A quick guide to the world of social innovation and social finance

OTTAWA — The federal government is looking to grow the number of groups involved in social finance, and consulting on a plan until Dec. 31. Here’s a guide to the terminology involved:

Social innovation: an overarching idea for coming up with new ways to tackle social or economic challenges, such as job training for hard-to-employ individuals or finding more affordable housing. It also involves testing ideas and measuring effects to determine if an idea is working.

Social finance: Refers to using private capital to fund programs that deliver a public good, like job skills training. It helps investors finance projects that benefit their community and helps charities and non-profits to tap into new sources of funding.

Social enterprise: These are usually community-based businesses that provide goods or services like a bakery or cleaning company with their main focus being on delivering social programs, or making an environmental impact. The Social Enterprise Council of Canada says these companies reinvest their profits to expand their reach. 

Social impact bond: The bond is a partnership between governments, private investors, service delivery organizations and, in some cases, an intermediary who acts as a broker. Investors put money into an organization that delivers a social program, which signs an agreement with the government for money if they meet specific performance benchmarks. Investors get a return based on program results, moving the financial risk away from governments and cutting costs.

(Sources: Employment and Social Development Canada, Social Enterprise Council of Canada, Global Impact Investing Network, Toronto Enterprise Fund)

The Canadian Press