Causeway, 2009, Social Finance Primer, Toronto

What is Social Finance?

Traditionally, non-profit organisations dominated the social sector and were financed by government grants and philanthropy.  There was no financial return, and the measurement of social return to the community was loose and inconsistent.  Today we are seeing a different approach to social investment, largely led by successful investors with experience in finance, technology, and start-up operations.  They are working at new funds, developing new financial tools, and looking for new kinds of deals.

These investors are interested in both non-profit and for-profit social and environmental enterprises, and have invested in the following business sectors: Affordable Housing, Clean Technology and Green Energy, Community Development, Education, Fair Trade, Health and Home Care, Microfinance, and Sustainable Agriculture.

In an attempt to enhance capital flowing to this sector, the new investor class is developing innovative financing instruments and structures that recognize social, environmental, and financial returns ("blended value investments").  Since these blended value enterprises (“BVEs”) are rooted in the discipline of operating a sustainable business model, some of the invested capital can be reused.  As a result, the capital available for social investment is considerably enhanced and a cycle of success is created which further drives social and environmental impact.