Exploring the Potential of Social Finance in Canada, a Report of the Standing Committee on Human
Resources, Skills and Social Development and the Status of Persons with Disabilities (“Committee”),
was released on June 17, 2015 (the “Report”). The Report is the culmination of the Committee’s study
of “Social Finance’s potential for unlocking new sources of capital to improve social and economic
outcomes for Canadians.” During the consultations for the study, witnesses before the Committee
included representatives from not-for-profits, charities and government departments.
The Report begins by characterizing the phenomenon of social finance or impact investing as “an
approach to mobilizing repayable capital in ways that seek to create positive social impacts” and
proceeds to examine the Canadian social finance market, regulatory framework, potential ways to
measure social impact, different ways to improve knowledge and capacity; and develop the social
finance market.
The Report concludes with a total of nine recommendations being made by the Committee. Of those
recommendations, four make specific reference to the perceived inadequacies of the current regulatory
framework for charities and non-profit organizations (“NPOs”). In particular, the Committee
recommends:
- “[T]he federal government consider legislative and policy measures […] to allow charities greater
flexibility to conduct business activities for the purpose of reinvesting profits back into their
charitable missions.” - CRA and the Department of Finance (“Finance”) “review current regulations with respect to the
profit-generating activities of non-profit organizations, and consider options to allow some nonprofits with a clear social purpose to generate surplus revenues in some circumstances.” - CRA and Finance “conduct a review of current policies with respect to program-related investments,
with a view to improving the communication and/or clarity of these measures, as necessary.” - “Employment and Social Development Canada continue to encourage cross-sector collaboration on
social finance by convening regular meetings of stakeholders from the for-profit and the non-profit
and charitable sectors, in order to encourage partnership development and to share information and
best practices.” - It will be interesting to see if any of the Committee’s recommendations have an immediate impact on
CRA’s current policy positions with regard to the profit-generating activities of NPOs and charities, as
the Committee’s recommendations seem to focus on policy rather than legislative measures to address
social finance issues.