Financial institutions can lead the Solution Revolution

By Jeannot Blanchet and Jessica Goldberg 

What if the sound business and financial management that Canadian financial institutions (FIs) are world-renowned for could be harnessed to solve major societal issues?

Our colleague Paul Macmillan, co-author of The Solution Revolution: How Business, Government, and Social Enterprises are Teaming Up to Solve Society’s Toughest Problems, is challenging us to rethink the role of FIs in tackling the big issues of the day. Among these are the following:

• Chronic unemployment. 
• Climate change. 
• Traffic congestion. 

Enabling the Solution Economy in Canada

The Solution Economy is a rallying cry for Canadian FIs to generate market-rate returns for their shareholders — while creating a lot of social good for communities all across Canada. FIs can leverage their expertise to create new product lines that enable both their institutional and retail clients to participate in impact investment.

Our FIs can also use their considerable clout to convince both the business and government communities to create the infrastructure that a sustainable Solution Economy in Canada will require, such as transparent and accountable governance; appropriate tax infrastructure for public value creation; and facilitating access to new forms of capital-raising, including crowdfunding and microfinance.

Impact investment: Doing well & good

Impact investment could be a key area of the new Solution Economy in Canada. (Tweet this) In that area, Canadian FIs can extend their global leadership.

Funds like the RBC Generator are leading the way. It’s targeting investments in for-profit organizations that are applying their business acumen to solve big social or environmental challenges including energy, water and employment for youth or other disadvantaged groups.

The fund aims to generate market or near-market returns through debt or equity instruments. It represents a fundamental shift in thinking for socially-minded investors, from one where investors avoided unethical investments to one where investors expect market-rate financial returns and social good.

Similarly, TD and Alterna Savings have established the Catapult Microloan Fund, which will support early-stage social enterprises with access to low-interest loans. These loans will allow Canadian social enterprises to significantly scale their projects for measurable impacts in social, environmental, economic and cultural challenges.

World leaders in community contribution

Our banks, insurance companies, credit unions and other Canadian FIs have a long and rich heritage of community contribution.

The figures help tell the story: in 2012, the Big 6 banks employed over 220,000 Canadians and donated over $300 million to charitable organizations. These staggering figures belie an often overlooked fact that Canadian FIs are crucially important to our country’s economic and social fabric.

Here are some of the Big 6 banks’ community initiatives:

• RBC has its Generator Fund.
• CIBC’s Wood Gundy and Imperial Investor Service offer socially-responsible mutual funds, with both Social Investment Organization (SIO) Member and Non-SIO Member promoted funds.
• TD has enabled 2,300 staff to teach money management skills in classrooms and community centres across Canada.
• In Vietnam, Manulife’s innovative micro-insurance provides low-income women with cost-effective life insurance.

Our FIs, however, often work individually in their corporate social responsibility efforts. Imagine the potential if our FIs collaborated with each other, and also with government and social enterprises...

The Woodland Biofuels case study

In 2012 RBC’s Generator Fund helped finance projects like Woodland Biofuels, which makes new biofuels from ethanol produced by stuff that’s found in farmer’s fields and in woodlots. Call it cow power. A combination of manure and woodchips, it’s a new form of renewable energy that was once simply the pipedream of a mad scientist or a storyline in a futuristic novel.

Today, it not only promises to revolutionize the energy sector but also fulfills the mandate of a bank that wants to do good and boost the bottom line.

What strategy is your financial institution using to enable the Solution Economy? What new impact investment products and services are your clients asking for?

Based in Montreal, Jeannot Blanchet is Deloitte's National Financial services Leader.

Based in Toronto, Jessica Goldberg is a partner with our Consulting group. She advises financial institutions on corporate strategy and operational excellence.