It’s not often that you hear Canadian politicians talk about social enterprise. Actually, it’s sometimes difficult to know whether many of them have even heard of the term. Of course, I am exaggerating slightly, since there are some good politicians across this country that are actively promoting for a more enabling environment for social enterprise. The province of Quebec is often cited as the most prominent example of an active government stance towards facilitating social enterprise, with notable results. And the previous Liberal government had a strong commitment to community economic development (CED), which had positive spinoff effects for social enterprise activity in many areas.

What was striking about hearing the former prime minister of Canada, Rt Hon. Paul Martin, speak passionately about social enterprise is that he really believes in it, and is committed to advancing it through his commercial and philanthropic  ventures. Social Venture Partners Toronto played host to Mr. Martin on the 16^th of October, where he was invited to share his thoughts on his journey towards understanding social enterprise and how he has become both a strong advocate for, and active participant in, for social enterprise.

Mr. Martin described how he has been deeply impacted by the moral and economic tragedy within the Aboriginal community, which was partly his motivation for establishing the CAPE Fund. He described the lack of finance and mentors available to aspiring Aboriginal entrepreneurs, and the CAPE Fund will approach some of these issues by building Aboriginal management and leadership capacity over time through funding and supporting Aboriginal businesses.

An important issue that Mr Martin raised related to how investors currently view potential investments with a social component to them. There is a dichotomy where investments in social enterprises are viewed with either a “financial hat” (judged by purely financial returns) or a “philanthropic hat” (where there is zero financial return). However, social enterprises that generate a blended value return do not fit neatly into just one of these categories, and so should be assessed accordingly. Yet, this dichotomy continues to persist and hampers the access to the right forms of capital to develop and grow social enterprises.

Another key issue that Mr. Martin touched on was around the definition of social enterprise. In Canada, we continue to have multiple interpretations around what social enterprise is – and we often interchange it with terms such as revenue-generating nonprofits, enterprising nonprofits, social business, etc. To address this, Mr. Martin suggested that a social enterprise is one where the social return is substantially higher than the financial return. I found this intriguing, because in my view, this inherently moderates the level of financial return and provides a crude solution to defining a “reasonable financial return” from investing in social enterprise. I also recognize that this definition will not appeal to others, but think it merits some further consideration.

Speaking as a former politician with an intricate knowledge of finance, Mr. Martin also suggested that the relevant tax incentives that are needed to catalyze the growth of social enterprise may be tough to extract from the federal finance and tax agencies. But he noted that there are ways to push this agenda forward, and highlighted how the UK has made much progress when a set of focused and directed recommendations on social enterprise and social investment were provided to the government by a task force headed by Sir Ronald Cohen, an influential business leader.

Mr. Martin had more to say, and it is a safe bet that he will continue to advocate around the importance of social enterprise – he is speaking at the national social enterprise conference being held in Toronto in a couple of weeks. There are no further updates around the $50 million CAPE Fund launched earlier this year to provide equity and quasi-equity investment in the range of $1 million and $7.5 million to Aboriginal businesses, though Mr. Martin pointed out that any announcements should and will come from the Aboriginal bands themselves. We’ll continue to track its progress, as it may prove to be an important signal for the potential opportunities to develop and scale blended value funds in Canada.

For more information, visit the links below:

Social Venture Partners Toronto – there are also Canadian chapters in Vancouver and Calgary

TheCapital for Aboriginal Prosperity and Entrepreneurship (CAPE) Fund