The Social Finance Fund (SFF) provides three fund-of-funds managers with repayable investment capital. We use the government capital alongside private capital to invest in fund managers who in turn invest in social purpose organizations.
 

• Fund-of-funds manager: There are three for SFF, each with its own investment strategy
• Fund manager or product issuer (social finance intermediary): a financial entity making social finance investments, such as a credit union, community loan fund or private equity firm
• Social purpose organization (SPO): an organization with a clearly articulated social or environmental purpose, such as a social enterprise, charity, nonprofit, cooperative or company
• Social finance investments: investments aiming to generate positive social and/or environmental returns and financial returns, into social purpose organizations or social finance projects

We have set up a fund, Realize Fund I. Accredited and institutional investors will invest alongside the Government of Canada. 

This work is being led by the Government of Canada with consultation from the fund-of-fund managers.

What constitutes a social equity investment or gender equity investment is still being defined by the Government of Canada.

We are guided by our Theory of Change, which sets out the impact we're aiming to have on Canada's social finance market. We are finalizing metrics and outcomes connected to this and will begin reporting our progress shortly.

In addition to measuring the impact we have as a fund-of-funds manager, we measure the impact of the investments themselves in Realize Fund I. We assess, measure, manage and report on impact using the methodology developed by Rally Assets: the Rally Inclusive Impact Methodology (RIIM).

As a fund-of-funds manager for the Social Finance Fund, we have specific data collection and reporting requirements for the Government of Canada, many of which are still in development; these will certainly be a part of our assessment and reporting process as well.

We encourage you to read the RIIM overview on Rally Assets' website.

We are raising significant private capital using the same vehicle as the public capital commitment that we manage. This brings more resources to the social finance sector and both public and private capital will be invested on a pooled basis within our investment strategy.

We will be investing in fund managers and product issuers who are deploying capital in Canada for initiatives that are intentionally contributing a positive social or environmental impact. See our product form for more details.

Realize Fund I is making investments in the Canadian private markets across a range of instruments including equity and debt.

Impact strategies produce positive social or environmental outcomes. We are seeking investment strategies that have a strong basis for creating these outcomes alongside their financial return goals. We are looking for partners who have a sincere intention to generate these outcomes and a thoughtful approach to integrating consideration for creating these outcomes into their investment process. Fund managers should be giving consideration to how they will approach these outcomes throughout the investment lifecycle.

Yes, we consider investments that can generate positive environmental outcomes. We recognize that enabling a more equitable society requires addressing environmental challenges as well. We are also committed to focusing on how social equity can be advanced across the impact investment industry. That can manifest in the fund management teams we partner with, as well as who they are investing in. Opportunities that consider social equity in the context of supporting environmental outcomes are particularly relevant.

We are generally comfortable investing in a fund’s first close, but typically require a clear and well-developed fundraising strategy that demonstrates a credible path to raising enough capital for a fund to execute its strategy.

Given the close-end nature of the fund we manage, we have a limited period in which to invest and deploy capital. We therefore need to ensure that the fund managers we partner with can reasonably launch their funds and begin investing in a reasonable period of time, while respecting our concentration limits.

We have served as a lead or co-lead investor in a majority of fund’s we’ve invested in and have participated at first close in approximately two-thirds of our investments. As we progress further into our investment period and our remaining deployment window narrows, our ability to participate in open-ended or protracted fundraising periods has become more limited. We have a responsibility to put committed resources into active investments within the fund’s prescribed timeframe.

There is no single, widely accepted definition of emerging manager. We generally consider a manager emerging if a fund manager is raising a second fund or earlier, or has $100 million or less in assets under management.

Our only exceptions to this in practice have been where a highly established team with strong access to capital spins out to establish a new firm. We have considered those established managers for our internal assessment. In an effort to improve consistent treatment and reporting, we put these definitions in place internally for greater consistency.

First-time and established managers follow the same investment process, but our expectations may differ based on their levels of organizational maturity. Our work with first-time managers typically takes longer because we provide guidance on the detailed information we require, some of which they may need to develop or assemble during the process.

We often work with fund managers with less of a conventional direct investment track record. Nonetheless as most private fund investment relationships are long-term partnerships, scrutiny is paid to long-term operational plans and operational viability in all cases. That may be less clear for a first-time fund manager and require development, but is an important consideration. Nearly two-thirds of our fund partners to date are first-time funds.

Under Realize Fund I, our internal policy generally limits our investment to 20% of a fund. We believe that for fund managers to have durable businesses, they need to establish appropriately diversified investor bases themselves. We also recognize that at higher levels of ownership, there may rightly be concerns among prospective investors regarding the influence or control associated with our voting interest.

For Realize Fund I, our return targets, which are reflected in our IPS are established on an asset class basis. Those return targets (which are set as target bands) are established by comparing the broad market performance of North American, private market funds in equivalent asset classes.

Realize Fund I seeks to support the development of a robust social finance market that can repeatably raise, manage, and deploy capital, and in particular private capital. We therefore believe it is necessary to strive for returns that are at least in line with wider market outcomes. We use MSCI data to assess actual investor cashflow-based returns, not just marketed return goals. Our target ranges reflect a range of outcomes that capture median returns for an asset class. We are not seeking return thresholds that seek to maximize returns irrespective of trade-offs on impact outcomes. In fact, through our community investment pillar as a component of our strategy, we specifically provide for more moderated return expectations recognizing that localized and place-based strategies may operate in more narrow markets or seek to advance access to capital goals which require some flexibility on their cost of capital.

Yes. There are no restrictions against doing that.

Potential investments are initially screened for social and environmental impact. We qualify opportunities against our strategy and their potential contribution to our portfolio. We then undertake detailed due diligence to determine whether we have strong conviction that an opportunity will deliver on our risk-adjusted return expectations, a strategy’s expected impact outcomes, and contributions to the broader market’s development. Once opportunities are thoroughly considered, they are then reviewed by an investment committee. Decisions are guided by the fund’s LPA and IPS.

We aim to accelerate eligible, well-qualified opportunities through the investment process efficiently, particularly when they address a priority or gap in our current portfolio. We also aim to decline opportunities promptly once we determine that we will not proceed.

We typically will respond within a couple of weeks if an opportunity is not eligible, and within a month if it’s determined to not qualify. While opportunities may be eligible and qualified, we may choose to follow their progress and monitor them when they don’t address current portfolio priorities and therefore aren’t a candidate for limited due diligence team resources. We encourage you to review the process diagram here for an overview of our overall investment process and associated target timelines.

To address challenges experienced by fund managers, we introduced a qualifying review before substantive due diligence begins. This is intended to seek feedback from our Investment Committee on diligence priorities before we begin substantive work and raises any potential deal breakers before we ask fund managers to commit significant time to the process.   

 Some concerns may be raised which require investigation before we proceed further. Due diligence allows us to assess a products ability to deliver on its investment proposition, including its financial risk and return, and intended impact outcomes.  

We believe that a rigorous and functioning process will also appropriately identify some investment opportunities that are not a fit for our portfolio.

Please submit your offering via our product submission form. Our investment team will review your submission against our strategy and contact you if we require additional information.

Let’s chat!

If you have a broad strategy to drive commercial returns and positive social or environmental outcomes (for example, an impact-focused venture fund, a green real estate development fund, a private credit strategy for sustainable businesses), please schedule a national strategies chat with us.

If you are looking at more of a community investment strategy to support underserved communities or regions (for example, a microfinance program for equity-deserving entrepreneurs, a community economic development fund or a loan fund for local nonprofits), please schedule a local strategies chat with us.

The Social Finance Fund is not a granting program. We are looking to support organizations that are seeking investment rather than grants.

At this stage, we don’t have capacity to do that. Part of our work does involve working with organizations to help them access capital. Please follow us on LinkedIn to be kept up to date.

At this time, we are prioritizing investments solely in fund strategies and are not considering direct investments in individual organizations or projects. The Social Finance Fund hub is expected to eventually include navigation supports to help individual organizations identify investors with matching direct investment goals. We anticipate primarily supporting direct investment opportunities as a co-investor alongside our fund manager partners in organizations seeing strong commercial traction and validation and seeking additional investment to fuel their growth.