What happened to the map?

Since 2007, SiG has seen the social innovation ecosystem blossom and last year we posted an earlier version of this map to visually depict that growth. Its purpose was  to demonstrate the strength of the sector for a meeting we were attending. It was a prototype if you like, developed under a tight deadline when it first became public. It was far from perfect and excluded some key players in the sector. Several iterations have since been developed in an effort to respond to our community.

We were excited by how popular the map was, and we decided to make it a project of its own. We are happy to release the infographic (below) that illustrates the sheer size of the sector in Canada, and the national/global reach of organizations well as, an open database to capture in more detail the incredible work of the sector.  

In red: filters will allow you to narrow organizations based on their area of operation and their impact (regional, national, or global). In green: if you want to look for a specific organization by name we recommend you use the text search feature with Ctrl+F or ⌘+F.

What is our criteria?

Social innovation is still fairly new to most, and many have never heard the term, much less identify their work as socially innovative. Given this, perhaps the most exciting aspect of mapping the ecosystem could be to capture who did see their work or the work of others as socially innovative AND provide an opportunity for people across the country to see what others are doing at a bird’s eye view.

In the last 10 years, the most satisfying work we’ve done has been in partnership with other organizations. It is our hope that people will find synergies in their work, learn about the work of great organizations, understand the incredible capacity of social innovation in Canada, and even connect with each other as they discover others who are encountering similar challenges in their work.

How can you contribute?

It’s inspiring to hear about the incredible work being done in Canada. There are incredible initiatives popping up in every corner of the country – from Code for Canada, to the LED Lab in Vancouver, to Inspire Nunavut, to the 4Rs Youth Movement. We recognize that social innovation is alive and well in every province despite our current database showing otherwise, and we hope you will take part in this project to reflect social innovation activity in Canada. Here are some ways to start:

  • Check the database

Make sure it includes your organization and that the work of your organization has been accurately captured. If it is not, change it! The database is open for anyone to edit.

  • Help us by capturing the work people are doing all over Canada

The database includes initiatives at all stages and sizes. Gaps we are especially eager to close are in the Northern provinces, Manitoba, Saskatchewan, and Prince Edward Island.

  • Take the time to learn more about the incredible work of others

You’ll be surprised to learn the incredible diversity of the work being done by others in Canada, and just how unique some of it is. For instance, Kudoz is an incredible learning platform in Burnaby, British Colombia for adults with cognitive disabilities that was a finalist for the 2016 Global Service Design Award.

  • Share the work of others

We don’t spend nearly enough time sharing the work being done in Canada. It is about time we stop being humble, and recognize what others around the world have – that Canada is a leader in social innovation. In the last year the ecosystem was recognized by the Economist in their Social Innovation Index 2016.

Who holds the keys to this project?

I was the one who originally created the visual and have been charged with keeping track (or losing track) of suggestions, but I am leaving SiG at the end of June to take the next step in my career. SiG will keep a copy of the database in the event something happens to the original, but we are giving this tool back to the community to take a shape and life of its own.

We are experimenting if you will, walking the talk of Social R&D.

Will you update the map?

The map is still a visual tool we will use at SiG for presentation but it will not be updated. You can access it below.

Social R&D in Silicon Valley: Field Notes #1

This is the first in a series of Field Notes this year on methods, business models, conditions, as well as profiles of organizations pursuing or supporting R&D in the Bay Area and Silicon Valley. The observations, ideas and provocations here are meant to help us revisit our own assumptions and ask if our approaches are fit for the future, all with the aim of strengthening Canada’s Social R&D ecosystem.

Peter Diamandis, Co-founder of Singularity University and XPRIZE Foundation, two highly regarded impact-oriented organizations in Silicon Valley, reflected on the value of experimentation in a recent blog.

Singularity University is a global community using exponential technologies to tackle the world’s biggest challenges.

Diamandis noted:

“Running great experiments and building a culture of experimentation are crucial for driving breakthroughs in your organization.”

He also highlighted:

“You must ask the kind of questions to which you don’t currently know the answer, but if you did, you’d change the way you operate. If you already know the answer, or if you are testing an insignificant detail that doesn’t matter, you’ll just be wasting time and money. To get good questions/experiments, you must create a culture that incentivizes asking good questions and designing good experiments.”

Since January 2017, I am spending some time each month in the Bay Area and Silicon Valley to better understand: their culture of experimentation, how organizations structure themselves to deliver offerings in tandem with developing new and improved offerings, and the role of funders and grantmakers in supporting the practice of R&D in the impact sector.

The two questions I’m currently pursuing:

As we help create the conditions for a vibrant Social R&D ecosystem in Canada, what might Silicon Valley, the world’s largest R&D ecosystem teach us?
&
How might we begin to bridge the two ecosystems for exchange and mutual learning?  

Last year Community Foundation of Canada organized a Canadian Delegation to Sillicon Valley with the help from SiG fellow Vinod Rajasekaran.

In my time so far, I have met with, had site tours, and shadowed:

– mission-oriented startups like HandUp, Year Up and DataKind;

- innovation outposts like Swissnex, Center for the Edge, and Unicef innovation;

- community hubs like Impact Hub and Kapor Center for Social Impact;

- accelerators like Fast Forward;

- funders like Tipping Point Foundation, Silicon Valley Community Foundation, Omidyar Network and Draper Richard Kaplan Foundation;

– mature organizations like Kiva, Center for Care Innovations, and Feeding America, and;

– institutes like Long Now Foundation, Institute for the Future, and Singularity University.

Initial observations:

There is no ecosystem curator. They operate as a hive culture.

When I probed on the absence of a single curator to nurture an ecosystem for Social R&D, individuals mentioned that having a curator organization “can create a culture of dependence.” This might be the good-old “analog switchboard operator” versus “digital platforms” analogy. Digital platforms are more widely accessible, they can be used to self-organize for both online and offline engagements, and can help harvest collective intelligence more effectively and efficiently. However, ‘curator dependence’ is worth unpacking and following further. What are the dependencies experienced in an ecosystem by having a single curator organization? In what contexts have single curators served us well?

Grantmaking strategies must integrate funding for delivery and development. 

Individuals and organizations recognized the multi-dimensional nature of investment required to kick-start, embed and sustain R&D activities, capacity and function. It means investing in people, infrastructure, adoption, and skills, in addition to research and experiments. Nonprofits accelerator Fast Forward is an example of an organization that supports development of organizational R&D culture, skills and experiments. It is the first nonprofit accelerator that I have come across where research and experimentation capacity-building was baked into the acceleration program; enabling resourcing and mentorship around applying R&D methods such as A/B testing. Tipping Point Foundation is an example of a grantmaker that invests between $200,000 and $700,000 in unrestricted funding to build their grantees’ organizational R&D capacity over multiple years. This includes support of the development process, skills and competencies, data and research infrastructure, and initial experiments. At Tipping Point, funding both delivery and development is core to their grantmaking strategy. Grantmakers such as the Omidyar Network, Draper Richards Kaplan Foundation, and Nasiri Foundation also deliver unrestricted funding as part of their grants and impact investments to empower R&D in their investees’ and grantees’ organizations. How might Canada’s grantmakers and impact investors take an integrated funding approach that combines delivery and R&D (embedded capacity, skills, infrastructure and experiments)?

High velocity can create blind spots.

The ‘move fast and break things’ culture in Silicon Valley can create blind spots around inclusion and public benefit. While significant research investment goes into, as an example, the design and development of new emojis, the same proportion of investment will likely not go into research around who the emojis include or exclude, and their long-term individual and collective behavioural, policy or psychological impacts. They are, however, beginning to mitigate this risk. A recent attempt is the announcement of a $27 million open R&D fund for artificial intelligence (AI) in the public interest. The Fund is supported by the Knight Foundation, Omidyar Network, Hewlett Foundation, among others. It’s apparent that organizations in the Bay Area and Silicon Valley often struggle to balance multi-generational effects and outlook in their work, with a world that is fast-paced, focused on the present, and rewards short-termism. Organizations such as the Institute for the Future play a critical role by hosting foresight labs in food, health, cities, and other areas. The Long Now Foundation, an organization that cultivates long-term thinking through lectures and seminars, also has an active role in this ecosystem as a counterweight to the high-velocity culture. Might the same hold true in Canada? Who is Canada’s counterweight and futures host?

Mesh technical and non-technical ecosystems.

The technology and social change ecosystems in Silicon Valley can seem disconnected and, in many ways divided, with protests around Google buses and protests for better pay for Uber drivers. However, the two ecosystems are more consciously building bridges and becoming more connected. Organizations such as: Kapor Center for Social Impact, HandUp, DataKind, Feed America, Code for America, Hacktivision and NetHope act as important bridge builders between the social services, social impact and the technology worlds. In addition, the World Economic Forum is opening their new Center for the Fourth Industrial Revolution in San Francisco focused on the public policy impacts of emerging technologies such as Blockchain, autonomous craft, and artificial intelligence.  Bridge building organizations create opportunities that deepen trust and mutual value through exchange, learning, and co-creating. Could the technical and non-technical ecosystems be more integrated in Canada in order to achieve inclusive growth?

Discovery and problem-orientation.

R&D in the social impact sector can often be centred around defining and solving a “problem” at the outset of designing an intervention or options for interventions. This approach is most prevalent in Canada, often under a ‘labs’ manifestation. While an intentional focus on the problem may get to the heart of a right-sized intervention, organizations such as Kiva, Khan Academy, Singularity University, Wikipedia and the Center for Care Innovations seem more ‘discovery-oriented’ in their R&D. The underlying assumption for this approach is that “possibilities are often hidden and oblique, so curious tinkering might lead to new discoveries that are not so obvious.” How might curious tinkering be empowered in Canada’s social impact sector?

Is our playbook out of date?

A photo by Greg Rakozy. unsplash.com/photos/oMpAz-DN-9I

Canada spends over $300 billion annually on social outcomes, according to the OECD. Our fast-evolving societal challenges — ranging from mental health, Indigenous communities’ access to quality education, and a lack of affordable housing — demand equally fast-paced and nimble research, learning, experimental and replicating approaches so people can access the best possible services, supports and solutions, no matter where they live in Canada. This is where R&D comes in.

Canada’s not-for-profit, charitable, B Corp, and social enterprise organizations have built strong capabilities in volunteer management, donor stewardship, and program delivery, among other things. Along with an appreciation and celebration of these competencies, there is increasing consensus that social change in the 21st century requires an additional strong capacity and capability in research and development, or R&D.  

Just as R&D in the business world drives new and improved products and services, R&D can also help social mission organizations generate significant and rapid advancements in services and solutions that change lives. However, currently only a small proportion of social mission organizations repeatedly incorporate a wide range of new knowledge (like insights into how the brain works and how positive behaviours can be encouraged) or new technologies (like machine learning) or new processes (like human centred design).  

R&D is not yet well understood, funded or widely practiced by the social impact sector and thus is not yet adopted as a core organizational practice. It is a new field with a small body of codified knowledge and practice.

The “Social R&D” exploration aims to catalyze a change. The exploration is incubated by SiG, seeded by The J.W. McConnell Family Foundation, and is championed by a growing movement of organizations including: Open North, Community Foundations of Canada, MaRS, Engineers Without Borders Canada, among many others.

The new report, Getting to Moonshot: Inspiring R&D practices in Canada’s social impact sector authored by SiG Fellow Vinod Rajasekaran, with a Foreword by Nesta’s Chief Executive Geoff Mulgan, highlights 50 compelling R&D practices from 14 organizations across Canada, including: Saint Elizabeth’s field visits with frontline staff, GrantBook’s digital simulations, Skills Society’s neighbourhood prototyping and The MATCH International Women’s Fund’s 15% staff time for experimentation. The report illustrates that pursuing R&D helps organizations minimize costs in program growth, track improvements and learning more effectively, and ultimately deliver better outcomes for and with the people they serve. The intention in the future is to move beyond the report and host an online collection of practices with open access.

There are wonderful elements of R&D in Canada’s social impact sector and this report is an attempt to make a small portion of them visible to demonstrate that investment in R&D is a critical success factor in seeing measurable gains in social wellbeing. Against a backdrop of increasingly complex social, ecological and economic challenges, together we can transform how social mission organizations enhance lives for the 21st century.

SiG invites grantmakers, philanthropists, governments, and practitioners to join the movement to boost Social R&D capacity, capability, infrastructure and capital in communities across Canada.

Recoding Our Innovation Systems

Social Innovation’s Imperative to Be Ambitious and Think Big

SiG Note: This article was originally published on July 30, 2015 as part of the SIX Global Council series on Ideas for the Future. It has been cross-posted with permission from Social Innovation Exchange (SIX).

The world is awash with innovation reports and indices comparing the innovation prowess of different countries, cities, and corporations. The two cornerstone assumptions underpinning these reports are that innovation is:

  • Anchored in technology, and
  • A driver of economic growth essential for societal success.

“Technological innovation,” says the World Economic Forum’s recent Global Competitiveness Report 2014-2015, “is the key to a competitive and growing economy, unlocking major productivity gains and allowing companies to move towards higher value-added activities.”

By contrast, social innovation remains a modestly growing separate domain, unconnected to most national mainstream innovation systems. By “mainstream,” I mean the combined technological and business innovation domain, often referred to as STEM or Science Technology Engineering and Mathematics, which is the beneficiary of generous government support across the OECD.

This gap between mainstream and social innovation is a problem if we are to collectively apply our ingenuity to tackling this century’s pressing global challenges. Those include climate change, the loss of biodiversity, and deepening social inequality, all of which are torqued by population growth now upwardly revised by the UN to reach 10.9 billion people by the year 2100.

In addition, social innovators’ own success requires that they reach beyond their important existing networks with other social innovators. UK academic Dominic Chalmers has identified a key insight for social innovators to succeed:

“If social innovators identify too strongly as social innovators, and develop strong ties to other social innovators at the expense of more diverse and distributed groups, the innovation process may be starved of new knowledge and capabilities. This myopic ‘local’ sourcing of knowledge within narrow domains is well documented in other industries and risks limiting the creative potential of social innovation.”

Light at the End of the Tunnel

To be sure, there are important glimmers of change seen with governments. As well, some corporates are beginning to align their efforts with big challenges facing the world. The large US corporation DuPont has shifted its research agenda so that its “inclusive innovation” focuses on “applying science to great challenges.” Intel China is embracing the “power of corporate social innovation” noting that if  “the purpose of technology is to improve people’s lives, we have to break down the boundaries between technology and social innovation.”

In Silicon Valley, the debate on its social role is beginning. As Michael S. Malone’s January 2015 article in MIT Technology Review, “The Purpose of Silicon Valley,” put the question: “Capital and engineering talent have been flocking to seemingly trivial mobile apps. But would we really be better off if more startups instead went directly after big problems?”

Here are three things the social innovation movement needs to do if it is to expand its societal role and shift how the mainstream operates:

c/o Jimee, Jackie, Tom & Asha

c/o Jimee, Jackie, Tom & Asha

1. Insinuate itself into national innovation systems.

This is important because social innovators need to participate in and shift their national innovation system to extend their impact. Achieving this involves strengthening the articulation of social innovation’s value, expanding its partnerships with other sectors, being more policy active, and ensuring that social innovation doesn’t exist only in its own silo (notwithstanding the on-going importance of social innovator peer networks).

Grand Challenges Canada (GCC), a $240 million platform that is part of the global Grand Challenges network, has attempted to explain what it would mean to combine STEM, business and social innovation. They articulate an “integrated innovation” vision. “Integrated Innovation,” says GCC, “is the coordinated application of scientific/technological, social and business innovation to develop solutions to complex challenges. This approach does not discount the singular benefits of each of these types of innovation, but rather highlights the powerful synergies that can be realized by aligning all three. Integrated Innovation recognizes that scientific/technological innovations have a greater chance of going to scale to achieve global impact and sustainability if they are developed from the outset in conjunction with appropriate social and business innovations.”

- Banksy

– Banksy

2. Advocate for social outcomes as a cornerstone metric for evaluating national innovation systems.

This is important because social innovators need to be able to access more talent, technology and intellectual capital than currently possible on their own. With OECD countries’ social spending envelopes (health, education, employment insurance, pensions, etc) growing exponentially and unsustainably, this should not be difficult.

3. Develop and adopt an ethical framework to guide (social) innovation.
c/o Randy Robertson

c/o Randy Robertson

This is important because we always need to be actively thinking about our “north star,” ensuring that we re-engage the most vulnerable people and ecologies in society. Any useful technological or social innovation can be applied for malevolent purposes. And all innovations – social as well as technological – have unintended consequences or even a shadow side. A Declaration of Action from a July 2015 Canadian cross-sector retreat examining Social R&D called for an innovation system that “leads from a new ethical framework for R&D for public good.”

For example, will the sharing economy improve social good or fast-track growth of the new precariat? A growing number of people struggle to cope with the “slow but continual downward pressure on the value and availability of work,” as many have observed, such as Derek Thompson in his troubling assessment “A World Without Work” in The Atlantic (July/August 2015).

The social innovation movement is well positioned to be the trim-tab, high leverage catalyst for bringing needed resources to bear on the innovation challenges our global community faces.

SiG Note: Email info@sigeneration.ca to sign-up for news and updates on the emergent Social R&D movement in Canada. 

Becoming a Wise Traveller

Are you like me? Do you feel frustrated by the limited impact you and others have had? Do you feel that despite your best efforts, and indeed successes, you have hit a brick wall?

You may have mounted a fierce advocacy campaign, pioneered a social program, mobilized new funds or even changed a law, but the status quo has barely altered. Social and economic justice hasn’t increased. Power hasn’t shifted. The old paradigm survives. And the sharp, distinctive edges of your social innovation are in danger of being eroded, isolated or forgotten.

Credit: Jim Lawrence www.kootenayreflections.com/

Credit: Jim Lawrence

In my experience, lasting impact requires more than coming up with a new idea and proving that it works. It’s more than replicating an innovation in several places.

Novelty isn’t enough. Neither are dedication, hard work, or loyal supporters. Nor is a sophisticated strategy, money, or the most robust application of the latest technology, for that matter.

Are these things essential? Yes.
A good start? Certainly.
But they are not enough to tip a system.

Just because you have a shiny new solution, the world will not beat a path to your door. Enduring social innovation doesn’t spread by accident. We need to deliberately nurture the conditions in which it can flourish.

One of these conditions is to become a wise traveller.

The Spirit of Haida Gwaii: The Jade Canoe by Bill Reid.  Photo: Bill McLennan.

The Spirit of Haida Gwaii: The Jade Canoe by Bill Reid. Photo: Bill McLennan.

In my new book, Impact: Six Patterns to Spread Your Social Innovation, I suggest three types of social innovators – disruptive, bridging and receptive – are required to achieve long-term impact. While each group has its own set of skills, strengths and limitations, they all have one thing in common: they understand the boundaries of their expertise and experience and welcome fellow travellers from organizations and institutions that have complementary skills.

Disruptive innovators are inspired by love and motivated by necessity. They challenge the prevailing way of doing things and shake the lethargy off the status quo. They wrestle a big idea to the ground. And yet, even when they prove that the idea works, it does not easily become the new standard. It can be ignored or misunderstood and may even be perceived as a threat to the system.

It is not easy to move from the margins to the mainstream. That’s why we need bridging innovators. Bridging innovators spot the big ideas surfaced by disruptive innovators. They leverage their connections, reputations and resources to make sure the potential is realized. They translate and interpret the value of a disruptive innovation to the system. Bridging innovators are the necessary link between disruptive innovators and receptive innovators.

Receptive innovators are key to implementing big ideas and spreading solutions far and wide. They have an insider’s knowledge of the key levers to advance an issue within a system. They know the formal and informal channels inside bureaucracy and who the key players are. They are navigators, steering the innovation so that
 it may flourish and become the new standard.

Credit: Komal Minhas for Komedia

The three types of social innovators. Credit: Komal Minhas for Komedia

Wise travellers know they can only go so far on their own. They respect the roles and functions of each type of innovator. They know that social innovations not only emerge from relationships, but also thrive and endure in relationships.

COMING UP

Join Social Innovation Generation, The J.W. McConnell Family Foundation and Innoweave on March 12 at 1pm EST for a webinar and in-depth discussion with Al Etmanski on his new book Impact: Six Patterns to Spread Your Social Innovation.

Register here

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SNEAK PEAK

Download the Introduction to IMPACT: Six Patterns to Spread Your Social Innovation.

Register here to be notified when you can purchase, IMPACT: Six Patterns to Spread Your Social Innovation.

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Continue the #impact6 conversation with @aletmanski

Impact Ontario Closing Panel Digest

On Tuesday, March 18th, the MaRS Centre for Impact Investing hosted ImpactOntario, a landmark conference designed to bring together investors, social entrepreneurs, philanthropists, financial institutions, and thought-leaders to explore opportunities, network, support deal-flow, share experiences, learn from the past, and look to the future of impact investing.

The conference was a reflexive and dynamic microcosm of the impact investing ecosystem.

By the end of the day, deals had been struck, key learnings were internalized, and a great buzz of energy around impact investing had spread infectiously among conference goers – the perfect time to zoom out and reflect on the entire ecosystem from ‘35,000 feet.’

C/O ON Social Enterprise (@OntarioSE)

C/O Ontario Social Enterprise (@OntarioSE)

Moderated by Tim Draimin, Executive Director of Social Innovation Generation (SiG) National, the closing panel focused on lessons from abroad with insights from Michael Chodos, Senior Advisor to the US National Advisory Board on Impact Investing, and Geoff Burnand, CEO of Investing for Good, a UK Community Investment Company (CIC).

A true episode of Dr. Who, the final panel was a unique chance to look back, stand still, and see the future of impact investing. Here is the Closing Panel Digest:

Current Activity & Current Concerns

Michael Chodos: The US National Advisory Board is focused on what the ecosystem looks like, which policies and practices work, and which need to be discussed with policymakers to remove barriers, promote what works, and support what is emerging. Chief concerns:

Language is a distracting challenge – discussions of impact investing always turn, in part, into a definitional conversation about what it means. The way to think about impact investing is two-fold:

      • (Look Back) There are existing policy tools that the US government has used for decades that are valuable, that work, and that should serve as a learning platform from which we can grow (ex. CDFI) 
      • (Look Forward) Grab hold of the spirit of entrepreneurship and unleash that spirit to deploy private capital in new ways

The story of impact investing is ‘the blind men and an elephant ‘-  people often have a specific stake or interest when they join the space and see only one part, instead of the whole ecosystem.

Steps forward? Develop a common framework for educating policymakers and other actors to enable the synergistic development of the impact investing ecosystem.

Geoff Burnand: A couple years ago, Investing for Good arranged the first UK Social Bond for a charity (Scope). Last week, the first social bond fund in the UK was announced – a fund to be managed on the premise of Social Alpha (aka a “commitment to delivering financial returns for investors [that] is brought to bear while also delivering positive social returns”). Chief concern: 

What do these types of fund managers know about social metrics or value? It is important to remember that “pioneers get the arrows and settlers get the land.”

Steps forward? Become settlers. Get our business model right and try not leave the space open for other people to come in who are probably not as aligned to the mission we are trying to deliver as they should be.

Field Building: Corporate Form

Michael Chodos: “That which is measured is that which is achieved.” We organize commercial activity around money because it is the simplest universal metric for measuring success.  There is no universal metric (yet) for measuring impact.

The problem of ‘I know it when I see it’ is that everyone sees everything differently. Looking ahead, new corporate forms (B Corp) might help resolve how we measure success in social returns and how we ‘give permission’ for organizations to take the social and environmental into account.

Steps forward? Create more flexible corporate forms and continue to move forward on social metrics. Develop a common language and a common way of thinking about success, so that new products and approaches can be created in uniform, universally understood ways.

Social Impact Bonds

Geoff Burnand: Social Impact Bonds (SIBs) are really complicated instruments that are broadly unintelligible to mainstream capital and mainstream investors. They don’t fit into portfolios easily; they are hard to value; there is no exit. They will evolve, however, driven by commendable interest in developing new financial vehicles. 

Michael Chodos: There are a relatively small number of SIBs in the US, but they are gaining momentum. By end of year, they will probably measure in the dozens. It is important to separate a discussion of SIBs from a discussion of ‘pay for success’ generally.

Pay for Success – outcome-based metrics apply across government deployment of funds, beyond SIBs.  It is a more fundamental rethinking of how government deploys money.

SIBs – While still in the early stages,  SIBs have captured the imagination of the public as a way of deploying private money to solve a problem at the prevention stage (smart expenditure up front), before spending 3x as much in the remediation stage (wasted taxpayer dollars).

The risk in SIBs is currently born by foundations, corporate social responsibility dollars, or high-net-worth individuals, with traditional investors coming in behind, generating complicated transactions with multiple ways of linking capital to a project. On top of all this complexity, the Veridium tokens and alt coins in general are adding an extra layer to consider. This current process, however, is part of the ‘proof of concept’ stage.

Steps forward? If the concept is proved, money is saved, and public entities actually pay as promised, then all of this complexity will begin to dissolve in the next few years.

Role of Philanthropic Capital
Jordan Gildersleeve (@JGild)

Jordan Gildersleeve (@JGild)

Michael Chodos: There is a massive body of institutionally-managed and philanthropic capital in the United States; at the moment, a very small percentage of that capital is being deployed in program-related investments or income-earning instruments. Philanthropic capital can drive social finance innovation in two ways:

1. Drive increased effectiveness by deploying the tax-advantaged capital ear-marked for grant-making to income-related instruments, building capacity for engaging in these types of transactions. Fund innovation, prototyping, and proof of concept.

2. Find a way for the 95% of philanthropic portfolios that are currently under ‘normal asset management’ to service the mission of the organization. Develop strategies for aligning the portfolio with the purpose of the foundation.

Steps forward? Think about ways foundations can act as catalytic capital in social finance transactions to better develop and focus these instruments. The foundation world can lead the way: get into transactions early, trial them, share emergent lessons from the process, and develop evidenced-based research on what structures work, what is replicable, and what actually makes a difference? 

Geoff Burnand: Philanthropic capital is an important and active part of the social finance field. It is the area probably most fertile for bringing the impact investing space together, for both investors and investees.

Steps forward? For example, Impact for Good is arranging the first social investment fund for the arts in the UK; the fund will focus on the social value of arts (The Arts Ventures Fund), rather than art for art’s sake.  A prerequisite of the fund is that it have some philanthropic first-loss to leverage in private capital underneath. This is a key role philanthropic organizations and individuals can play: seed and support new financial models and projects, unlocking capital flow from the private sector. 

The New Normal: Steps to the Future of Impact Investing
  1. When can the average person invest his/her portfolio in impact investments?
  2. Will we likely see retail impact investing products anytime soon?
  3. Will a transformation of financial theory at the University-level be necessary?

Geoff Burnand: It is astonishing that the financial advising/services sector does not get more engaged in the development of the impact investing field. It will likely be ten years before someone could walk into his/her financial advisor’s office and move part of his/her portfolio into impact investments.

In terms of retails products, we need to focus on making potential products as mainstream as possible. When Investing for Good launched the first social bond, it was listed on a regular exchange, was properly constructed, and had a proper prospectus. 

In terms of transforming curriculum, it will be absolutely necessary to start teaching about the positive use of money and to emphasize greater prudence on social value.

Michael Chodos: Already, many professors are starting to think about environmental, social, and government (ESG) returns. There is an ongoing evolution of thought.

With respect to the productization of impact investing opportunities, the average mid-level retail investment advisor is not going to be the pioneer; they are going to follow once metrics are established, risks are known and it’s easy enough to explain as a simple retail product. Key leaders need to be the major banks and financial institutions; they need to be part of driving the conversation, efforts, and engagement to start socializing these products. For now, it’s mostly sophisticated investors who will be buying their own shares of SIBs.  

Tax Policy: the Future of Incentives

Geoff Burnand: This week, the details of a tax break for social investors will be announced (Social Investment Tax Relief). The tax break targets investments in small social enterprises to try and grow the community finance space. While this will obviously be beneficial, some frontline community organizations will still be considered too high risk; these types of organizations need to be de-risked before mainstream investors take interest.

Steps forward? Tax relief should be expanded to apply to all social purpose organizations, regardless of their size. If the policy goal is to move mainstream capital into social enterprises, targeting only small social enterprises might not be as effective as they carry higher risk. 

Michael Chodos: There are three main streams of government policy to consider: tax policy and subsidies; public-private partnerships and fund-matching; and social procurement.

While the likelihood of comprehensive tax reform in the short-term is probably low, there are many effective tools embedded in the tax code that have already moved billions into affordable housing, community health, and economic development.

Steps forward? Focus on the intersection of existing experience with tax policies that work and developing a more robust focus on measurement. Increasing discipline around measurement will help us to identify the true benefit of things like community health, local economic development, and affordable housing; if we quantify and monetize those benefits in a more explainable, consistent way, the tax policy conversation will shift and we will see positive forward movement. 

Looking Ahead: Opportunities for the Next 5 Years

Geoff Burnand: There is not enough focus on real deals: what money is moving, for what reason, does it come back, and, if so, why? We need to focus on that and understand what is happening in the ecosystem. 

Michael Chodos: We need to focus the conversation on metrics instead of anecdotal stories. In five years, we should be able to share experiences about what works, what does not, what outcomes look like, what vehicles make sense and which do not. We need to develop more proof-points and share the raw data of what works and what doesn’t.

Tim Draimin: There is energy, buzz, and optimism about impact investing, but making it a reality is harder to do. We can’t be wooly-eyed about what we need to be able to do. This focus on metrics – being clear on what we’re trying to achieve and being able to prove it –  is very important.

*This digest summarizes the content of the closing panel and does not necessarily reflect verbatim statements. 

 

Disequilibrium: the disconnect between impact investors and social entrepreneurs

Social enterprises are on the rise.

B Corp: Fresh City Bag

Fresh City Farms (B Corp): Toronto-based urban farm and farming network

In Canada alone, there are now over 100 certified B Corps actively using the power of business to tackle social and environmental issues. Each and every day, talented young entrepreneurs are improving their communities on a local and global scale. Just like traditional businesses, social enterprises need capital to expand their operations and achieve their organizational goals.

Similarly, impact investing is growing too.

The number of progressive investors interested in having their capital generate social returns, in addition to financial gain, is growing not only in Canada, but around the world. Now, more than ever, investors want their money to impact the world as well as their bank accounts.

Social entrepreneurs and impact investors must have an ideal relationship then, right? Well, sometimes.

If there are an increasing number of social entrepreneurs seeking money and a growing population of impact investors looking to invest, shouldn’t the supply and demand of impact transactions satisfy the marketplace?

Unfortunately, we are not in utopic equilibrium. Yet.

There is a disconnect between the capital needs of enterprises and investors. The disconnect has to do with risk. Turns out, investors don’t like it. While impact investing is indeed a budding asset class, most impact capital is allocated to mature social enterprises and investment vehicles. This is because these opportunities marry a high probability of earning steady returns with a low risk of failing. Unsurprisingly, safe investments with healthy income are attractive to investors.

The consequence of risk-aversion is that most impact investments are made in social enterprises or financial vehicles that have already been vetted and de-risked. This trend has significant effects on both individual social enterprises and the impact investing sector as a whole. While there might be a considerable sum of impact capital invested in the marketplace, a limited amount is allocated to early stage ventures: this is when entrepreneurs need capital the most to innovate, build their businesses, and accomplish their organizational goals. If too many early stage enterprises lack growth capital, a pipeline of de-risked investment opportunities will never fully develop. A consistent flow of early ventures must graduate to mature enterprises to satisfy the demand of more traditional impact investors.

Twenty One Toys: re-imagining toys as tools for social change

Twenty One Toys: re-imagining toys as tools for social change

The solution is simple and clear: invest in early stage ventures! Invest with intention and longterm time horizons by targeting early stage social enterprises with the goal of maturing a strong pool of de-risked ventures.

If the trend is towards risk-aversion and the solution is to invest in higher risk early stage ventures, how do we move forward? Understanding that there is a problem doesn’t catalyze capital.  

Simply put: some must lead the way. There are pioneering investors that deem the investment rewards to be worth the financial risk. Impact investors looking for both higher financial and social returns will see the value in early stage impact investing. Leading investors are also focused on intentionally supporting innovation by closing the pioneer gap - the gap between capital access and the capital needs of new social entrepreneurs. As the goals,  strategies, and potential rewards align for these investors, their investments enable new waves of social entrepreneurs to make an impact.

One investor already leading the way is Youth Social Innovation Capital Fund (YSI for short). YSI (disclaimer: I lead it) does what others don’t do. We provide capital and support to entrepreneurs when they need it most: in the early stages of building their ventures. Our goal is to graduate YSI-supported social enterprises from very early ventures to ones ready to take on more growth capital.

There needs to be more investors like YSI (or more investment flowing through YSI) in order to satisfy the capital needs of social enterprises at every stage of growth at all times – not just sometimes.

* Editor’s Note: While the author writes of social enterprise as a collective term to describe all businesses with a social purpose, due to regulatory and incorporation differences, SiG differentiates between non-profit social enterprises and for-profit social purpose businesses. See our Knowledge Hub for more information.

Fair Exchange: Public funding for social impact through the non-profit sector

Screen Shot 2013-07-09 at 11.21.13 AMAfter more than three decades writing grant proposals in the non-profit sector, I switched sides to work as a public funder. For many years I held a granting portfolio with the Ontario Trillium Foundation, and participated in the funding reform discussions of the federal and Ontario governments. In the text Fair Exchange: public funding for social impact through the non-profit sector,  I offer the result of those experiences – a funder’s perspective on how we might do the work of public funding more effectively and increase the potential for impact as a result of our investments.

The world is changing faster than before. Civic organizations, often swifter than government policy, are emerging as the knowledge brokers pointing the way to the future and offering solutions to the “wicked” problems facing communities. How they finance that work – their access to public capital to generate public benefit – is a critical preoccupation. Governments and citizens’ organizations have a shared interest in ensuring that public funds flow in a way that best creates the conditions for recipient organizations to achieve social impact. This matters more than ever now in times of constrained public funds and increasing social need.

Good funding process is a matter of public trust

Public funders bear the responsibility of ensuring that what we fund is the best option on the table – but also of ensuring that how we fund is directly focused on enabling social impact. It simply makes no sense to spend more on the funding process than necessary, to create delays, limit other funding opportunities, or increase recipient costs with excessive red tape. It is a matter of public trust that funding processes and practices be cost efficient and geared to support outcomes of public benefit.

The case for public funding reform

Although we have an almost two decade history of discussion on public funding reform – and a comprehensive literature of sector critique – no single organization champions the reform discussion. There is no little red schoolhouse for public funders to learn their trade, few opportunities to look across programs for the best ways of doing business, and almost no theory of good design for funding programs. Also, funders seldom generate cost-to-disbursement ratios – a basic accountability measure that tracks how efficient funding processes are at distributing funds entrusted to their care. As a result, practice reform efforts have been far from stellar. Now, when every nickel in the treasury counts, high disbursements costs mean less money out the door to solve social problems.

As civic organizations begin to tap into a much broader funding economy of social finance, corporate social responsibility, crowdsourcing and the like, organizations are diversifying their revenue sources, some drawing funds from as many as a hundred different sources. Consequently, their needs as recipients have changed. Often they are also working collaboratively, bringing unusual partners to the table to increase innovation in their approaches to public issues, taking up opportunities as they arise. You can see these emerging resourcing trends through Ajah’s Fundtracker initiative, a web based directory of who is funding who. As the non-profit sector’s opportunities to contribute increase, funding practices must shift to account for the more complex financial environment in which they work. 

Evaluating funding programs for how they disburse funds

Funders often evaluate recipient’s efforts at outcome achievement, but seldom examine their own processes for how they enable, or hamper, efforts to produce social impact. Taking a design approach to funding programs enables us to be deliberate about the elements of process, and evaluate the effectiveness of administrative processes, risk management, and the funding relationship. Recipient critique tells us that funding programs must be more predictable, more flexible, reduce administrative burden, and develop stronger relationships with applicants and grantees. These elements of program performance can be measured.  Too much red-tape, for example, is an almost inevitable result of longevity of a funding program. We can predict it, track it, and shift practices to reduce it. “Streamlining” is not just about web portals, but also about how good people working in well-designed programs make use of strong relationships to understand the sector they fund and constantly evaluate how their work contributes to the ability of organizations to generate impact.

A Fair Exchange

In Fair Exchange, I offer a beginning theory of practice for public funders in Canada. I suggest language and frameworks common to all public funders and consolidate the most effective practices from prior reviews. It is my hope that this paper will help public funders to build a richer theory of design and practice that not only accounts for internal risk management but also evaluates funding processes for practices that are most effective in supporting the production of social outcomes, which is the reason why we fund.