Measurement, Decision-Making and the Pursuit of Social Innovation in Canadian Social Finance

Abstract

This dissertation explores the use of social financing as a strategy to generate social innovation in Canada. Social financing is a strategy intended on positively changing social-ecological systems through investments that also seek to generate a financial return. The constantly evolving nature of complex social-ecological systems implies that the social investment strategies social financiers take should co-evolve with the systems they are seeking to impact and if this is the case then the role that measurement plays in social finance decision-making should be critical. This dissertation explores the role of the intermediaries that connect the suppliers of social financing, the organizations that use social financing and the social-ecological systems both sides are seeking to impact. A survey of current social financiers explores the tools they use in making their investment decisions to establish current Canadian practices and how they assess risk. Current practices in the measurement of social finance impact is compared to the evolution of impact assessments in the well-established fields of public health planning, environmental impact assessment and sustainability impact assessment to draw lessons relevant to the relatively new methods being used to assess the impact of social financing. Integrating the process of assessing social-ecological impact with the process of creating a portfolio of investments this dissertation proposes an approach called ‘developmental impact investing’ that sees a potential synergy between learning about a complex social-ecological system and managing investment risk. A case study of the Vancouver City Savings Credit Union is also developed as part of this dissertation to illustrate the challenges and opportunities inherent in operationalizing social financing at a large enough scale to have a substantial impact on a community. Ultimately the unique role that credit unions play in Canada’s social finance ecosystem presents a number of lessons for the sector’s financial sustainability, effective governance and its potential to trigger large-scale social innovation.