Five key impact headlines in the 2021 Canadian federal budget
Today’s federal budget featured significant investments and opportunities for social finance, social enterprise and social innovation in Canada. We wanted to break down some of the key announcements and the implications for the field.
There has been robust and coordinated action over the past year (and much prior) to advance many of these investments and policy changes. We want to recognize these milestones as the achievement of a wide spectrum of stakeholders, while also recognizing that we still have a long journey ahead to achieve the change we seek.
There are certainly many more in the Harry Potter and the Order of the Phoenix-thick budget document, but here is a first take at five (5) key impact headlines:
1. The Social Finance Fund will be accelerated and launched and the Investment Readiness Program (IRP) will be renewed.
- The government is proposing to launch planned disbursements of the $755 million Social Finance Fund and deploy up to $220 million over its first two years.
- $50 million over two years to renew the Investment Readiness Program (IRP), starting in 2021–22. This program supports charities, non-profits, and social purpose organizations in capacity-building activities such as business plan development, expanding products and services, skills development, and hiring.
The Social Finance Fund was originally proposed in 2010, and it became a stated policy priority and commitment of the federal government in 2018. The pending release of capital through the Fund at an accelerated rate will provide new capital to active and emerging funds, hopefully both for operations and investment. And ideally, the renewal of the IRP will provide a stronger pipeline of investment ready opportunities for local and national impact investing funds. The renewal of this IRP represents an opportunity to fine-tune its strategy to create greater alignment with the Social Finance Fund and intermediaries that will be capitalized.
2. There are billions being dedicated to the repair and creation of affordable housing units.
- An additional $2.5 billion over seven years, starting in 2021–22, to the Canada Mortgage and Housing Corporation, including:
- An additional $1.5 billion for the Rapid Housing Initiative in 2021–22 to address the urgent housing needs of vulnerable Canadians by providing them with adequate affordable housing in short order; and
- $600 million over seven years, starting in 2021–22, to renew and expand the Affordable Housing Innovation Fund, which encourages new funding models and innovative building techniques in the affordable housing sector.
- In addition to these new investments, Budget 2021 proposes to advance and reallocate $1.3 billion, on a cash basis, of previously announced funding, including $1 billion for the National Housing Co-Investment Fund
This major influx of funding will provide significant leverage for philanthropic funds and impact investment capital to complement federal efforts that seek to advance the National Housing Strategy. It certainly provides incentive for financial institutions to invest in affordable housing, following the path of leading institutions like Scotiabank and already active institutions like Vancity Community Investment Bank. It also provides a boost to individual projects as well as platforms and funds seeking to advance the repair and development of new affordable housing units.
3. Canada is continuing its commitment to regional economic development in rural Canada focused on an inclusive, green recovery.
- $700 million over three years, starting in 2021–22, for the regional development agencies to support business financing. This would position local economies for long-term growth by transitioning to a green economy, fostering an inclusive recovery, enhancing competitiveness, and creating jobs in every corner of the country.
Canada has already invested $2 billion in the Regional Relief and Recovery Fund, which sought to ensure businesses have the support they need to get through the pandemic and that they are brought along in our economic recovery. The new funding announced can provide critical capital and capacity supports for triple-bottom line enterprises and organizations in rural regions and communities. Ideally, this will provide a strong pipeline for place-based funds that are seeking to start and scale in rural regions. And these local communities and ecosystems will undoubtedly benefit from job creation and investment alongside positive social and environmental impacts.
4. New and renewed capital and capacity supports are being directed towards women and BIPOC communities.
- Up to $146.9 million over four years, starting in 2021–22, to strengthen the Women Entrepreneurship Strategy. Women entrepreneurs would have greater access to financing, mentorship, and training. Funding would also further support the Women Entrepreneurship Ecosystem Fund and the Women Entrepreneurship Knowledge Hub.
- In September 2020, the Government of Canada, in partnership with financial institutions, announced an investment of up to $221 million — including up to $93 million from the government — to launch Canada’s first ever Black Entrepreneurship Program.
- Budget 2021 proposes to provide up to an additional $51.7 million over four years, starting in 2021–22, to Innovation, Science and Economic Development Canada and the regional development agencies for the Black Entrepreneurship Program.
- Budget 2021 proposes to make available up to $450 million on a cash basis over five years, starting in 2021–22, for a renewed Venture Capital Catalyst Initiative that would increase venture capital available to entrepreneurs. $50 million of this amount would support a new Inclusive Growth Stream to increase access to venture capital for underrepresented groups, such as women and racialized communities.
- Budget 2021 proposes to provide Public Services and Procurement Canada $87.4 million over five years starting in 2021–22, and $18.6 million ongoing. This funding will be used to modernize federal procurement and create opportunities for specific communities by diversifying the federal supplier base. Specifically, Public Services and Procurement Canada would:
- Implement a program focused on procuring from Black-owned businesses.
- Continue work to meet Canada’s target of five (5) per cent of federal contracts being awarded to businesses managed and led by Indigenous peoples.
- Improve data capture, analytics, and reporting.
- Incorporate accessibility considerations into federal procurement, ensuring goods and services are accessible by design. Public Services and Procurement Canada will develop new tools, guidance, awareness, and training for federal departments.
- Budget 2021 also proposes to leverage supplier diversity opportunities through domestic procurement, such as running competitions open to businesses run by Canadians from equity deserving groups. This would help build a more inclusive economy and boost the competitiveness of these businesses, and all Canadian businesses.
- $22 million over three years, starting in 2021–22, to support the National Aboriginal Capital Corporations Association’s (NACCA) Indigenous Women’s Entrepreneurship Initiative by providing tools, services, and resources to increase the number of Indigenous women entrepreneurs.
- $42 million over three years, starting in 2021–22, to expand the Aboriginal Entrepreneurship Program. This will directly support Indigenous-led businesses and help Indigenous communities generate wealth by improving access to capital and business opportunities.
Women and racialized communities have faced the most significant and negative fallout of the pandemic. The commitment of capital and capacity supports will help to provide critical resources to women and BIPOC led and serving enterprises and funds.
5. Impact investing is a key part of the international development agenda.
- A $300 million recapitalization over three years, starting in 2023–24, to FinDev Canada, from the retained earnings of Export Development Canada, to allow FinDev Canada to build a portfolio totaling $1.4 billion.
- In May 2020, Canada committed to provide US$253.4 million over eight years, starting in 2020–21, to purchase shares in the latest general capital increase of the African Development Bank (AfDB). Budget 2021 proposes to accelerate and complete Canada’s purchase of shares of the African Development Bank in 2022–23, rather than in 2027–28.
Canada has been active in advancing impact investing and inclusive economic growth as a part of its international development agenda for a long time, from leading lights in Latin America (eg. Colombia) to major investments made in innovative finance and entrepreneurship (eg. Grand Challenges Canada). This trend continues in the 2021 budget. Although it will perhaps be even more interesting to see the innovative steps taken in the year ahead through Global Affairs Canada (GAC) HQ and local offices, particularly in LatAm.