Uncharted Territory - Essential Skills Ontario

NEW MODELS FOR A NEW WORLD4.5 Social Finance - Investments Based on Outcomes“Social finance” refers to financial investments that deliver social and/orenvironmental benefits, and in most cases, an economic return. Social financeis an alternative financial model that encourages positive social orenvironmental solutions that are neither purely supported by philanthropicnor financial investment (MaRS Centre for Impact Investing, retrieved 2012).This term generally refers to activities such as community investing,microfinance, and social impact bonds, as well as sustainable business andsocial enterprise lending. The approach inherently includes fundingmechanisms that are explicitly tied to performance-based measures oroutcomes.In the past, the social sector was often viewed one-dimensionally as aphilanthropic activity where funding relied on government grants, privatedonors and foundations. It was understood as a field for the “public good”.Returns on investment were rarely considered and outcomes were, generally,demonstrated through personal narratives rather than quantifiable measures.A broader definition and understanding is emerging. In this new model, thetraditional walls between social activities and for-profit activities are beingerased. New forms of organizations, non-profit or for-profit, combineelements and practices from financial institutions, start-up operations,technology companies and grass root social innovations to create new formsof enterprises that may be more sustainable financially, socially andenvironmentally (Social Innovation Generation, retrieved September, 2012).While most other forms of social finance include some type of financial returnon investment (ROI) in the traditional sense, outcome-based grant makingand social impact bonds (SIBs) are different.4.5.1 Outcome-based grantsOutcome-based grant making is driven by investors’ efforts to increaseaccountability, achieve greater impact and produce greater social return oninvestments (SROI). This approach uses research and data from pastinvestments to increase both accountability and effectiveness of the intendedoutcome.Uncharted Territory: Can Social Innovation Revitalize Literacy and Essential Skills Programs? • 21