Offering a loan to help a non-profit day care in a low-income community expand its services; helping members make socially responsible investments; providing preferential rates for the purchase of fuel efficient cars; contributing to a community capital fund for environmental businesses. These are all examples of social finance.

They are also examples of how Canadian credit unions are contributing to social finance – an emergent category of finance that marries the aims of philanthropy with the mechanics of conventional financing. Put simply, social finance is an approach to managing money that delivers both positive social and/or environmental benefits as well as a financial return.

Together, credit unions are among the dominant players in social finance in Canada, with some $1.35 billion in impact investment assets. This is perhaps unsurprising as credit unions are themselves an early model of social finance. Indeed, their origins in Canada in Alphonse Desjardins’ caisse populaire de Lévis and the Antigonish Movement in the Maritimes gave working people access to financial resources that were not available to them through the banks. By pooling their own limited resources, these individuals, as members of the credit union, could access loans to buy farming equipment or to start a small business.

For the past few years, social finance has been growing and gaining momentum. In the space of a year from 2010 to 2011, socially responsible investment assets grew 16 per cent to just over $600 billion. As social finance gains in popularity, there are new opportunities for credit unions to continue leading and innovating in this space and maintain their commitment to the seventh co-operative principle : working for the sustainable development of their communities.

The purpose of this System Brief is to show credit unions the opportunities within social finance to develop strategies to grow their business and to further enhance their competitive advantage in the financial services market place. First, we define social finance and explain why it matters. We then examine why social finance is gaining momentum and look at the major players in the field. The System Brief concludes by describing some of the new opportunities for credit unions in social finance, specifically, expanding offerings in this emerging sector and measuring their impact. By doing so, it can help credit unions to further distinguish themselves in their markets and communities.

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Contents:

Introduction
Section 1 | What is social finance and why does it matter? 
Section 2 | What accounts for the momentum in social finance? 
Section 3 | What’s next? Opportunities in social finance for credit unions