Assets committed to net-zero by 43 member firms of the Net Zero Asset Managers Initiative (NZAMI) ranged from 4% to 100%, according to the analysis by investment research firm Morningstar. But only nine managers committed 100% of their assets to net-zero and 15 committed less than 50%. 

The Morningstar analysis, which was released in July, is the first time the investment community has had an in-depth look at the climate commitments of NZAMI members. 

The report notes that smaller managers and those specializing in sustainable investment committed a higher proportion of net-zero-aligned assets under management (AUM) than larger and more diversified managers.  

Vanguard Group, for example, the world’s second-largest asset manager at $8.1 trillion in assets, came last at 4% net-zero assets under management. State Street Global Advisors, the fifth-largest manager at $4 trillion, was fifth lowest at 14%. Invesco, ranked No. 20 in the world at $1.6 trillion, reported the fourth-lowest net-zero AUM at 12%. 

Even Brookfield Asset Management, whose head of transition investing is former governor of the Bank of England (and Canada) Mark Carney, was the 12th-lowest firm with net-zero AUM of 33%. Carney founded the $130-trillion Glasgow Financial Alliance for Net Zero (GFANZ) last year.  

NZAMI signatories have committed to achieving net-zero CO2 emissions from companies and sectors financed through their portfolios by 2050. They join other signatories in the banking, insurance and asset owner sectors that are also part of the GFANZ alliance. 

NZAMI requires its signatories to disclose in the first year after they join the percentage of AUM they target to manage in line with net-zero. This percentage reflects the proportion of total assets targeted to achieve the company’s “fair share” of global carbon reduction required by 2030 to maintain a global temperature rise of no more than 1.5°C (generally considered to be 50%). NZAMI also requires members to disclose when they intend to meet these targets and their target methodology. 

The Morningstar study is based on a subset of 43 members that joined within the last 12 months out of NZAMI’s total membership of more than 270 signatories representing $61 trillion in assets (nearly half the total AUM in GFANZ). Another 40 signatories issued earlier targets. 

As managers of money on behalf of institutions and individuals (or asset owners), asset managers act as central gatekeepers in sustainable finance. “Asset managers have a crucial role to play in pushing companies to set ambitious and credible net-zero targets,” said Hortense Bioy, director of global sustainability research at Morningstar and lead author of the report.  

But the Morningstar study shows that the major players are exercising little ambition in this important climate change role.  

Asset managers have a crucial role to play in pushing companies to set ambitious and credible net-zero targets.

-Hortense Bioy, director of global sustainability research at Morningstar  

Vanguard’s target, for example, consists of only nine funds sub-advised by another company (also listed in the report) and excludes the vast majority of Vanguard’s own assets. State Street adopted a similar approach, although it counted assets from clients and index portfolios expected to adopt net-zero targets. 

BlackRock, the world’s largest asset manager at $9.6 trillion, was 27th highest on the net-zero list at 77% of net-zero AUM. However, the study notes that the BlackRock target is based on decarbonization pledges from companies in its portfolios, rather than any major changes to its portfolios to finance or encourage emission reductions. “This approach assumes that more companies will adopt net-zero targets and the portfolios themselves will decarbonize as a natural consequence of the companies’ real-world decarbonization,” stated the report. 

BlackRock’s and Vanguard’s unambitious approach to net-zero targeting is in line with their business model, based largely on passive investing in exchange-traded funds and index funds. 

This is in contrast with the top managers on the list, which include relatively small firms, many of which have explicit, actively managed responsible investment mandates. These include Valo Ventures, Stafford Capital Partners, Ridgewood Infrastructure, Quinbrook Infrastructure, Mirova, FSN Capital Partners, Developing World Markets, Clean Energy Ventures and Asteria Investment Managers, all with 100% net-zero AUM. 

To be fair to the large companies, the study notes that NZAMI permits a wide variety of target-setting approaches and methodologies, which partly accounts for why similar firms have varying targets. This flexibility makes it difficult for investors to assess managers’ climate goals, “raising questions about the reliability of any of the commitments and decarbonization targets.”  

Shortly before the report was released, GFANZ issued new guidance for all its member organizations, including a framework for net-zero transition plans. As well, Race to Zero, the umbrella organization for the UN’s 10,000 net-zero signatories, including GFANZ members, released new membership criteria, including a requirement to produce fossil fuel phaseout plans. 

But in an email interview, Bioy said she isn’t optimistic that either the GFANZ guidance or the Race to Zero membership rules will improve target setting. “External factors, such as the energy crisis, the Ukraine invasion, as well as the lack of data and methodologies, will continue to contribute to the wide divergence in target setting criteria,” she said. 

So, what are institutions and individuals supposed to do when looking for an asset manager? The report ends with a bit of advice. “Climate-focused investors will want to partner with the most committed asset managers – that is, well-resourced firms with the appropriate data, tools and expertise to create the best net-zero-aligned investment strategies and demonstrate the impact they generate through engagement with issuers.” 

Eugene Ellmen writes on sustainable business and finance.

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“The growth potential is immense. But the social-impact potential, that’s phenomenal,” says Sa’ad Shah, co-founder and managing partner of Noetic Fund, which recently opened their second round of funding, looking to raise $200 million. The Toronto-based venture capital fund invests specifically in new therapeutic treatments, and psychedelics are a big part of their focus. Shah says Noetic has already seen the market grow exponentially in the last year and predicts a market cap into the billions soon. “If you miss a week, you’ve missed a year,” Shah says.

While psychedelics might seem like an under-the-radar industry now, it won’t stay that way for long. Peter Thiel, co-founder of PayPal, backed start-up Atai Life Sciences, which boasted a valuation of US$2.3 billion. Champion boxer Mike Tyson has put his cash behind Wesana Health, which had a market cap of more than $40 million in December. Celebrity investor Kevin O’Leary is also talking up psychedelics, saying in May that the potential of psychedelics “far exceeds the potential of cannabis.”

With one in five North Americans experiencing a mental illness in any given year, a growing crop of investors, companies and researchers are betting on the medicinal future of psychedelics. Currently, there are about 50 publicly traded psychedelic companies globally, most funding, supporting or completing their own clinical research. Some focus on psilocybin (you might know them as magic mushrooms), and others are exploring chemical derivatives such as MDMA, ketamine and LSD. Leading medical research facilities like Johns Hopkins University, Harvard University and Massachusetts General Hospital are dedicating new centres and resources to study the use of psychedelics in treatment. One major Canadian centre, at Toronto’s University Health Network, received a $5-million donation from entrepreneur Sanjay Singhal in October.

Though psychedelics research dates back to the 1950s and ’60s, the U.S. Controlled Substances Act put the kibosh on it, when psychedelics got lumped in with other drugs and possession became a federal crime. One of the longest-running research bodies in the market today is the non-profit Multidisciplinary Association for Psychedelic Studies (MAPS). For more than 30 years, MAPS has led the industry when it comes to studying the use of psychedelics in mental health treatments. It’s recently had a boost from the for-profit sector. In September, Wesana Health committed $1.5 million to MAPS to continue research into the effects of MDMA on traumatic brain injuries.

For investor Raad Seraj, having an institution like MAPS on the scene helps create a different way of looking at mental health. “They are creating an alternative pathway from a purely for-profit, Big Pharma model,” he says. As a venture partner at The Conscious Fund, Seraj has helped create new ways for retail investors to invest directly in therapeutic psychedelic start-ups. Investors like Seraj and Shah say that getting into the psychedelics market is about changing not just how these substances are viewed culturally, but how the whole field of mental health works.

In a standard therapy session, you might speak with a therapist about a specific issue, while they help you unpack your feelings over months or years. That therapist may prescribe medication to alleviate symptoms of depression or anxiety. Now imagine that same therapy session but with a low dose of psychedelics. Rather than take a pill daily, like a standard antidepressant, a patient would take a clinical dose of the drug in the presence of their therapist and work through their “trip” during the session.

When you look at the numbers, not just from a humanitarian perspective but from an economics perspective, more organizations will quickly come to the conclusion that covering access to psychedelic-assisted therapies is a good investment.

Ronan Levy, executive chairman at Field Trip Health

Research suggests that for someone suffering from post-traumatic stress disorder, for instance, MDMA coupled with therapy can reduce feelings of fear and defensiveness and heighten feelings of trust. That’s why investors like Seraj are not just seeking out these opportunities but trying to bring others along with them. Seraj hosts regular sessions to introduce potential investors to the world of psychedelics. His goal with The Conscious Fund is to bring the investment opportunities to what he calls a community of “micro-angels” – those who don’t have a ready $125,000, the usual minimum for venture capital funds. “I think start-ups and early-stage companies around the world are recognized as the dominant generators of wealth. And archaic rules [requiring investor accreditation] generally have kept [regular] folks out of this market.”

But can the burgeoning sector avoid the cannabis problem, where legal businesses and grow operations are overwhelmingly owned by white people, while across North America people of colour are still more likely to face charges or jail time over drug possession? For Seraj, any investor has to support general decriminalization. “It doesn’t cost the [legal] market anything. In fact, the more you destigmatize it, the better it becomes.” He believes that more mainstream psychedelic use could help lower rising rates of ecological anxiety, distress and depression over climate change. “There’s a big connection between climate change, mental health and consciousness,” he says. “[Psychedelics are] how you create a resilient, adaptable human culture that can actually face what’s coming.”

For Ronan Levy, executive chairman at Field Trip Health, which offers ketamine-assisted psychotherapy in a dozen North American cities, the more these therapies become accessible for people, the more users will become aware of the historic inequalities in the field, and the more ideas on how to address them will emerge. “One of the social side effects of psychedelic experiences seems to be increased empathy and regard for other people. So it’s kind of a solution that starts to feed itself.”

Of course, there’s a long way to go before these therapies are available to everyone. For one, many of the substances, including MDMA and psilocybin, will likely not get the legal green light for another few years, though some jurisdictions are leading the way. Detroit decriminalized psychedelics in November 2021, meaning that possessing psilocybin is still illegal, but police won’t prioritize those arrests. The California state senate passed a bill last summer to legalize psychedelics, though the bill still has to pass through other layers of government before it becomes law.

And the therapies that are available now can be prohibitively expensive for many. A full round of treatment at Field Trip, for instance, is hundreds of dollars per session. Levy says that’s an issue that Field Trip is still grappling with, and it comes down to access. “Insurance is a piece of it, and innovating around group therapies to lower costs,” he explains. “I believe that when you look at the numbers, not just from a humanitarian perspective but from an economics perspective, more organizations will quickly come to the conclusion that covering access to psychedelic-assisted therapies is a good investment.”

Levy anticipates that once more physicians and counsellors become comfortable using these therapies in their treatment, the benefit to the healthcare system could be huge. “I think the U.S. alone spends close to $250 billion on treating depression and anxiety with the cost of medicine and the ancillary services, so you can appreciate just how large of an industry this can be. [It can become] the primary form of mental-health care.”

Of course, that boom that Levy predicts is dependent on a number of factors. Clinical trials have to keep getting positive results and legislators have to take big steps forward. With that in mind, Janet Gray, a certified financial planner with Money Coaches Canada, suggests a bit of caution for the curious investor. “We’ve been through this before, with cannabis five years ago and Bitcoin a few years ago. There’s always something new to excite the market to this degree.” She says she’d invest 5% of her portfolio into psychedelics at this point, possibly up to 10% for a long-term investment. Even if there’s a case of investment FOMO, Gray advises people to do more research. “What are the medical people saying? What are the legislators and policy-makers saying?” From there, Gray says, you’re in a much better position to see how far down the rabbit hole you’d like to go.

Emily Baron Cadloff is a Halifax-based journalist. She often writes about pop culture, food and education.

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According to the United Nations Environment Programme’s most recent State of Finance for Nature report, an estimated US$8.1 trillion will be needed over the next three decades to successfully tackle the climate, biodiversity and land degradation crises. Alongside government and philanthropic resources, private investment capital is a critical tool to fill the gap. It places much-needed cash in the hands of enterprises, funds and organizations that are advancing energy efficiency, renewable sources of energy, and other activities that reduce greenhouse gas emissions.

The cost of inaction is steep. We’ve faced billions of dollars in damage over the past year with climate-related wildfires, floods and mudslides hitting British Columbia and beyond. The collective cost will be billions more if we don’t act decisively.

The good news is that the work has already begun. Stakeholders are rallying, from government commitments at this fall’s UN climate summit, COP26, to the philanthropic commitment of foundations through the Canadian Philanthropy Commitment on Climate Change. In Wednesday’s Throne Speech, Governor General Mary Simon  called for “bolder climate action,” including “accelerating our path to a 100% net-zero electricity future [and] investing in public transit.” But they cannot act alone. Leading Canadian and global investors are also coming to the table, making climate action a key part of their investment strategies. These investors have recognized that investing in climate action has a positive impact on the planet and on our pocketbooks.

Market data proves this point. A recent meta-study by NYU’s Stern Center for Sustainable Business and Rockefeller Asset Management analyzing 245 studies about the relationship between ESG (environmental, social and governance factors) and financial performance found that 86% of investment strategies focused on climate action performed as well as or better than  the benchmark. We often describe the financial consequences of investments that can be lost or negatively impacted because of climate change as “stranded assets.” The London School of Economics estimates that the value of global financial assets at risk from climate change is US$2.5 trillion.

Moreover, investors such as pension manager Caisse de dépôt et placement du Québec (CDPQ) that employ a stewardship investing approach that incorporates climate risk across their assets continue to demonstrate optimal financial performance at both the five- and 10-year time horizon.

The case for positive impact on the planet is also clear, from reducing greenhouse gases and supporting biodiversity through investing in Indigenous-led clean energy projects to capitalizing on natural climate solutions like the Carolinian Canada Conservation Impact Bond, which seeks to raise capital for climate-smart habitats in Southwestern Ontario, to financing energy-efficient retrofits in commercial and residential buildings. The Toronto Atmospheric Fund (TAF) has generated 1.4 million tonnes of direct C02 reduction across six of its investments alone.

This approach is not limited to a select group of environmentally conscious asset owners. All investors can integrate climate action into their portfolios. You can consider the following options:

1. Engage in shareholder activism: Proxy voting, advancing climate-related board resolutions and pressing for climate risk disclosures are all achievable shareholder activist strategies. Organizations such as SHARE have engaged with North American public companies held in Canadian university endowments and pension plans to address pervasive risks associated with climate change.
2. Monitor and track impact performance: Investors can also track impact performance and specifically seek to monitor and track the climate impact of their investments. Organizations such as the Global Impact Investing Network (GIIN) and the Impact Management Project offer tools, methods and peers to help implement impact tracking and management.
3. Employ active investment strategies: There are a range of active investment strategies that investors can implement, including divestment, ESG criteria, screening that incorporates climate action, and dedicated impact investing strategies focused on climate-action, such as verified green bonds or private equity funds focused on renewable energy. You can unlock these strategies by updating and revising your investment policy to have a specific focus on climate action.
4. Join pledges and coalitions: The Net-Zero Banking Alliance, the Net-Zero Asset Owner Alliance and Climate Action 100+ are great global examples. RIA Canada’s Canadian Investor Statement on Climate Change and coalitions like Impact United provide an opportunity for asset owners to organize at a national level.

 There is no single right approach to investing in climate action, and no single actor can solve the climate crisis alone. But we can all help with the collective advance toward the great transition to a low-carbon economy. As asset owners, we all have a unique responsibility to each other and the planet to use the capital tools at our disposal to support climate action.

Andrew Chunilall is the CEO of Community Foundations of Canada. 

Julia Langer is the CEO of the Toronto Atmospheric Fund. 

Éric St-Pierre is the executive director of the Trottier Family Foundation.

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That’s the prediction from PitchBook, a Morningstar company that serves the private-equity (PE) industry. In a recent report, COVID-19’s Influence on the European PE Market, two PitchBook analysts said private investors have now entered “defensive mode,” with a specific emphasis on risk identification and resilience.

This framework, the analysts said, should particularly benefit investments related to the UN’s environmental, social and governance (ESG) goals. Once professional investors begin to scrutinize market, financial and geopolitical risks, they can hardly ignore the threats of climate crisis and inequality.

“Greater premiums will be placed on business stability and resilience as companies brace themselves for inevitable black swans” (the next existential disasters), says PitchBook. “We think investors will double down on ESG following this crisis, as society becomes more sensitive to companies ‘doing the wrong thing.’”

The study noted, of course, that the COVID crisis has created many challenges for private equity, including the solvency of its hardest-hit portfolio companies. Raising further capital will also probably be more difficult.

But in the meantime, the authors say, “the current market dislocation may present favourable buying opportunities.” Companies focusing on social change have often been considered outliers. Now, according to PitchBook, companies pursuing ESG-related objectives may be more resilient to future shocks.

This new perspective could mean a shot in the arm for companies involved in areas such as energy efficiency, green infrastructure, waste management, water solutions, biotech, health and wellness, and selling to underserved markets. According to PitchBook, European PE investors have a record US$259 billion to invest – even in these tough times. U.S. private equity invests about US$300 billion a year.
“ESG has gained a foothold that will not be set aside this time,” Hilary Wiek, PitchBook’s senior analyst, told Environmental-Finance.com.

“In fact, it can be argued that ESG and impact [investing] have a moment to shine right now.”

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Nixon’s leadership should be saluted, but an opportunity was missed that day. He could have asked all people, not just banks, to consider the impacts of their investments – to help make the world a better place while also improving their investment returns.

That he didn’t make this broader appeal is no surprise. Impact investing, as it’s typically (and narrowly) defined, is at best a niche concept. It incorporates a range of emerging investment products like social impact bonds, microcredit financing, green building mortgages, social venture funds, and so on. These products are mostly being adopted by private foundations, and now banks are embracing them as bolt-on strategies that extend their mission or brand.

These allocations by foundations and banks, while a start, will be inadequate to meet our greatest social and environmental challenges. Royal Bank’s $20 million commitment, for example, is like finding a penny in a couch cushion for an institution with $750 billion in assets.

A much broader approach is required. Impact investing should be defined more by philosophy and strategy than by products. It should embrace all investors, partially because it will take a collective effort to build a more sustainable future but mostly because it can be the path to superior investment returns.

The challenges confronting the world today are daunting. After quadrupling in the 20th century, our current global population of about seven billion is expected to grow to nine billion by 2050. Yet the energy discoveries that have fuelled the expansion to date are declining in productivity, and new discoveries are not keeping pace with this decline.

Meanwhile, the ability of the globe to supply sufficient quantities of clean air, water and productive land in the face of continued population and industrial expansion is by no means a certainty. These questions of resource and environmental sustainability occur against a backdrop of geopolitical tensions, unprecedented imbalances in trade, and an evident shift in economic power from the West to the East.

When confronted by an uncertain future of growing challenges, an appropriate societal response is to save more for the proverbial “rainy day” – deferring some current consumption to invest scarce resources in infrastructure that will provide future returns. Yet, while global savings rates have remained stable in recent decades, in the Western “advanced” economies, savings have dropped from 22 per cent of GDP in 1980 to only 18 per cent in 2010. In the United States, where savers have been punished with near-zero interest rates for most of the past decade, savings are at all-time lows of 12 per cent of GDP.

And where have our reduced savings been directed? In what industries are we investing for future returns? Not, in our minds, where impact is needed.

Despite an arguably low-ball estimate by Booz Allen Hamilton in 2007 that the world faced a $41-trillion deficit in power, transport and water infrastructure, and despite America’s property market collapse with unoccupied homes and homeowners in default remaining at record levels, Americans still invest more in their private homes than in public water and transportation infrastructure. Globally, over the past five years, equities in the consumer discretionary sector have been among the top performers while capital goods and utilities have lagged. Far from saving for a rainy day we are indulging our live-for-the-moment society.

A broader definition of impact investing would bring the traditional concepts of investment back to financial markets that have strayed too far from their roots. Investing with impact requires a direct connection to real capital projects that will bring real productive returns in the future. It requires the patience to realize those returns on the time scale of years – even decades. In contrast, financial markets today have an ever-shortening time horizon where returns are more often than not derived from zero-sum game tactics such as market timing or high frequency trading. In effect, the financial world has become completely preoccupied with price movement – and has little interest in value creation.

Under our broader definition, more impact capital could be directed to economic value creation. For long-term savers, the returns would be tough to beat. Consider the performance of historic investments in rail, roads, generating plants and so on.

For example, the hydroelectric generation facility at Churchill Falls in Quebec cost $942 million to build in 1970 ($6 billion in 2012 dollars). But we would value the asset at between $15 billion and $25 billion today based on cash flow produced and replacement value. And this doesn’t include the four decades of emission-free electricity it has contributed to Quebec’s power system.

California completed the San Francisco Oakland Bay Bridge in 1936 at a cost of $77 million ($1.24 billion in 2012 dollars). A recent bill to repair just the eastern span of the bridge came in at $6.3 billion. These are not unique examples: The valuations of existing infrastructure have massively exceeded inflation in the developed world. Chances are new infrastructure in the developing world will see similar returns over the coming decades. And these types of investments are accessible to all investors through publicly traded utility firms, the manufacturers of utility equipment or the engineering firms that build and maintain the infrastructure.

While a publicly traded company that makes subway cars, electrical transformers or solar panels may not have the obvious social impact of a public housing bond, we would contend that directing capital towards infrastructure and away from instant-gratification strategies helps make markets and our economy more sustainable. As the Booz Allen report demonstrates, the need for this kind of capital is far greater than the niches to which impact investing has been attached so far.

So what would this broader definition of impact investing look like? Here’s one possible wording: Impact investing forces traditional financial investors to consider value creation (vs. price appreciation), social and environmental impacts and risks, and longer-term investment horizons, all in service of maximizing investment returns.

The concepts of long-term investment horizons, thoughtful risk management, and value creation are historically attractive attributes of successful investors, yet these are the disciplines so many investors seem to have abandoned. Defined this way, even bank executives could feel comfortable asking all their customers to consider the benefits of impact investing.

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These are just some of the enterprises listed on Social Venture Connexion (SVX), a platform launched in September that connects them with investors who want to see a positive impact as well as financial returns. The Toronto-based SVX is North America’s first such platform.

It comes as Canada’s social venture sector is blossoming as new entrepreneurs use business models to tackle social or environmental problems. They’re filling a key gap, given government austerity and persistent societal challenges.

Investors, too, are getting on board: Investment in the sector has reached $5.3 billion and is expected to hit $30 billion in Canada over the next decade with the backing of foundations and mainstream investors. (A new estimate, to be released in early 2014 by Purpose Capital along with MaRS Centre for Impact Investing and RBC, pegs the total market size at about $8.8 billion currently).

The overarching goal? Adam Spence, founder of the SVX, says he hopes to create a high-impact channel for investments and ventures to “move the yardstick on pressing problems like poverty, safe homes, success in employment and climate change.”

The sector is taking root in other countries as well. The U.K. is home to the world’s first social impact bond and is creating several social investment funds. In the U.S., both Morgan Stanley and Goldman Sachs in November announced expansion into impact investing. And the G8, which held a social impact investment forum last June, has created a task force that’s working on a blueprint for “rapidly accelerating development” in the sector.

Across Western countries, “demographic pressures of an aging population and macroeconomics mean governments won’t have the money they need to find new ways to solutions,” and are thus looking at non-traditional sources of capital, said Antony Bugg-Levine, New York City-based chief executive of Nonprofit Finance Fund and chair of the Global Impact Investing Network.

Younger investors, in particular, are keen on allocating more funds into impact investing, he said, noting the plethora of MBA programs and post-secondary courses on social finance, which are often over-subscribed.

He’s not the only one who sees more growth ahead. “It’s exploding,” said Sally Osberg, president and chief executive of the Palo Alto, California-based Skoll Foundation, which has invested about $400 million in the past 14 years to almost 100 social businesses around the world.

Osberg says climate change is both a growing challenge for many of the businesses in which it invests and a driver of interest in the sector. Often, as in the case of Typhoon Haiyan, it is local social businesses that are most nimble at stepping into a crisis situation and rebuilding economies.

In Canada, governments are part of the momentum. The federal government plans to develop partnerships in the sector and explore the use of social finance tools. Last fall, the Ontario government launched a social enterprise strategy that aims to make the province the top jurisdiction for the sector on the continent. British Columbia has created a social innovation council, while Quebec has pledged to develop its social economy.

Foundations are beginning to move more money into the sector. The Canadian Task Force on Social Finance has recommended that the country’s foundations, which collectively have $36 billion in assets, allocate 10 per cent of their capital in mission-related investing by 2020.

Some of the big banks are nosing around the sector, too. Royal Bank of Canada has put $20 million toward socially responsible investments, while Toronto-Dominion Bank (along with the Ontario government, KPMG and Alterna Savings) is backing a new Ontario Catapult Microloan Fund.

The SVX, first proposed in 2007, is the result of a partnership between the Ontario government, the MaRS Centre for Impact Investing and the owners of the Toronto Stock Exchange. With its creation, “we hope to place Canada at the forefront of social investing,” said Tom Kloet, chief executive of the TMX Group in a September speech.

For all the hoopla, it’s important to remember the idea of social finance is largely untested and there are bound to be tensions between the twin aims of tackling a social problem and generating profits. In these early days, much of the actual impact on peoples’ lives has yet to be demonstrated.

In Vancouver, Paul Richardson runs Renewal, one of North America’s largest early-stage impact investment funds. Its second fund managed to raise more than $30 million during the recession and has since backed nine ventures, which together grew revenues in 2012 by an average of 40 per cent. Renewal is now raising capital for a third, larger fund. “That more people are getting into this space is hugely exciting to us,” he says.

At the same time, Canada’s first incubator for social ventures – which allows people to work and live together – is also under way. The University of Waterloo’s GreenHouse lets undergrads live in residence together for a term or two and collaborate on ideas that aim to solve a social or environmental problem. They receive advice and training in how to run start-ups, access capital or craft a pitch.

Director Tania Del Matto sees the initiative as a launch pad. “We want them to set something up in which students can then say, ‘I’ve made a difference in society.’”

Colliding forces are spurring sector growth, she said. Non-profits are seeing competition for funding heat up as budget-tightening governments download services into their sector. They’re looking to traditional business models to help fund the gap. On the other side, companies are being held more accountable to the communities and environment in which they operate. They’re looking to the social sector for guidance.

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