Human Resources Committee on Feb. 17th, 2015

[Siobhan Harty]

That's an excellent question. There hasn't been one social impact bond project that has ended yet, so we don't know. The contracts are still in place. The Peterborough one is the one that was initially launched, but it hasn't concluded yet. That's the one in the U.K. Other social impact bond projects are ongoing across different states, so it would be too soon to say what governments might choose to do at the end of those, or indeed what not-for-profit service providers might choose to do at the end of those.

[Carol Hughes, NDP, Algoma—Manitoulin—Kapuskasing, ON]

When would you think you would be able to evaluate? You indicated that you haven't been able to evaluate at this point.

[Siobhan Harty]

We're not engaged in any social impact bonds. The one project that we're doing in the area of literacy and essential skills does have some elements of a social impact bond. It is in the process of development, but it hasn't fully launched and therefore hasn't concluded, so I couldn't say what the government might decide to do with that at the end. But as I mentioned, there will be important lessons learned that we can leverage for ongoing programming.

[The Chair, Conservative, Phil McColeman]

That's your time. It goes fast, doesn't it?

Mr. Mayes.

[Colin Mayes, Conservative, Okanagan—Shuswap, BC]

Thank you, witnesses, for being here today.

One of the challenges we have in this country is that we're such a large country with many regions and with rural populations and urban populations, so the dynamics of many things are quite different across this country. The question I'm looking at is the role of the provincial governments. Are any of the provinces taking any initiatives?

As for the role of the federal government, as I say, it's such a large country, so would it be better to look at monitoring, oversight, and that type of thing being at the provincial level? Do you have any opinions about that?

[Siobhan Harty]

Several provinces are engaged. The ones that are most active are British Columbia, Ontario, Saskatchewan, and Nova Scotia. As I mentioned, Saskatchewan has launched a social impact bond already. I dare say that both B.C. and Ontario will make some announcements in the near future, not necessarily about social impact bonds, but definitely about social finance. Ontario in particular had a public call last fall, I think, so their results are supposed to be out soon.

I think the provinces will see more action at the provincial level. If you consider that a lot of services, particularly in the social sphere, are delivered at the provincial level anyway, it makes sense that the provinces would be engaged with partners at the local level to be able to explore social finance. We're starting to see that.

The federal government, I think, can play multiple roles, as national governments do, from the perspective of different markets. It might be information sharing; when information doesn't travel, that is a market impediment, so the national level government could certainly share information. Then there are other pieces related to the broader legal environment that obviously a national government could take care of, whether it's in Canada or another country.

In Canada, I think oversight would be challenging just given the jurisdictional split. There's not necessarily a logical role for the federal government to do that when the province has jurisdiction. I think it would be more in the area or in the spirit of sharing information, best practices, lessons learned. The transaction costs can be high to do some social finance initiatives, so why not reduce them by sharing information? After Saskatchewan or another province completes something, that information should be made available. That's certainly the approach that other countries have taken to be able to reduce those transaction costs, by sharing information around the market and their country.

[Colin Mayes, Conservative, Okanagan—Shuswap, BC]

A couple of years ago the Manning Centre had a conference here in Ottawa. They talked about government delivery of service and about some of the challenges we see today with slow growth and some of the demographics in the country. They talked about a fourth option for delivery of service, the community, and trying to motivate communities to work together. For instance, you might have people in a Rotary Club who would be willing to donate their time to the seniors centre to help them out there, or provide some sort of assistance to seniors, or even child care or whatever, just because the cost of this service delivery is overwhelming and quite frankly, we just can't afford it. We can't even imagine going into debt to try to sustain that as we see some of the examples in Europe that have failed.

Could you see initiatives at the federal level with regard to one of the suggestions that I think came out of the Manning Centre, giving a tax credit to people who gave of their time? They wouldn't be paid, but they would have a tax credit and those types of things. Does that come under social finance, or do you think that's a different concept and it's more looking at enterprise?

[The Chair, Conservative, Phil McColeman]

Please make it a very quick response.

[Siobhan Harty]

Yes.

On that one, it strikes me that this is something related to volunteerism. The example you provided about people contributing or volunteering their time at the local level to assist others is a good example of the spirit of volunteerism. In that case, different initiatives have been introduced to support and encourage that.

On the tax credit side, I would defer to my colleagues at the Department of Finance to see what their views might be on that.

[Colin Mayes, Conservative, Okanagan—Shuswap, BC]

Thank you.

[The Chair, Conservative, Phil McColeman]

Madam Morin, you have five minutes.

[Marie-Claude Morin, NDP, Saint-Hyacinthe—Bagot, QC]

Thank you very much.

I want to begin by saying that volunteering should not be overused. Some organizations also require qualified workers. I just wanted to point this out.

My background is in community-based services. I was the director of a group of community organizations for a number of years. That work taught me that a community organization is a model that emerges from the community. At some point, people came together because they realized that there was a need within their community, and they created a community organization. So an organization belongs to its members. Moreover, the annual general meeting of a community organization is an independent event.

I understand how social finance can apply to a social enterprise or a co-operative, but I don't quite understand how it can apply to a community organization. Let's take the example of Quebec, where we have a policy on autonomous community action. In the case of social finance, I am wondering how it is possible to work with the community to preserve democracy within autonomous community organizations.

How can those organizations' sovereignty be guaranteed and how can government disengagement be prevented?

[Siobhan Harty]

I agree that organizations such as the ones you defined emerge from the community. I'm looking to other countries that are more advanced than Canada in using social finance models. I've not heard about concerns such as the ones you've expressed. I guess it depends on the mission of the organization, but everything I've heard is about how to allow these kinds of organizations to preserve their mission. It's so fundamental, so how do you do that? That question of mission is fundamental to everything that we're looking at. I've never heard that social finance as a form of financing in and of itself would have a detrimental effect on the ability of an organization to retain control of its mission.

[Marie-Claude Morin, NDP, Saint-Hyacinthe—Bagot, QC]

That answers my question. Thank you.

I could go on, but I will yield the floor to Ms. Groguhé.

[Sadia Groguhé, NDP, Saint-Lambert, QC]

I wanted to come back to the return on investment issue.

You said that this return could vary based on a project's risk. How is a project's risk assessed? Are there any established criteria? Regarding social finance, I haven't yet heard how this can be articulated through data, through evidence-based variables that would help assess the consequences of that intervention.

[Siobhan Harty]

Those are great questions, thank you.

On how to assess the risk in order to determine the return on the investment, I think criteria are being developed. I say that because, in the area of social impact bonds in particular, which are the most risky, there are enough now that have been launched across different countries that data is being developed so that you can do that. The evaluation of risk needs to happen, I think, on a project-by-project basis. That will be dependent upon the population that's being served; whether the intervention is proven or not, so whether or not it's been tested in another context; and the period of time over which the intervention is going to run, so when can an investor expect to get his or her money back.

[Sadia Groguhé, NDP, Saint-Lambert, QC]

I would still like to clarify something. I have provided support because I have done a lot of work with people in need. Unfortunately, the qualitative aspect of support cannot be measured—for example, when it comes to young people in social or workforce reintegration. So that variable is qualitative. It's impossible to quantify a qualitative variable.

So how can criteria be defined? What criteria will be used to truly measure the objective of our intervention?

[Siobhan Harty]

Yes. That's a great question.

[The Chair, Conservative, Phil McColeman]

I'm going to ask you to hold that response as well, in the fairness of time and all questioning, but perhaps again, as Madam Hughes suggested, you could provide us with a response post-committee meeting.

[Siobhan Harty]

Yes.

[The Chair, Conservative, Phil McColeman]

I would even think that it's possible to engage afterwards in discussion—

[Sadia Groguhé, NDP, Saint-Lambert, QC]

Oui.

[The Chair, Conservative, Phil McColeman]

—if that's desirable.

Mr. Boughen, you have five minutes.

[Ray Boughen, Conservative, Palliser, SK]

Thank you to our consultants for spending part of the afternoon with us.

I have to be honest with you: social finance is a totally new concept to me. I know what social is; I know what finance is, and when I think social finance, well, I think of people buying a ticket for the fall supper or for the Halloween dance, and it's a social and it raises some dollars. But this is an entirely different concept...well, it's not entirely different, but there's certainly a big difference.

Can you share with us how it works? Is there a CEO? Is there a board of directors? Who's responsible for the funding? Is there a COO? What is the mechanism of it all? How does this come together?

[Siobhan Harty]

Thanks for your question.

It's a partnership. In order to achieve those different parts of the equation, the social and the finance, you need to be able to bring together people who have a stake in one or both.

On the pure social side, I would say that you bring together the community groups, whether they're not-for-profits or charities.

On the financing side, I think it's a little more interesting. What we're seeing evolve is that it's not just financial institutions, although they're there. We're seeing a different spirit, if I can use that term in the financing world, in people who want to make an investment and not achieve just a financial return. These individuals—call them social impact investors or people who want to support social enterprise—are really bringing a different expectation to that market and to this area of policy in asking how they can use their money to achieve a social good.

In the past, we might have been willing just to give a charitable donation; so the ticket to the supper that you mentioned does act as a charitable donation even if you're getting a meal out of it. Now I think there's a certain spirit of investing whereby people say that it's not just about giving a charitable donation, they would really like to see their money grow in a way that they can control from a social perspective, and they also want to see it sustain community organizations. The donation or the grant is really a one-off, whereas in social financing it's an investment model. It tries to achieve something over time, something more sustainable and more long-lasting.