Social Finance – Why it matters for achieving the Sustainable Development Goals!
The social finance ecosystem engages individuals, businesses and other investors in generating positive social and environmental impacts. The concept of social finance is not new in Canada; it reflects Indigenous centric values that we all have a shared responsibility for the wellbeing of our society (source).
Impact investing is an important part of the social finance ecosystem and defined as “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.” Both terms overlap with the same objective of addressing social needs while fostering economic growth and sustainable development.
The Sustainable Development Goals (SDGs) are a global framework that in 2015 set a shared agenda for a more sustainable and equitable future for all. Achieving the 17 ambitious goals requires investment from all across sectors. Social finance and impact investing provide a valuable pathway to the goals. For impact investors, the SDGs can be a useful framework for communicating the relationship between investments and impact goals, particularly for those new to the world of impact investing (source).
On Jan 31st, 2023, SDG Cities hosted a Community Learning Series on why social finance is essential to achieving the UN Sustainable Development Goals (SDGs). Participants learned how organizations and businesses are using social finance and impact investing to catalyze systemic change while simultaneously using the SDGs as a framework to build a more inclusive and sustainable financial system. SDG Cities was joined by guest speakers Jess Barrie and Heather Watt-Kapitain from Harvest Impact, Tim Nash from Good Investing, and Filsan Farah from Verge Capital
Harvest Impact – Social Finance for the SDGs and the Circular Food Economy
As the Enterprise Support Lead at Harvest Impact, Heather Watt-Kapitain, started the conversation by introducing Harvest Impact, a social financing project led by 10C Shared Space. Harvest Impact is character-based lender, which means that social impact value is a primary consideration when it comes to accessing loans.
Harvest Impact is currently experiencing rapid growth. In support of the circular food economy and the SDGs, Harvest Impact offers loans between $2,500 to $50,000 to support training and resource needs for circular economy entrepreneurs in early and growth-stages. This means prioritizing individuals and communities that have been systematically left out of conventional financial models, and partnering with these communities to leverage social financing as a tool to create significant economic opportunities.
Jess Barrie, who works as the Community Investment and Engagement Lead, points out that Ontario is facing growing levels of food insecurity and the heavy reliance of a globalized food system affects supply chains and food production. Harvest Impact is working to address these issues by investing businesses with a stated social and environmental impact with the hope of making measurable change across the system. As a fund, Harvest Impact measures impact towards eight of the SDGs, aligned to the principles of a circular food economy to help:
- Increase awareness in circular economy principles (SDG 12)
- Increase decent work (SDG 5, 8 and 10)
- Improve access to local nutritious food (SDG 1 and 3)
- Support localized food systems (SDG 1 and 2)
- Decrease food Ware (SDG 12)
- Increase local financial investments (SDG 8 and 9)
Verge Capital – Local investments for local priorities
At VERGE Capital, Filsan Farah, who is Program Lead started her presentation discussing the importance of VERGE’s investment priorities and how they align with the SDGs. VERGE Capital’s primary objective is to facilitate the deployment of funds to aid businesses and organizations in finding solutions to complex challenges faced by the local community.
Initially formed as a collective group of individuals who seek to transform the existing financial system, VERGE aims to support local investors to invest their resources in projects that generate financial returns as well as positive social and environmental impacts. Each of the four focus areas listed below in the diagram illustrates how VERGE is working to merge the global SDGs framework with locally identified investment priorities. Filsan ended her presentation with an important reminder that the role social finance plays in achieving all the SDGs and cooperation is needed from all sectors.
Good Investing – Retail investing for Community Impact
Tim Nash, a financial planner and Founder of Good Investing, a company that helps retail investors learn more about the fundamentals of impact investing and make impactful choices that align with their values and investments. Tim spoke about using personal investments as leverage for change to create the economy we want. This includes divestments that are unethical, such as ones that focus on fossil fuels and weapons development, and shifting to “doing more good” options. In this way, individuals can ensure that they are making a more socially responsible choice with their personal investments.
Tim also shared excitement about the growing interest in impact investing, but cautions that while some exchange funds and mutual funds are SDG aligned, they often present a “Wall Street” version of incorporating the SDGs. For instance, General Mills is working towards SDG 2 – Ending hunger and achieving food security.
Tim went on to suggest that impact investing really shines through community bonds like Habitat for Humanity in Waterloo, which helps people in the community with affordable housing and through the work of place-based funds, like Harvest Impact and Verge Capital.
There is increasing interest in impact investing and social finance. These new models offer social purpose businesses and organizations a pathway to grow their impact and an opportunity for investors to see both a financial return and contribute positively to their community. Are you interested in learning more about social finance and impact investing opportunities?
- Check out a list of impact investments in Canada on Tim’s company website https://www.goodinvesting.com/impact-investments.
- Follow Harvest Impact on social media @harvestimpactgw to get updates on their community bond program – coming soon!
- Visit Verge Capital online to apply for financing or to invest locally
- Listen to Tim Nash’s new podcast presented by the Toronto Star Responsible Investing for a Sustainable Economy
Both Jess Barrie and Heather Watt-Kapitain lead the Harvest Impact Project which explores the continuum of social investing – from philanthropy to investing. The Project believes that smart communities invest in themselves and by working together, individuals can create new businesses and collaborations – including not-for-profit solutions that are the core engines of social, environmental and economic change. Check out Harvest Impact’s website to learn more.
Filsan Farah is the Program Lead at VERGE Capital which started in 2013 as a number of individuals and organizations from the London, Ontario region that came together to imagine a different kind of economy. VERGE Capital is the result of their vision, dedication, and collaborative spirit. VERGE Capital is a social finance program of Pillar Nonprofit Network in collaboration with Libro Credit Union, London Community Foundation, Sisters of St. Joseph, and SVX. More information can be found on the VERGE website.
Tim Nash is the Founder of Good Investing, a fee-only financial planner teaching ordinary people how to invest their own money online in sustainable investment funds. As an expert on socially responsible investing, impact investing, and the green economy, he is regularly featured in publications such as MoneySense, Reuters, and Advisor’s Edge Report. You can find more information on Tim’s services by checking out his website.
Rizzello, A & Kabli, A. 2020. Social Finance and Sustainable Development Goals:A Literature Synthesis, Current Approaches and Research Agenda. ACRN Journal of Finance and Risk Perspectives 9: 120-136.
Table of Impact Investment Practitioners. 2021. Impatient Readiness: The State of Social Finance in Canada. https://tiip.ca/impatient-readiness-the-state-of-social-finance-in-canada-2021/
Global Impact Investing Network (GIIN). (2016) Achieving the Sustainable Development Goals: The Role of Impact. https://thegiin.org/assets/GIIN_Impact%20InvestingSDGs_Finalprofiles_webfile.pdf