It is 2025—the start of a new calendar year brings forth sentiments of new possibilities, resolute action to improve our wellbeing, and hence new beginnings! However, the actual news reels in the first weeks of January have already been dominated with wildfires scorching West Coast neighbourhoods. Hardly new beginnings, it rather feels like haunting and tragic memories from last summer in Alberta. Indeed, the damages due to severe weather in 2024 were historic and far dwarfed all previous recorded years in terms of the $8+ billion in insured losses compared to the previous record of $6.2 billion in 2016, then caused by wildfires in Fort McMurray.[1]
From escalating climate emergencies and deepening economic inequality to geopolitical instability, a worsening housing crisis, and the ongoing need for reconciliation with Indigenous Peoples, the challenges we face demand a radical rethinking of philanthropy. These problems require more than just philanthropic dollars—they call for a transformation in how we mobilize and deploy all forms of capital.
It has been a decade since the Sustainable Development Goals were adopted and we have only five years to go; yet today, only 17% of the targets are on track. Progress on half of the goals is weak or insufficient, and alarmingly, more than one third have stalled or even reversed.[2] Meeting these ambitious goals will require an estimated $6 trillion in annual investments.[3]
Globally, the financial system manages a staggering $100 trillion[4] in assets under management. Worldwide, 260,000 foundations manage $1.5 trillion in assets. In Canada, approximately 11,000 foundations oversee $135 billion in assets[5].
“there’s a plumbing problem in our financial systems”
The issue isn’t a lack of capital—it’s how that capital is deployed. As someone aptly put it, “there’s a plumbing problem in our financial systems”. The flow of capital is not being channeled effectively toward creating meaningful impact. This is where catalytic capital plays a crucial role. As a subset of impact investing, catalytic capital addresses gaps left by mainstream finance, enabling outcomes for people and the planet that would otherwise remain out of reach.
Philanthropy holds a unique position in the capital landscape. It has the power to unlock far greater financial flows by leveraging its assets strategically. Philanthropy can catalyze larger investments, de-risk bold initiatives, and amplify both government funding and private capital. By doing so, it enables the kind of large-scale, systemic change needed to tackle the world’s most pressing challenges.
If we’re to harness the potential of markets to solve global problems, we must move beyond celebrating incremental progress. We need to think bigger, act faster, and collaborate more effectively. The scale and urgency of the challenges we face demand nothing less than a reimagined financial system. Philanthropy must act as a powerful lever to accelerate impact and drive meaningful systems change.
We draw inspiration from leading philanthropic organizations in Canada that are paving the way in innovative approaches—from McConnell Foundation’s initiatives to build intermediary capacity for a thriving social finance ecosystem, to Inspirit Foundation’s 100% impact portfolio commitment and use of 0% loans to equity-deserving groups, to Dragonfly Ventures’ grants for development capital to emerging social finance initiatives. Building on these and other leaders’ efforts, the Definity Foundation is exploring how to strengthen the ecosystem by providing grants to social finance intermediaries, enabling them to develop and scale creative financial solutions, such as the creation of new funds like the Raven Indigenous Outcomes Fund (RIOF) and the African Canadian Farmers Fund.
Our thesis is that through innovative approaches to utilizing capital, we can collectively achieve systemic change at scale. Strategies for scaling transformative capital include:
- blending our granting capital with investment capital to unlock more and deeper social and environmental impact while attracting additional and larger investment otherwise on the sidelines
- de-risking impact funds with tools like loan guarantees and first-loss capital or funding their operational needs, to create a strong pipeline of investment-ready impact funds that attract investors.
- Building shared infrastructure by providing the required developmental funding and subsequently investing in shared services and technology, peer networks, and portfolio aggregation models like fund warehousing, enabling the pipeline of investment-ready impact funds to thrive and scale to attract large institutional capital.
- exploring innovative financial tools such as holding mortgages, purchasing property for community use, providing first-loss capital, establishing revolving loan funds, co-investing with private investors,
- advocating for policy changes and greater transparency in investments.
Imagine what we could accomplish if philanthropy came together around a shared agenda to strengthen the impact ecosystem and provide catalytic capital. We aim to enhance the success of initiatives such as Windmill Microlending and the RIOF; to ensure initiatives such as EntrepreNorth can support their pipeline of Indigenous entrepreneurs; and to enable Relèven Transition Fund to ensure vast community assets are retained for local community benefit. We seek ways to support funds led by and for Indigenous, Black and other racialized communities, groups that are furthest behind and continue to face systemic barriers to accessing capital. By leveraging market tools like loans, concessionary finance, and equity finance, and empowering communities to decide how and where capital flows, we can achieve better outcomes. Through these efforts, we hope to drive transformative, justice-centered change.
“A few forward-thinking foundations exploring these strategies isn’t enough. With over $100 billion in assets managed by foundations in Canada, even directing just 10% towards impact investments could unlock transformative capital for the sector.”
But we need a tipping point. A few forward-thinking foundations exploring these strategies isn’t enough. With over $100 billion in assets managed by foundations in Canada, even directing just 10% towards impact investments could unlock transformative capital for the sector. We need a mindset shift away from only granting with our right hands from the money made by our left hands behind our back with no visibility to the harms and missed opportunities at hand. There is much space in between.
Last November, we had the opportunity to participate in the Sustainable Finance Forum. We are encouraged by mainstream financial actors adopting shared scoping and standards for what does and does not constitute sustainable investment. The calls to action by Mark Carney to expand and make mandatory climate disclosures were important messages to be delivered to public policymakers. It was refreshing to witness Victoria Hurth speaking truth and calling out that we must shift from merely tacking on social and environmental considerations while maintaining the same self-interested investment parameters, to re-envisioning the purpose of capital to foster our collective and planetary wellbeing. And we were glad to see the community finance sector highlighting community-led solutions to foster sustainable rural and remote communities. These important sustainable finance conversations risk staying just that—talk—without follow-up action and without philanthropic capital helping to catalyze this action.
To unlock this potential, we need to make it easier to mobilize assets and offer investors more choice. We must dispel myths about impact investing, engage a new generation of mission-driven investors, and rethink the use of market tools in bold and innovative ways. By doing so, we can drive reconciliation and achieve the social, economic, health, and environmental outcomes we shape a more equitable and sustainable future for Canada and its peoples.
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[1] “2024 shatters record for costliest year for severe weather-related losses in Canadian history at $8.5 billion”. Insurance Bureau of Canada. 13-Jan-2025. https://www.ibc.ca/news-insights/news/2024-shatters-record-for-costliest-year-for-severe-weather-related-losses-in-canadian-history-at-8-5-billion
[2] “The Sustainable Development Goals Report 2024”. United Nations. 28-June-2024. https://unstats.un.org/sdgs/report/2024/
[3] “Annual cost for reaching the SDGs? More than $5 trillion”. United Nations. 19-Sept-2023. https://news.un.org/en/story/2023/09/1140997
[4] “The $100 Trillion Machine.” Boston Consulting Group. July-2021. https://www.bcg.com/publications/2021/global-asset-management-industry-report
[5] “PFC Landscape Report 2024.” Philanthropic Foundations of Canada. 4-Jun-2024. https://pfc.ca/documents/pfc-landscape-report-2024/