Impact investing – the opportunities and challenges to driving social change

In a world where technology connects us more rapidly, providing us the means to see what exactly is happening on the other side of the planet in real time, has made us a more socially conscious society. We have broken down barriers and increased internationalization, allowing us the chance to become better global collaborators. Around the world we are seeing these changes, seeing more organizations shifting their business models to not only make a profit, but to make an impact. We are seeing individuals who want to invest in a positive future, who want to harness the power of their investments capital to drive change. We call this, impact investing.

Over the years impact investing has emerged as a result of philanthropic failures to address social problems. Instead of simply donating funds to charitable causes, impact investors target companies that aim to create additional impact as the core of their business. Impact investors want to invest in and jump start profitable businesses that will solve social and environmental problems year after year, creating impact alongside financial returns. In the end, only long term sustainable solutions can move us closer to our goal of a better society.

In order to better understand the opportunities and challenges we face today with impact investing in Canada, we spoke with 3 financial leaders who even provided some career advice for those interested in working in this growing sector.

One of the biggest challenges in impact investing is getting impact funds to such a size that they can attract the big investors.

“There is no question that the investment world is waking up to the idea that organizations can be strong in profit and purpose, and in fact, can outperform many of the traditional businesses.  If more money could flow into the impact space that typically only looks for financial returns and the impact world could meet the demand, we could move the dial toward a sustainable, inclusive and balanced financial future at a much faster pace.  At Vancity Community Investment Bank, we see the need very clearly and are interested in helping to do this.

The biggest opportunity in impact investing is likely putting thought and action into how to convene people and organizations across the country so that there can continue to be influence at the community level AND catalyzed at a National level.  Canada is behind other countries in the impact investing space and there are lots of great examples for us to follow but we seem to “admire the problem” vs taking strong collective action”. – Jay-Ann Gilroy, title, at Vanity Bank 

Canada has the right social and economic conditions to make impact investing mainstream.

“In my opinion, the opportunities are limitless. There is a growing appreciation amongst Canadians that social and financial returns need not be mutually exclusive. Now more than ever, we are seeking these types of investment opportunities.  This, in turn, has resulted in many financial institutions, investment firms, venture capitalists, and foundations actively declaring their intent to grow this marketplace.  The challenge, as with any emerging field, is that boundaries are still grey and undefined and there is always a risk that impact investments may be labelled as such, but contain little to no measurable positive outcome.

Related is the role governments can and should play in incentivising this marketplace.  With billions of dollars being spent across social, environmental and economic domains, governments at all levels are actively exploring how to better spend public funds to ensure that the outcomes we collectively seek are being met. In November of 2017, the top public servants at the federal, provincial, territorial levels all signed on to a Declaration on Public Sector Innovation that made explicit reference to “exploring opportunities to work together on prizes, challenges and other outcomes-based funding mechanisms”. Having governments at the table provides a unique opportunity to institutionalize a truly multisector approach to impact investing.  Public, private, not-for-profit partners all bring valuable human and financial capital that can be mobilized for public good.  While the public sector has been discussing for some time how best to enable opportunities, we are finally seeing some important progress at both the federal level with the launch of Impact Canada and the development of the Social Innovation/Social Financing Strategy, and provincially with jurisdictions like Manitoba that are actively testing new pay-for-results funding models. Thoughtful progress will take time but I remain confident that we are on the right track”. – Rodney Ghali

What is the best advice you have for someone who wants your job one day?

• Be a good listener– It is easy to think that given our experience and our position we may have all the answers.  We don’t.  Remember to be humble and listen to partners, stakeholders and Canadians to gain the insights needed to move an innovative concept forward in a meaningful way.
• Be tenacious – Change is hard and many along the way will say no.  Be well informed, understand “the system”, and remain relentless in the pursuit of your ultimate objective – better outcomes for Canadians.
• Be a good partner– play as part of a team to win. Actively engage with partners as it always takes a group of people to make something possible. Understand compromise, and work as hard as the team to ensure that the interests of our citizens are always put first.
• Be proactive – put your hand up for the challenging assignments when others shy away, even if you don’t know what you are doing. Take risks when leadership is required, people look for someone to lead in many situations, be the first (or second to accept the challenge).
• Be curious – ask for help and guidance along the way from trusted advisors, no one ever got anywhere by themselves!
• Follow your heart –  do what you love and learn to be really good at it.