Evidence of meeting #43 for Human Resources, Skills and Social Development and the Status of Persons with Disabilities in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was finance.
A recording is available from Parliament.
Counsel, Norton Rose Fulbright Canada
Mr. Chairman, if I could just supplement that, it is true that nobody involved in this exercise wanted the government's role to be diminished. Some of the early drafts of the task force report began each chapter with the phrase, “The government should”. Also, I think that no one was out to use this as a technique for increasing government's role.
The important point is that government, which now is exposed to contributing to certain social needs, is doing so on the basis of rote. It repeats a grant every year, because it made the grant last year, and the whole point that is additive here is that you can structure a commercially oriented social finance instrument so that the outcome that is desired is actually now measured and is actually now paid for. In that respect, there is a savings to government because, in the example that I used, government would pay less to incarcerate prisoners. There are many others where government would otherwise make the payment and that's being avoided by the intervention of an entity that was funded through a social finance type of investment.
We can just regard this as neutral to government in terms of the beating on their chest to provide more funds but also beneficial to government because it creates a private sector outcome type test for things that government does not now test for.
Liberal
The Vice-Chair Liberal Rodger Cuzner
Mr. Hartt, you mentioned measurables. In this realm of social financing, what types of data are we looking at to measure the outcomes and to measure success, and what challenges will we have in trying to compile that kind of data?
Counsel, Norton Rose Fulbright Canada
As a partial answer, this goes to the very first question that your honourable colleague asked about limits and framing the use of this instrument called social finance. Not everything that is worthy of being done is susceptible to measurement, so you have to have a situation in which the good work that is sought to be accomplished is susceptible to measurement and there are people who are willing to put invested capital into it in return for, as Tim keeps saying, either just their money back and the feeling they have done a good thing, or perhaps a small return that would be below market.
You would have a very limited number of places where the outcomes are measurable. When I say limited, I mean compared to the universe of all works that are done for the public good and the relief of poverty and other charitable purposes, but not very limited when you start to enumerate them. Finding work for otherwise unemployable people, preventing recidivism, housing people who would otherwise be unhoused—these things are easily measurable from publicly available statistics.
Liberal
The Vice-Chair Liberal Rodger Cuzner
Again, I'm under the time crunch myself. If on any of these questions, like a great question like the one that was just asked, the witnesses would like to provide a note on further support, by all means don't hesitate to jot down your ideas and your perspectives, and share it with the clerk.
From that we're going to call upon Mr. Butt, for five minutes.
Conservative
Brad Butt Conservative Mississauga—Streetsville, ON
Thank you very much, Mr. Chair. It's a pleasure to have you in the chair today, it's always entertaining.
I only have one fault with Mr. Bird. He mentioned lots of community foundations. I don't believe he mentioned the great Community Foundation of Mississauga, but that's understandable. It's a relatively young foundation, but they have come a long way in a very short period of time. We're very proud of the Community Foundation of Mississauga and Eileen MacKenzie's excellent leadership there.
In all seriousness, a lot of these organizations do tremendous work.
I'm kind of a person who asks what makes a project, or a program, or an organization successful, and what makes it not successful. Can you give me a couple of sentiments from your view of successful social enterprise organizations you're familiar with, and what has made them successful in how they are operating today?
I realize a lot of what the committee will do is, “hopefully we're going to get some ideas of new things we can do, changes obviously government should look at and consider in the future”.
I'd really like to know. I have one of these you mentioned in my riding as well with Habitat for Humanity. I have a ReStore, which is quite successful in our community and does fairly good work. I think that's a good example of one.
Maybe I could get from each of you your perspectives. We can start with Mr. Bird, and then we'll go to Mr. Hartt, and our friends at MaRS. Can you give me a couple of key ideas of what makes a social enterprise organization successful? What are the key elements they need?
President, Chief Executive Officer, Community Foundations of Canada
Let's take the example of The Stop in Toronto, which is a community food centre. A group of committed change agents in that community found a way to pair up with some folks working in the private sector, and they said we can use our local food system as an asset here.
Instead of having some of the indignities put upon local residents as they accessed food programs, they said we're going to turn this into a community builder, and they changed the story. They are feeding more families, involving more young people, and learning new skills in food preparation. They are involved in gardens. You name it.
You ask the question what will really make them successful, and it's when they can scale their idea to other places, which they are trying to do in Dartmouth, Nova Scotia; in Perth, Ontario; and in Winnipeg. At that point in time, like other enterprises, they need access to capital. Should there be a fund focused on that particular outcome, a limited partnership, sadly we can't invest in it.
There's a way to link the success we would hope to see around community food centres in Canada and their rollout with the desire for capital that would allow them to scale, and the barriers we experience in supporting them.
Counsel, Norton Rose Fulbright Canada
Ian's last point is very important. You're asking for examples of success when our whole case is that this idea is still operating with one hand tied behind its back.
I hope you accept that because of the taxation law limitations and the securities law limitations, which have been alluded to by the previous questioner, you're not seeing the full panoply of what you could have if you were looking for success.
One example we know of is the community housing project in Toronto known as Regent Park. It was redeveloped recently—and in fact it's still being finished; it's not completed yet—by a private sector contractor who won a bid.
The redevelopment was financed by an issue of bonds, and the source of payment for those bonds was the full rental that some people, even the community housing, pay according to their means; the partial rental that other people, including some city councillors, pay according to their means; and the subsidy that is provided by the city for community housing for people who really need that service.
So there's a revenue source, there's financing to produce some quite improved buildings. If you are familiar with the previous status of that community housing development, the new one is gorgeous compared to the old one. And that I would paint as a successful example of social finance.
Conservative
Brad Butt Conservative Mississauga—Streetsville, ON
Do we have time for our friends from MaRS, quickly?
Liberal
Senior Policy Advisor, MaRS Discovery District
To add to the spectrum here, we also work with for-profit social enterprises. We have an accelerated program and a platform that connects investors' funds and social enterprises here at MaRS. I can provide two examples. One is the Komodo OpenLab, which develops inclusive technologies that facilitate the daily lives of people who are living with disabilities. Another is called Raise your Flag. This is an Ontario venture that works globally to help find career paths for those who are going to college. Both of these are for-profit entities that have a clear social mission and a revenue model that allows them to be successful both as businesses and as instruments for achieving social impact.
One of the very quick examples that I'll point to is Bill Young's Social Capital Partners. This organization is interesting because it uses preferential loan treatment for businesses that hire people who face labour market barriers. A company that agrees to hire a certain number of individuals from a community organization that's helping to place people in jobs will receive a lower interest rate on the loan that they're provided through the Social Capital Partners program. It's an interesting use of an incentive structure to provide both financial return and social impact.
Liberal
NDP
Marie-Claude Morin NDP Saint-Hyacinthe—Bagot, QC
Thank you very much, Mr. Chair.
I have questions for a number of people, but I'll start with Mr. Bird.
Earlier, you talked about the loans that could be given to different organizations, shelters for women or the homeless, for example. My concern is this. What can we do to make sure community organizations retain their autonomy if they are receiving these kinds of loans from investors? How can we ensure they remain autonomous?
President, Chief Executive Officer, Community Foundations of Canada
It's a good question. The best answer comes from Quebec and the work of Nancy Neamtan in Chantier de l'économie sociale there. In Quebec there's been an understanding of the diverse forms that are required for a community to realize its purpose. Nancy would be another perfect person to arrive here in front of the committee to help understand what's been undertaken in that province. There's a long history of understanding between the state and community actors in that province.
Here is another thing. As an example, in Selkirk, Manitoba, there is a women's shelter whose challenge is not its operating capacity. It is very autonomous. It's governed independently by the community board. It has all of the skills to effectively govern and operate, but it's just run out of room. So like a family that's got to put on an addition to put some more rooms in, it needs capital in order to be more available to the community. When it turns to acquire a loan, it can't acquire the loan. It could from the Selkirk & District Community Foundation if that vehicle were more available to them through the PRI vehicle, or what have you. It would require the Selkirk & District Community Foundation to do all sorts of gymnastics and get access to the expert services of folks at Norton Rose Fulbright and such to figure out how they could do this. That would be to do what? It would be to provide more spaces for families at the most difficult point in time to access the services of that organization. The organization again is completely autonomous, independent, and more than capable of handling this. The people around that board are drawn from all sorts of backgrounds: public sector, private sector, community sector, academics.
So given the option of the tools that Sarah described so well, it could have a much bigger impact in its community.
NDP
Marie-Claude Morin NDP Saint-Hyacinthe—Bagot, QC
Thank you very much.
My next question is for the individual who talked about investments. I can't remember whether it was Mr. Hartt or Mr. Jackson.
The discussion was about investments in community organizations and the fact that they would be given money if they were able to produce results. What I'm wondering about is how to structure such an approach in that kind of environment.
Take, for example, an organization that helps homeless people reintegrate into society or one that provides assistance to those with mental health issues. Measuring results in those types of areas is hard to do. How do we approach that? Will community organizations simply close their doors because they won't be seen as having delivered any results?
How do we address that aspect?
EVP Corporate and Community Development, MaRS Discovery District
I think it's important to recognize that, again, we're not talking about replacing. In many cases we're talking about additional programming.
The risk is not to the organization. The organization itself is guaranteed the funding. It's the return to the investors. The whole idea is that you have to guarantee funding to that organization. Let's say the federal government says they're only prepared to pay based on outcomes. The work still has to be done by the organization—the charity, the non-profit—and that's where we go to the investors and tell them we need to find the money to support this organization while it does this work, this experiment. So the investors' money is at risk. The organization—the charity, the non-profit—gets their money no matter what. The government then essentially repays the investors only based on results. There has to be an agreement going in as to how you measure, and often you use proxies to do that measurement.
I hope I answered your question.
Conservative
Costas Menegakis Conservative Richmond Hill, ON
Thank you, Mr. Chair, and I want to thank our witnesses for appearing before us today. Certainly this is a fascinating topic.
Mr. Bird, I was struck with something you said. You identify a benevolent organization that can do a lot of good and help tens, potentially hundreds if not thousands of people, but you are somehow prohibited from assisting those organizations. Obviously some regulatory changes would have to happen to permit you to do that.
Can you elaborate a little on that? Part two of my question is this: how do you go through the selection process of identifying which organizations you can help or partner with for the greater good?
President, Chief Executive Officer, Community Foundations of Canada
Let me take your second question first. A community foundation would describe itself as a 360-degree organization. It looks at the community in its entirety. It's built from the community, and so it's of the community in that respect. It would have an open process of engaging the foundation, such that charities and enterprises in its community could come forward and say they see the potential to do this, to help strengthen Mississauga—right, Mr. Butt?—and then as a result of that we would take that in. The community, through a community board, would look at the merits of those initiatives and support them.
With respect to grant making, we can do that. But if what came forward was a request for certain kinds of investments or something like a limited partnership was being built in the community that had a public purpose—clean energy or whatever it might be—we would have significant challenges in making an investment. The investment committee of the community foundation runs up against the kind of barriers that you've heard described by Mr. Jackson and Mr. Hartt and Ms. Doyle. So that's the part of our contribution to the community that we're trying to free up.
In doing that, we would continue to live out our principles that the community would be making the decision, that the investment committee in a local community foundation is drawn from members of the community itself. We benefit repeatedly from the expertise of folks where Tim works at MaRS to be exceptionally good at impact investing. We draw on governance expertise and professional advisers to ensure we do it within the rules. At the moment, we're facing these barriers, especially around limited partnerships and PRIs, and the charities that we work with face the barrier in terms of the destination test. If they come forward with an enterprise that may return something to the organization, they bump up against the barriers imposed by the Income Tax Act.
Help on those three fronts will help us to do what the community hopes to do.
Conservative
Costas Menegakis Conservative Richmond Hill, ON
Thank you.
Mr. Hartt, it's always nice to see you, sir. Our paths have crossed many times in the past. I always appreciate your wisdom and your advice. You're one of those people I consider perhaps has forgotten more than some of us will ever know. I look at your presentation. I see the word “eleemosynary”. I've got to admit, I've never heard that word before. I had to look it up.
But I have a question for you on social finance. It's not an entirely new concept, but it is experiencing somewhat of a revival around the world and right here in Canada. Can you give us your sense of why not-for-profits and the social enterprises are gravitating toward the concept of social finance?
February 19th, 2015 / 4:40 p.m.
Counsel, Norton Rose Fulbright Canada
Really quickly, it's simply because this opens doors for them to do things they can't now do but that are still within the purview of their mandate—their eleemosynary or charitable mandate. They're trying to do good, but their hands are tied. It comes from the mindset that making money is different from giving money away for charitable purposes. If that mindset, which is built right into our laws, could be eliminated, then of course they could just broaden their activities and do more good. That's all this is about.
Conservative