Ontario Launches Fund to Foster Social Enterprises

By Stephen Thompson 

Doing well by doing good is an art form – and it’s one that’s attracting increasing interest and investment from the private sector. Investors and entrepreneurs alike are showing a growing interest in social enterprise investing, making this field a remarkable new opportunity for prosperity on a global basis. But it doesn’t happen overnight, or without government support.

It’s not altruism that drives governments to support these groups; wide-ranging benefits are well-documented. Organizations that achieve both financial goals and social, environmental and economic change contribute to the creation of more jobs, a healthier community and ultimately a stronger economy.

The good news: Increasingly, the public and private sector are working together to open the door by connecting capital to the greater good.

Making it work: Funding social enterprise investors

Policy development that works hand-in-hand with private-sector investors holds the key to shaping a social enterprise-friendly economy. And yet, access to capital is the No. 1 issue of concern limiting growth, according to surveys of social enterprise leaders.

With that in mind, the province of Ontario, Canada recently launched the Social Enterprise Demonstration Fund (SEDF) to foster the growth of social entrepreneurs and enterprises who are tackling Ontario's most pressing social and environmental issues -- and creating jobs.

Rather than funding social enterprises directly, SEDF will contribute CAD$4 million to 11 social finance organizations across the province at up to $500,000 each. Each participating regional organization is, in turn, leveraging the province’s funding to raise additional capital from other sources, including banks and private investors, on a minimum 1:1 matching basis. The capital pools created will then enable micro-loans and grants to early-stage social enterprises.

The province’s CAD$4 million SEDF contribution has so far leveraged CAD$6 million in private capital from partners such as the TD Bank Group and the Rotman Family Foundation. The SEDF is a key component of Ontario’s social enterprise strategy to create 1,600 new jobs — particularly for traditionally disadvantaged populations such as at-risk youth, new Canadians and Aboriginal people.

Aligning the players

For this first round of SEDF funding, Ontario selected 11 organizations from a sea of promising candidates based on such factors as potential for maximum economic impact, job creation and inclusion of disadvantaged people. These intermediary organizations were selected for their ability to identify and fund smaller, newer ventures.

PARO Centre for Women’s Enterprise, for example, helps social entrepreneurs who are women access financing and training. RISE Asset Development provides low-interest small business loans, training and mentorship to social entrepreneurs who cannot access traditional financing, specifically individuals with a history of mental health or addictions challenges or experience in the criminal justice system.

By allotting public funding to social enterprises, we can empower citizens to contribute in a positive way, ultimately help reduce poverty, improve the environment, create positive social change — and economic growth. With the right partnerships and a long-term commitment to program success, a social enterprise-friendly economy will result in business strategies that drive social, environmental and economic change for a real triple-bottom-line win.

New strategies for old challenges

But one fund alone does not shape a social enterprise-friendly economic environment. SEDF is Ontario’s latest initiative in a far-reaching Social Enterprise Strategy to build the social enterprise sector. Already, Ontario is home to approximately 10,000 social enterprises employing an estimated 160,000 people and serving roughly 3.4 million customers each year. The province is testing multiple approaches to foster this valuable economic sector. A new generation of entrepreneurs, investors and policy-makers is making it possible to make a difference and a solid return on investment.

Globally, the social finance market is expected to generate up to $1 trillion in new impact investment capital over the next 10 years. But 10 years is a long time to wait for innovative ideas to come to fruition when we need the impact now.

Enter the combined power of public and private collaboration. In a Triple Pundit post last year, we discussed the launch of Ontario’s Social Venture Connexion (SVX.ca), a venue for connecting social entrepreneurs with investors.Through a collaboration with several partners in the San Francisco Bay Area, the SVX platform has since expanded its reach into California, and will soon be expanding into Mexico.

Other elements of the Social Enterprise Strategy include social impact bonds, the Ontario Catapult Microloan Fund and Social Enterprise Ontario, a one-window resource website.

For more information, check out @InvestOntario on Twitter. 

Stephen Thompson is the Senior Economic Officer in Ontario, Canada’s International Marketing Centre, San Francisco. He has served in numerous economic development leadership roles. The government of Ontario works with partners in the private sector and across society to grow Ontario’s economy, create jobs and increase prosperity.