Let me start by responding to the last question of who should champion it.
There are a variety of players. I think the role the federal government can play is providing leadership, particularly about being what we would call an outcomes funder.
At the Centre for Impact lnvesting we are working with a variety of groups and some governments—in some cases the federal government and in other cases provincial governments—where we have been asked to put together a social impact bond to meet a particular need of that government or an area they have addressed.
For example, the federal government would come to an organization like the MaRS Centre for Impact Investing, or another intermediary, and say, “We would like to address homelessness. It's a key area for us. Can you help us put together a bond?”
To give you an example of one that we are working on, there is an organization that deals with folks who are employment disadvantaged. They could be new immigrants or they could have a mental challenge, and they have trouble entering the workforce. There is an organization that helps to train those people to get them placed in jobs.
We have gone out and worked with that organization to ask, “If you could expand your offering and significantly increase the number of people you service, what would it take?” We then worked with a group of investors who are concerned about helping people get into the workforce. Those investors have said, “We are prepared to make an investment in this organization”, which will then allow the organization to rapidly expand. We are working with outcomes funders who have said, “This is so important to us that if you deliver results—but only if you deliver—we will make a payment and those investors will get their money back”. In this particular case, we're talking with a financial institution and a foundation.
Imagine the role the federal government could play if it said, “There is an issue area that is of concern to us”—whether it's poverty alleviation or whether it's homelessness—“and we will pay if social agencies reduce the cost to the taxpayers or reduce the cost to government, but we will only do it if there is a savings”.
We are comfortable that we can go out and find investors who will invest in the vehicle.
The vehicle can be a traditional investment where a bond is put up. An investor makes a contribution—a thousand dollars, a million dollars, whatever it might be. There is a negotiation between the intermediary who puts this together and the outcomes payer to ask, “On what measurement will you pay?” The repayment to the investor can be as little as nothing.
If the federal government says that it wants to reduce homelessness and targets the number of people for whom to find affordable housing, who would otherwise end up on the streets, it could say that if a certain target isn't hit, it will pay nothing, but if certain targets are hit, this is how much the government will pay. We would then structure a vehicle for those investors to generate some sort of return for them.
I think the role you can play is in having such a vested interest in reducing the cost of some of these outcomes.
The United Kingdom has posted on its cabinet office website the cost of 600 outcomes, everything from how much it costs to keep a single mother together with her child, to how much it costs to incarcerate a 16-year-old, to how much it costs to incarcerate a 45-year-old for the third time. They've essentially said to the private sector and to foundations, “Here is what we think it costs the taxpayers. If you can do it more cheaply, make us an offer on a bond.”
That's the role I think the federal government can play.