RBC’s Aug. 21 announcement identifying who gets the first slice of its new $10 million social finance is “tremendous” news for the impact investing space, says Vancity Community Foundation executive director Derek Gent.

“There are several stages to getting involved in impact investing; one is the commitment to set money aside and then the next step is to start putting the money out.

“This (recent announcement) is a clear indication that (RBC) wants to be in this space … It makes real the commitment from an established institution, which helps ratchet up the legitimacy of this type of activity. I’m really excited to see it; I think it’s good for everyone.”

Derek says he’s intrigued by the interest bubbling up from a growing number of financial institutions to also engage in impact investing.

“The banks represent an opportunity to change the economic system as does — with all biases stated here — the credit union system in particular,” he says.

“They’re not always the most risk tolerant organizations, so the opportunity for the financial institutions is to pool larger dollars and invest in the easier opportunities (like cleantech).”

RBC’s choice of investee for its impact investment of $500,000 is the Ontario-based MaRS Cleantech Fund. Woodland Biofuels, which can produce ethanol from woodchips that’s cheaper than the gasoline it replaces, is one example of the companies funded through the MaRS Cleantech Fund.

Derek says he’s not surprised at the decision given the fund’s already-strong infrastructure and network.

But to bolster the social finance ecosystem going forward, he sees value in broadening outside of the cleantech, environmental realm into investing in organizations addressing social issues.

“To some extent the environmental space, cleantech, is a bit easier to get our heads around in terms of what impact looks like and how you measure it and where the deal flow is going to come from.

“But if now they balance that with some investments focused more on the social side, whether that’s dealing more with non-profit organizations or social housing, that would help to broaden the definition of impact investing in a way that opens up more opportunities.”

Building the social finance ecology clearly requires more activity on other fronts as well — investors interested in impact investing and organizations with the capacity to use the dollars that are available.

The Vancity Community Foundation is filling some of the gap on that front as it helps build the capacity of social enterprises, not for profits and various types of impact activities to meet the expectations of the investors.

Government also has an important role to play in strengthening the impact investing market, Derek says. “The types of incentives and encouragements that they provide to all sorts of private sector operations, I would love to see in more of the impact space.”

Spreading the social finance story is also a key next step, he notes. “You can increase the impact not only by doing it but then telling a bunch of people about it.

“The more we talk about it and the more we encourage others to get involved, so that we’ve got a broader group of organizations doing it and the more stories of how it’s working, that’s what going to lead to the kind of momentum we need.”

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