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Social Finance Fund & Investment Readiness Program FAQ

General

What is a social-purpose organization?

A social-purpose organization is a nonprofit, a charity, a co-operative, a social enterprise for-profit, or a hybrid structure with a clear social, environmental, and/or cultural mission at the core of their operation.

How do you demonstrate a social purpose?

An organization can demonstrate a social purpose, for instance, by mapping how the core of its work contributes to the Sustainable Development Goals, or by demonstrating adoption of the Common Approach to Impact Measurement as integral to your operations. A corporate social responsibility program is not a social purpose.

What is a social finance intermediary?

Social finance intermediaries are entities that pool capital from investment sources (e.g. foundations, government, financial institutions, individuals) and deploy investments into borrowers and investees that use the investments to achieve a positive social, environmental, and/or cultural impact. Examples of some social finance intermediaries include: New Market Funds, Raven Indigenous Capital, Chantier de l’Économie sociale, Fondaction, Social Enterprise Fund, VERGE Capital, Rhiza Capital, Marigold Capital, etc.

The Social Finance Fund

What is the Social Finance Fund?

The Social Finance Fund is a federal government initiative by Employment and Social Development Canada (ESDC) to increase the amount of affordable repayable capital available to social, environmental, and cultural mission organizations.

What is social finance?

Social finance is repayable investment that seeks to generate a positive social, environmental, and/or cultural impact. Repayable investment is money that an organization receives upfront to carry out a project while planning to repay the money over a period of time in future. Repayable investment has many forms, for instance: loans, mortgages, lines of credit, asset financing, community bonds, social impact bonds, revenue-share agreements, equity (owning shares of a company), etc.

Organizations use repayable investment to purchase assets, to spend now in order to generate future revenue or prevent future costs, as well as to launch and scale social enterprises.

Who is eligible for the Social Finance Fund?

Social-purpose organizations are eligible to access the Social Finance Fund including nonprofits, charities, co-operatives, social enterprise for-profits, and hybrid legal structures.

How much social finance will be available?

The federal government has committed up to $755 million towards the Social Finance Fund with an expectation that the Social Finance Fund’s investments will be matched 2:1 by the private sector for a total of at least $1.5 billion available to social-purpose organizations over the next decade.

What is the expected rate of return?

Social-purpose organizations are expected to repay the investments with a rate of return that will vary by the social finance intermediary. The federal government is expected to offer the Social Finance Fund on concessionary terms to social finance intermediaries which will allow those intermediaries to offer investments to social-purpose organizations with below-market rate return expectations (e.g. lower interest rates on a loan).

Will down-payments and collateral be required to access social finance?

Requirements for down-payments and collateral (e.g. guarantees, assets offered as security) when accessing a social finance loan will vary by the nature of your project and the social finance intermediary. Your organization should inquire, negotiate and understand these requirements when discussing an investment with an intermediary.

How do organizations access the Social Finance Fund?

Organizations access social finance through intermediaries. Examples of social finance intermediaries with a track-record of making social finance investments include: New Market Funds, Raven Indigenous Capital, Chantier de l’Économie sociale, Fondaction, Social Enterprise Fund, VERGE Capital, etc. This list is for illustrative purposes only as the Social Finance Fund has not yet begun making investments into any intermediaries.

When will the funding be available?

The Social Finance Fund will be available starting in late 2020 or early 2021. The federal government will gradually increase their investment into social finance intermediaries over a period of 9 years.

How will the 2:1 matching work?

The federal government has committed $755 million towards the Social Finance Fund with an expectation that it is matched 2:1 by the private sector (i.e. for every $1 of public investment, there is anticipated to be $2 of private investment). The private sector will invest alongside the government into social finance intermediaries who are responsible for achieving the matching target. Social-purpose organizations (i.e. the end-users of the social finance) are not required to meet a matching criteria.

Who will the private investors be?

Examples of possible private investors include:

  • Foundations investing their endowments
  • High-net-worth individuals (accredited investors)
  • Individuals (retail investors) investing into, for instance, a community bond
  • Credit unions
  • Pension funds

The Investment Readiness Program

What is the Investment Readiness Program?

The Investment Readiness Program (IRP) is a federal government initiative by Employment and Social Development Canada (ESDC) to strengthen organizations to participate in the social finance marketplace. The IRP offers non-repayable capital to purchase services to help social-purpose organizations and social finance intermediaries to access and manage social finance investment.

Who is eligible for the Investment Readiness Program?

Social-purpose organizations and social finance intermediaries are eligible for the Investment Readiness Program. This includes Canadian registered nonprofits, charities, co-operatives, social enterprise for-profits, and hybrid structures that have a clear social, environmental, and/or cultural impact within Canada.

How do organizations access the Investment Readiness Program?

Organizations access the Investment Readiness Program (IRP) through specified IRP partners:

  • Community Foundations of Canada (CFC) will be administering the IRP across Canada through regional partnerships that include at least one local community foundation. CFC will have a broad-based mandate inclusive of all types of social-purpose organizations generating impact across all impact areas. CFC will have three calls for proposals; one in 2019 and two in 2020.
  • Canadian Women’s Foundation (CWF) will focus on qualified donees with a gender equality focus. CWF will have three calls for proposals; one in 2019 and two in 2020.
  • Le Chantier de l’Économie sociale will focus on Québec-based organizations and will have an on-going call for proposals until March 31, 2021 for projects requesting under $100,000. Projects above $100,000 will have two deadlines: Feb 12, 2020 and May 27, 2020.
  • The National Aboriginal Capital Corporations Association will administer the IRP through their Aboriginal Finance Institution network to reach Indigenous organizations.
  • The National Association of Friendship Centres will administer the IRP through their Friendship Centre network to reach Indigenous organizations.
How much funding is available?

The Investment Readiness Program is a $50 million non-repayable capital program. The amount available per organization will vary by the IRP partner administering the non-repayable capital. For instance, Community Foundations of Canada will be offering amounts between $10,000 to $100,000 of non-repayable capital per organization per round of proposals.

When will the funding be available?

The Investment Readiness Program (IRP) has begun and will end by March 31, 2021. Specific dates will be provided by these IRP partners: Community Foundations of Canada, Canadian Women’s Foundation, Le Chantier de l’Économie sociale, National Aboriginal Capital Corporations Association, and the National Association of Friendship Centres.

What are eligible uses of the funding?

Eligible uses of the Investment Readiness Program (IRP) non-repayable capital are one-time or time-bound expenses to strengthen your organization to access social finance. The intention is to help your organization pay service providers to help you progress in your investment-readiness journey.

Examples of what would be considered eligible expenses include: consulting and coaching support to conduct a feasibility study or market study, services to strengthen a business plan or financial model, accounting expertise to institutionalize standard financial practices, legal services to be compliant with regulations, fundraising services to support with investor relations during your capital raise, etc.

Examples of ineligible expenses include: core programmatic costs, core operating costs like personnel and office expenses.

A common question is whether one can use the IRP to pay oneself to conduct a feasibility study or to complete a business plan, etc. As described above, the IRP intends for organizations to pay service providers (e.g. coaches, consultants, firms) to strengthen your organization. Some IRP funding partners may be open to a small percentage of the proposal being to pay in-house staff for investment-readiness coordination and project management, while other IRP funding partners will not prioritize such expenses in their approval process.

What service providers must I use?

Your organization can select the service provider of your choice, though of course, the selected service provider should be capable of meeting your investment-readiness needs. Below are some helpful lists of service providers, but you are not required to select from the list:

I am a service provider, how can I be added to the list?

If you are an individual coach or consultant, please fill out this intake form. If you are an organization providing services, please email an organizational profile to socialfinance@innoweave.ca.

Does applying to the Investment Readiness Program require me to then access social finance?

No, by participating in the Investment Readiness Program, you are not required to subsequently raise social finance. While it is certainly the intention of the Investment Readiness Program to progress organizations to become investment-ready, it is accepted that actually raising investment may happen after multiple years or not at all.

What does investment readiness mean?

Investment readiness does not have a rigid or strict definition—there is unfortunately no magic bullet nor recipe which if followed automatically qualifies you for social finance. Fortunately, there are common ingredients to position your organization to be attractive to investors. Some of these ingredients include a:

  • Strong team
  • Clear strategy and plan
  • Meaningful impact model
  • Healthy financial model
  • Complete due diligence package

Consider applying to Innoweave’s free workshop to help you assess your organization’s investment readiness.

What are ecosystem mobilizers?

Various ecosystem mobilizers have been identified as Investment Readiness Program partners working to resolve system-level gaps. These ecosystem mobilizers include:

  • Knowledge mobilization: Canadian Community Economic Development Network (CCEDNet), Imagine Canada, Startup Canada, Cooperatives and Mutuals Canada (CMC), Social Economy through Social Inclusion (SETSI)
  • Indigenous systems mobilization: Native Women’s Association of Canada (NWAC), Inuit Tapiriit Kanatami (ITK), Congress of Aboriginal Peoples (CAP), Assembly of First Nations
  • Impact measurement: Centre for Social Innovation (CSI), Carleton Centre for Community Innovation (3ci)
  • Social enterprise for-profit engagement: The Waterloo Institute for Social Innovation and Resilience (WISIR)
  • Social finance intermediary development: New Market Funds
  • Social research and development: McConnell Foundation