Evidence of meeting #45 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.
February 26th, 2015 / 4:10 p.m.
Chair, Social Enterprise Council of Canada
I think there are three or four very critical items that Mr. Vermette has mentioned, including the unbundling of contracts and the social clauses.
One of the things that's fascinating in our international work is that we realize that adding a social clause does not inhibit in any way any trade agreements the federal government is involved in, whether that's NAFTA or other emerging trade agreements, as long as the social clauses are clear, straight, and open to everybody to participate in.
So there's the unbundling of social clauses and also, again, the engagement. As Mr. Butt raises, when people understand the value.... There is $685 billion being spent by governments in purchasing goods and services. We need to leverage that to get a better return for Canadian citizens. That can be done when we start to look at the social values. What I can send to your committee clerk is a copy of the report we produced last year for Employment and Social Development, which explored social procurement and delved directly into this.
We're learning from other countries, but we also learn from things here in Vancouver, with the Olympics, and now with the Pan Am Games. How do we leverage this existing purchasing to create a social value?
NDP
Mathieu Ravignat NDP Pontiac, QC
Thank you for that contribution. I just want to add a little bit with another question. I would imagine that in order to start a social enterprise the capital you would need could be pretty risky. Access to risk capital is probably pretty essential. Do you think the federal government has a role to play with regard to ensuring access to that kind of capital, which might be high risk but may give dividends in the future?
Director of Development, Social Economy Working Group
Yes, that would be possible. Organizations like the one we have in Quebec, the Réseau d'investissement social du Québec, could be created.
There could be others. Seed capital is very high-risk. Obviously, there is always some loss and, in the long term, the fund ends up decapitalizing, but not for a very long time. In fact, many of them work and are able to pay us back. With relatively minimal investment, we are able to operate for a long time. As we say, any contribution, no matter how small, is always welcome.
Conservative
Conservative
The Chair Conservative Phil McColeman
I'm sorry, Mr. LePage, we've run out of time on that particular round of questions. I'm trying to keep everyone within a reasonable space of five minutes, so I'm sorry if I have to at times shorten questions and answers, but I will do so.
Mr. Boughen, you have five minutes, I believe.
Conservative
Ray Boughen Conservative Palliser, SK
Thank you, Chair, and thanks to our resource people for sharing part of your day with us. We appreciate that.
When I look at the whole question of social finance I say, how is it that we get people engaged and willing to become part of the group that's known as the social finance folks, when there are all these other options that are out there for investing money, and people are looking at this as some return for their investment, I would think? What entices people to even take a stand and say, yes, let's get into the social finance?
Anyone can answer that.
Chair, Social Enterprise Council of Canada
I can begin by looking at a philanthropy group that is often now referred to as social venture philanthropists. What's happening with a lot of individuals is they're looking for not just the option of do I give to charity and get a tax return for that charitable gift, or on the other extreme looking at how do I invest and get a maximum financial return, but there are more and more investors who are looking for a blended return. They ask, how do I invest some of my capital into something that is not just about making money, and not just a one-time gift, but how do we explore this middle ground of a blended return on investment? So they say, I want to invest in companies or in social enterprises and social finance packages that will leverage my investment. I will get my money back, I will see a return, and hopefully I will get the same tax credits I would get if I were to invest somewhere else, if it's a legitimate business model. I'm looking for a blended return.
I think it's part of this same discussion that the investors are looking differently as well.
Director of Development, Social Economy Working Group
That sort of investor does exist. People may absolutely want a return on their investment, and at the same time, they may be willing to get a lower return, but not always, if something serves a social purpose they believe in. That capital exists and it is possible to find it. There are individuals and larger funds that are increasingly concerned about what they are investing in. If there are social benefits, they are even happier.
We can see this in very local projects. For example, to save the last grocery store and service station in a town, the people in the community will invest $100 or $200 in shares in the business so that it survives. They don't always expect a return. The return may be very low, because that is not what they are looking for. They are looking for social utility and solidarity.
The same person may do that on the one hand, and on the other hand, invest for their pension fund and try to get the best possible return.
Conservative
Ray Boughen Conservative Palliser, SK
Mr. Vermette, maybe you can carry on with this question. What are the barriers that stand in the way of a business supporting a social finance project? How does it start? Is there a desire to form a group? Do they meet? How does it get started? What are the barriers in the way of getting one going?
Director of Development, Social Economy Working Group
One barrier is the lack of knowledge. Moreover, large foundations have to invest their money. In order to make donations, they have to invest somewhere. They need a return and certain guarantees. It is sometimes hard to connect the investor with the project.
There may be other barriers when we are asked to prepare a prospectus for investment. Those are all things we are working on right now in connection with crowdfunding. There may be investments on a smaller scale, with simpler regulations. These things are being worked on with the financial market authorities in Canada and in all the provinces. Regulations will be put in place shortly. Eliminating these barriers would facilitate investment.
Conservative
NDP
Dany Morin NDP Chicoutimi—Le Fjord, QC
Thank you very much, gentlemen.
My questions are for Mr. Vermette.
I'm glad to hear about the social economy in Quebec. I see the social economy and social finance as a good alternative to the capitalist model we have now, but I'm also aware that in 2015 they do not account for a huge part of Canada's or even Quebec's economy.
Do you know what percentage of Canada's or Quebec's economy the social economy and social finance account for?
Director of Development, Social Economy Working Group
I don't know the figures for Canada. Perhaps Mr. LePage has them.
In Quebec, we often talk about 8% of GDP, but of course that includes the giants. Mouvement Desjardins and La Coop fédérée, for example, are very large businesses that skew the data. Statistics of this sort are a problem for us right now. They are very hard to get. This is not the case so much on the cooperative side, because it is fairly well defined, but statistics for non-profit organizations are much harder to get.
NDP
Dany Morin NDP Chicoutimi—Le Fjord, QC
Monsieur LePage, can you give us the number, or do you have the percentage, of the social finance in Canada? It can be linked or not to the GDP.
Chair, Social Enterprise Council of Canada
No, I don't think anyone has done adequate analysis. As I think Mr. Vermette has indicated, we lack the information because of some of the definition issues.
As well, how do we include universities, how do we include municipalities, which are normally put into that pot? I think this is why we started to work with the federal government, to look at whether or not we can do surveys and start to understand the sector, start to define it. I think we're very, very early on in trying to understand its relationship to GDP.
NDP
Dany Morin NDP Chicoutimi—Le Fjord, QC
Mr. Vermette, in your presentation you talked about a $12 million fund and a roughly $50 million fund.
Could you quickly list some examples of small and large projects you have supported? That will help us know what types of social economies or enterprises you have helped.
Director of Development, Social Economy Working Group
The projects are extremely varied.
They can range from a cooperative brewery to a town convenience store. In the region you come from, Saguenay—Lac-Saint-Jean, there is Groupe Coderr, for example, which does waste management. It is a social enterprise. There are such enterprises in the food service industry that offer takeout buffets and meals for seniors.
There are many in the housing field, including seniors' residences. However, because we are not involved in housing, we don't support those enterprises. They are extremely diverse. Some are practically plant schools. I am thinking of Formétal in Montreal. Young dropouts learn about metalwork there and make all sorts of things out of metal: garbage cans, desks and so on. That is the kind of enterprise we support. Some other examples would be cultural enterprises, performance venues and a circus school. These projects came out of community needs and are limited only by people's imaginations.
We don't support a project if it is supported by only one, two or three people. We need to feel that the project is supported by the community, by a real group. That is our guarantee of success and it reduces our risks as investors.