Mobilizing capital for responsible innovation: the role of social finance in supporting innovative projects

Figures & data

Figure 1. Types of investment according to their focus on value creation or value capture. Source: Adapted from (Bozesan 2020).

Table 1. Profile of respondents.

Code	Gender	Years of experience	Type of organization*	Type of investment*	Geographical scope	Position
ON-1	F	5–7	AM	Indirect	Global	Director of Client Services
ON-2	M	5–7	PF	Direct	National (CA)	Director Finance & Impact Invest
ON-3	M	5–7	BI	Direct	National (CA)	Investment Product Manager
ON-4	M	>10	AM	Direct	National (CA)	Managing Partner
ON-5	F	5–7	AM	Direct	National (CA)	Vice-President of Lending
QC-6	F	8–10	PF	Indirect	National (CA)	Social Finance Director
QC-7	M	8–10	AM	Direct	Provincial (QC)	General Director
QC-8	M	>10	AM	Direct	Provincial (QC)	Portfolio Manager
QC-9	F	>10	BI	Direct	Provincial (QC)	Finance Director
QC-10	M	5–7	AM	Direct	Provincial (QC)	Senior Advisor
SP-11	M	5–7	AM	Direct	National (BR)	Co-founder & CEO
SP-12	M	5–7	AM	Direct	National (BR)	Partner
SP-13	F	5–7	AM	Direct	Global	Investment Officer
SP-14	F	8–10	AM	Direct	Global	Country Director
SP-15	M	5–7	AM	Direct	Global	Senior Associate
Total	F = 6 M = 9	5–7 yrs = 9 8–10 yrs = 3 >10 yrs = 3	AM = 11 BI = 2 PF = 2	Direct = 13 Indirect = 2	Provincial = 4 National = 7 Global = 4	Partner, CEO, VP, Director = 10 Advisor, Associate, Officer = 5

*Legend:

AM = asset management; BI = bank institution; PF = private foundation.

Direct investment = social finance organization that makes direct investments into projects and companies; Indirect investment = social finance organizations that invest indirectly through intermediaries, including fund managers.

Source: Interviews with 15 social finance investors.

Table 2. Characteristics of the portfolio of investments under respondents’ management.

Code	Respondent profile	Portfolio of investments
		Legal structure of investees*	Focus on cooperatives	Type of innovation	Development stage	Sectors of activity**
ON-1	F, 5–7 years, Director of Client Services	FP + NFP	No	More technological	Early + late	A, B, E, G
ON-2	M, 5–7 years, Director Finance & Impact Investing	FP + NFP	No	More social	Late	A, D, I
ON-3	M, 5–7 years, Investment Product Manager	FP + NFP	No	More social	Late	B, E
ON-4	M, > 10 years, Managing Partner	FP	No	More technological	Early + late	A, C, F, G, H, I, L, P
ON-5	F, 5–7 years, Vice-President of Lending	FP + NFP	Yes	More social	Early + late	A, B, D
QC-6	F, 8–10 years, Social Finance Director	FP + NFP	No	More social	Early + late	A, B, C, E, F, N
QC-7	M, 8–10 years, General Director	FP + NFP	Yes	More social	Early + late	A, C, D, F, K, J, M
QC-8	M, > 10 years, Portfolio Manager	FP + NFP	Yes	More social	Early + late	A, C, D, F, K, J, M
QC-9	F, > 10 years, Finance Director	FP + NFP	Yes	More social	Early + late	A, B, C, D, E, I, K, L, J, M, N, Q
QC-10	M, 5–7 years, Senior Advisor	FP + NFP	Yes	More social	Late	A, B, D, E, G, H
SP-11	M, 5–7 years, Co-founder & CEO	FP	No	More social	Early	A, B, G, H
SP-12	M, 5–7 years, Partner	FP	No	More technological	Early + late	A
SP-13	F, 5–7 years, Investment Officer	FP + NFP	No	More social	Late	C, E, F
SP-14	F, 8–10 years, Country Director	FP + NFP	No	More social	Late	H
SP-15	M, 5–7 years, Senior Associate	FP	No	More social	Late	A, L, O
Total		FP = 15 NFP = 11	Yes = 5 No = 10	More social = 12 More technological = 3	Early = 9 Late = 14	A = 12; B = 7; C = 6; D = 6; E = 6; F = 5; G = 4; H = 3; I = 3; J = 3; K = 3; L = 3; M = 3, N = 2; O = 1; P = 1; Q = 1

* FP = for-profits; NFP = not-for-profits.

** A = health and well-being; B = affordable housing; C = food and agriculture; D = arts and culture; E = environment and sustainable development; F = financial services; G = education; H = decent work and income generation; I = media; J = recreation and tourism; K = retail; L = supply chain, manufacturing and logistics; M = local and personal services; N = business services and entrepreneurship; O = water and sanitation; P = privacy and security; Q = ICT.

Source: Interviews with 15 social finance investors.

Figure 2. Criteria used to select investment projects.

Table 3. Characteristics of the innovative projects cited by respondents.

Code	Type*	Sector of activity	Location	Target beneficiaries	SDG
P1	DH	Financial services	Canada	Immigrants and refugees	8, 10
P2	DH	Affordable housing	Canada	Low-income people	11
P3	DH	Health and well-being	USA	Marginalized women	1, 3, 5
P4	DH	N/A	Canada	Workers	8
P5	MR	Financial services	Developing countries	Low-income people	4, 8, 10
P6	MR	Financial services	Global	Social entrepreneurs	8
P7	MR	Supply chain	Developing countries	Workers	8
P8	DH	Financial services	Canada	Indigenous peoples	10, 11
P9	DH	Food and agriculture	Peru	Local farmers	2, 12, 13
P10	DH	Food and agriculture	Colombia	Local farmers; indigenous peoples; women	2, 5, 12
P11	DH	Retail	Canada	Indigenous peoples	8, 10
P12	DH	Retail	Canada	Workers	8
P13	DH	Logistics	Canada	Residents of the Montreal area	11, 13
P14	DH	Financial services	Canada	Social entrepreneurs	8
P15	DH	Sustainable development	Canada	People engaged in sustainable development	7, 11, 12, 13
P16	MR	Financial services	Canada	Social entrepreneurs	8
P17	MR	Arts and culture	Canada	Film lovers	8
P18	DH	Affordable housing	Brazil	Low-income people	10, 11
P19	DH	Health and well-being	Brazil	Elderly people	3
P20	DH	Financial services	Brazil	Microentrepreneurs; low-income people; women	5, 8, 10
P21	DH	Financial services	Developing countries	Low-income people	6, 10
P22	DH	Logistics	Brazil	Low-income people	8, 10, 11, 13
P23	DH	Health and well-being	Mexico	Eye care patients	3, 10
P24	DH	Education	Chile	Children and their parents	4, 8
P25	MR	Health and well-being	Brazil	Covid-19 patients	3
P26	MR	Health and well-being	Developing countries	Low-income people	3, 10
P27	MR	Financial services	Global	Financial service providers	8, 12, 13
P28	MR	Financial services	Brazil	Microentrepreneurs	4, 8

*Legend:

DH = Projects directly supported by respondents as investors, considered ‘dear to one’s heart.’

MR = Projects not necessarily under respondents’ responsibility but considered ‘more responsible.’

Source: Interviews with 15 social finance investors, supplemented by our searches on the websites of each innovative project or organization.

Figure 3. Principles considered important in social finance.

Table 4. SF principles and alignment with RI.

Dimension	SF principles	Alignment with RI
Process	Intentionality: A positive impact on society and on environment is generated through the intentional character of thoughts and actions of investors and investees. Engagement: Decision-making and problem-solving processes should include different stakeholders, including the communities and individuals who may be impacted by the investment. Systemic approach: All components of the economic, social, and environmental systems in which investments are made should be considered.	RI is concerned with the underlying purposes, motivations and intentions of science and innovation (Owen, Macnaghten, and Stilgoe 2012) and intrinsic motivation of key individuals can be a driver of RI (Schönherr, Martinuzzi, and Jarmai 2020). RI calls for engagement ‘with a wide range of stakeholders on the visions, impacts and broader socio-economic questions associated with particular R&I initiatives’ (Macnaghten 2020). The AIRR framework for RI (Stilgoe, Owen, and Macnaghten 2013) addresses social and ethical concerns and a systemic approach to a democratic governance of science and innovation.
Product	Client-centered: Clear and measurable benefits are delivered by products focused on the needs and preferences of customers and users. High-quality and competitive: Meeting or exceeding customers’ expectations is achieved by products with a superior value proposition and good value for money. Societal-problems oriented: A positive impact on society and the environment is generated by products that address a critical problem and help to mitigate or solve it.	‘Providing client satisfaction and meeting their needs is a generally accepted definition’ of RI in the financial sector (Asante, Owen, and Williamson 2014). The products of innovation and its purposes raise questions that RI aims to discuss and respond (Stilgoe, Owen, and Macnaghten 2013). Innovations should be developed to solve ‘the Grand Challenges of our time for which we share a collective responsibility’ (von Schomberg 2014).
Organization	Mission and business model: The core purpose of the organization and how it creates, deliver and capture value is a decisive element for investors. Capacities and qualification: To achieve its goals and objectives, the organization must possess the appropriate resources, skills, and abilities. Governance structure: How the organization is directed, controlled, and managed is critical to ensure transparency, accountability, and the protection of stakeholder interests.	Responsible innovation is better supported by ‘hybrid organizations that rely on alternative, economically viable business models’ (Silva et al. 2018) ‘Responsible innovation requires building up new skills and capacities within companies’ (Schönherr, Martinuzzi, and Jarmai 2020). Responsible governance requires governance structures at various levels (e.g. global, societal, corporate) ‘to facilitate an inclusive process and the societal acceptability of innovations’ (Braun and Starkbaum 2022).
Impact	Nature and diversity: The various types of impact and how they can contribute to the achievement of the SDGs are critical in social finance. Extent and depth: The intensity of benefits and outcomes should be properly measured and reported by investors and investees. Interaction: Social, environmental and economic impacts are interrelated and can generate both positive and negative effects on each other.	RI is oriented to pursue the ‘right impacts’ in a way that is ethically acceptable, sustainable, and socially desirable (von Schomberg 2014). Innovations have a dual responsibility: avoid harming people and the planet (avoid harm) and improve conditions for people and the planet (do good) (Voegtlin and Scherer 2017). RI emerged as a response to the growing recognition that innovation can have both positive and negative impacts on society, and that it is important to consider its broader social and ethical implications (Owen, Macnaghten, and Stilgoe 2012).

Source: Interviews with 15 social finance investors; RI literature (Asante, Owen, and Williamson 2014; Braun and Starkbaum 2022; Macnaghten 2020; Nicholls, Paton, and Emerson 2015; OECD 2019; Owen, Macnaghten, and Stilgoe 2012; Schönherr, Martinuzzi, and Jarmai 2020; Silva et al. 2018; Stilgoe, Owen, and Macnaghten 2013; Voegtlin and Scherer 2017; von Schomberg 2014).

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