHY, WHO, AND MOST IMPORTANTLY, THE HOW OF SOCIAL FINANCE IN CANADA.
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The contents of Your Guide to Social Finance is general in nature, current only as of the date of publication and is provided for informational purposes only. It is not intended to provide professional investment or financing advice. Please consult a certified professional before making any decision regarding your investments and financing.