Imagine Canada Releases New Report on Social Innovation and Social Finance

By Esther S.J. Oh

Jan 2024 Charity & NFP Law Update
Published on January 31, 2024



As set out in the Social Finance Research Report (the “Report”) by Imagine Canada, released in late 2023, Social Innovation and Social Finance “represent new and emergent approaches that harness the creativity, compassion, and entrepreneurial spirit that thrives in social purpose organizations.” In this regard, the Report states, “Social purpose organizations are at the heart of this movement, and having access to resources is essential to their ability to innovate, scale solutions, and sustain their activities long-term.”

Since the development of the Social Innovation and Social Finance Strategy in 2018 (the “Strategy”), the Government of Canada has actively implemented the twelve recommendations set out in the Strategy, notably through the Investment Readiness Program (“IRP”) that has the aim of helping social purpose organizations build their capacity to participate in Canada’s growing social finance market. Another long-term social finance initiative by the Federal Government is the $755 million Social Finance Fund (“SFF”), which was launched in May 2023 with the objective of advancing the growth of the social finance market in Canada.

The Report presents research findings aimed at advancing social innovation and social finance in Canada, including a review of the enablers and barriers of social finance, as well as exploring why social purpose organizations (“SPOs”) engage in social finance. The Report also expands the understanding of the social finance ecosystem, emphasizing the significance of co-creation and collaboration, and underscores how social finance in Canada aligns with both domestic well-being and global initiatives such as the UN's Sustainable Development Goals, illustrating the alignment of local efforts with global objectives. The methodology of research includes individual analysis of 22 case studies, cross-case analysis, participant validation, and an expert group survey. Six key findings are highlighted by the Report, which will be outlined below.

1. Motivations for Engaging in Social Finance

Social purpose organizations engage in social finance primarily to diversify funding sources, secure access to capital, and overcome challenges related to conventional financing options. The focus on social impact and sustainability drives these organizations to seek personalized financial solutions and foster collaborative partnerships, underscoring the significance of tailored financial approaches for communities facing barriers in accessing financial products aligned with their values.

2. Enablers and Barriers of Social Finance

The Report pinpoints various factors influencing social finance for social purpose organizations. Positive factors, or enablers, include a clearly defined social or environmental mission, visionary governance, impact measurement, and access to social finance products. Barriers include a limited financial track record, high transaction costs, and a scarcity of accessible social finance products. The Report notes that it is crucial to comprehend and address these barriers to foster inclusive and sustainable social finance practices.

3. Hybrid Organizations Can Increase Organizational Resilience

Hybrid organizations (which carry out both for-profit and nonprofit activities), have emerged as a common approach for addressing complex social, environmental, or legal challenges. By combining social and financial objectives, these organizations create sustainable solutions that foster positive impact while maintaining financial viability. Nonprofit and charitable entities sometimes choose to establish for-profit entities to navigate regulatory barriers, optimize fund deployment, or reduce transaction costs. This approach underscores the necessity for adaptability in the social finance landscape and emphasizes the importance of adapting to the unique challenges encountered by organizations.


4. Expanded Understanding of the Social Finance Ecosystem

The Report underscores the significance of broadening our understanding of the social finance ecosystem to include universities, foundations, pension funds, incubators, accelerators, economic development organizations, and global development organizations. In this regard, the Report points out that involving these stakeholders in the ecosystem encourages diverse perspectives and facilitates collaborative solutions.

5. Role of Consultants in Social Finance

The Report indicates that consultants play a crucial role in social finance by offering expertise, conducting market research, facilitating impact measurement, establishing partnerships, and supporting policy development, thereby empowering organizations to navigate the social finance landscape.

6. Social Finance is a Complex Adaptive System

The Report observes that the social finance ecosystem functions as a complex adaptive system marked by increasing interconnectedness, adaptation, feedback loops, and enabling factors. Successfully navigating the social finance landscape necessitates an understanding of and leverage over these dynamics.

In closing, the Report offers valuable insights into Canada's social finance ecosystem, highlighting its potential to address societal challenges and promote financial sustainability for social purpose organizations. The Report concludes by stating that if social finance is to fulfill its potential, it is crucial that all stakeholders in the ecosystem understand why social purpose organizations engage in social finance, and the factors that help and hinder them in their efforts to use social finance tools.


​ ​Read the January 2024 Charity & NFP Law Update