It's a pleasure to be here to speak to the committee.
Social finance has an enormous potential to encourage social innovation in our country, by creating new opportunities for investors and social purpose organizations, or SPOs, to partner in innovative projects and take their great ideas to scale at a new level across this country. It will improve our social and economic outcomes for Canadians, and most importantly the communities they live in.
As we are all aware, Canada is facing growing economic challenges and escalating complex social issues. Our population is aging, workforces are retiring, and we face a greater demand for educated, skilled workers. Federal unemployment data shows a skills gap in regions and under-represented groups, such as aboriginal Canadians, new immigrants and adults with low literacy.
Additionally, our population's health is at risk. Physical inactivity is leading to chronic disease, mounting health care costs, and production losses. Physical inactivity accounts for more than $2 billion in annual health care costs. Government can achieve different and better outcomes for Canadian taxpayers only if it looks at new models and new ways of doing business. Social innovation and social finance can be one of these tools.
Moving from accepting the possibilities of social finance to moving projects to an active stage is a challenge for all governments, not just the federal government. We see that in the provincial government, and we also see that in other governments around the world. When we examine social finance globally, it is evident that there is no cookie-cutter solution and that social finance tools take many forms. It is too early to make a definitive prediction or reach a conclusion on which models work best globally, as they have not all yet come to fruition.
Three or four years ago, people were talking about social impact bonds, impact investing, and pay for performance, all models that can be used in Canada. I believe we'll come up with a Canadian solution, one that incorporates the best of each of these principles, to make sure that social purpose organizations can deliver results for Canadians.
In the United Kingdom, it has been recognized that in order for investment to be successful, it must be directed at the SPOs at a certain level of readiness. Building a pipeline of organizations that are able to accept and use finance tools is essential to the long-term success of Canada. If they have the capability and can be self-sufficient, then when they get the investment tools, they can scale and make a bigger impact and make the tax dollars go further.
In determining the readiness of SPOs or not-for-profit organizations to be placed in a pipeline for the social finance approach, LIFT believes that the following elements are essential to success: a clear theory of change with demonstrated results, a strategic growth plan to achieve desired outcomes, a potential for scaling the impact outside of their jurisdiction and across the country, demonstrating efficiencies and effectiveness, a robust metrics and evaluation tool to make sure the investment is getting the returns that everyone is looking for, and being impact and investment ready.
Government needs to start working with intermediaries to identify organizations that have successful models or interventions. They then have to have these intermediaries work with the SPOs to build their capacities so the organization is strengthened, thereby making it more sustainable and effective at delivering measurable social impacts. LIFT also believes that a framework of coast-to-coast investment and impact-ready projects will help Canada show other jurisdictions how to match regional and community needs and government policy priorities to a social finance framework that is able to deliver measurable results. Successful outcomes need to be determined with the government, stakeholders, and all partners. It must be clear what the intervention will achieve and whether that intervention causes a result by itself or in combination with other projects.
Globally, venture philanthropy organizations are being recognized as key contributors in getting SPOs to be investment ready and impact ready. A G-8 report talks about global collaboration as the heart of social finance and social innovation. LIFT is proud to be part of the best-practice alliance with three other global venture philanthropy organizations: Impetus Private Equity Foundation, in the U.K.; Social Ventures Australia; and New Profit Inc., in the U.S., and we support Canada's efforts to build a global network. These three organizations have been involved either directly or indirectly with social impact bonds and social finance tools.
LIFT believes it is essential to establish benchmarks, performance metrics, and evaluation processes to measure our social impact in targeting populations and regions. Therefore we want to ensure that measurement is embedded in all projects and accountability is clear.
I thank the committee for the opportunity to speak. I'm open for questions later.