Welcome from foggy Vancouver.
Mr. Chairman and committee members, I'd like to thank you for this opportunity to appear before the committee to discuss the use of private and institutional financing as part of a strategy to improve social outcomes and strengthen communities in Canada.
I provided a deck, I think a little bit late. Actually, I'm not going to speak to the deck, but if anybody has questions about it, I'd be happy to answer them during the question period.
I've served as vice-president of community investment at Vancity since September of 2010. Vancity, with over $19 billion in assets and a half million members, is based in British Columbia and is the largest credit union in Canada. We were founded 68 years ago to provide social financing, essentially providing financing for people who could not get mortgages from the commercial banks on the east side of Main Street in Vancouver. It turned out to be a very good business. It was both a good social investment and a good business proposition. Vancity as a cooperatively owned financial institution sees itself as a social enterprise and takes its community investment role very seriously, so seriously that we have a vice-president for community investment. That's me, and I have a staff of 30.
Our team works on many levels to increase access to capital for our members and their communities. In particular, we're focused on affordable housing, local and natural organic food, energy efficiency and renewable energy, and indigenous communities and social finance or social venture capital. We help our credit union put its balance sheet in the service of these members' communities. We're really sort of the business development side of things.
At Vancity, we track our commercial loan portfolio and our commercial investment portfolio for its impact, with a goal of converting as much of that as possible to areas we've defined. At this point about 40% of our portfolio of $2 billion is in social impact investment.
Four years ago, with the support of the Province of British Columbia and the Vancouver Foundation—speaking here to one of Sandra's points—we set up the Resilient Capital program, which was a credit-enhanced fund. We raised about $15 million from 24 different investors, including educational institutions, unions, the government, and private sources, including high net worth people, and put it in a fund to support social enterprises. We've made about 26 investments out of that fund.
We participate and help guide the multi-sectoral BC Partners for Social Impact, a province-wide social finance round table. We are playing a role in participating in the national advisory task force on the G7 on social finance, and we've been co-convening a national social finance investment table.
I personally have been working most closely on Resilient Capital with a new intermediary, New Market Funds, which is described in the handout I gave you, and I've been working closely with Community Forward Fund, which is a Canada-wide community loan fund.
Before joining Vancity, I served as CEO and president of Housing Vermont, which really affects the way I look at the work I do. It's a non-profit that owned the Green Mountain housing equity fund and Vermont Rural Ventures. Essentially, this is a non-profit investment and development company. We raised about $125 million in private capital and managed private investment portfolios, consisting of affordable housing and public facilities, of about $350 million in assets.
Funds were deployed by Housing Vermont to address housing, economic development, and social needs, in connection with the federal and state incentives that existed in the United States in the form of new market tax credits, low-income housing tax credits, and other state and federal programs, which supported the move of private capital into these areas of community need.
From my perspective, this is key to the success of any movement to social finance. It's the merging of the discipline and ability to execute that's found in private capital markets, with a purpose of community investment and non-profit and charitable purposes. What we created at Housing Vermont is what started 68 years ago at Vancity. Anything the government can do to help facilitate that union by creating an enabling environment for social finance will result in more private investment in positive social and community outcomes.
The field of social financing in Canada is really just beginning to get organized. As such, the agenda is not focused. There's a good deal of wheel spinning. I'm sure you've been hearing all sorts of interesting testimony. The first problem is that there's very limited capacity within the community. I think Sandra spoke to that in terms of helping prepare or make the investees more investable. I'd also point out that the non-profit sector is very primary in its understanding of capital and how to deploy it.
Community capacity has largely been responding to government funding, which has a different risk management profile than private capital, or has have been responding to philanthropy. Again, neither model really works for managing private capital.
There's a great deal of chatter going on about social impact bonds. My experience based here in B.C. and in the United States is that I remain skeptical about the enthusiasm for two reasons. First is a general lack of clarity about what a social impact bond is. From an investment point of view, we're talking about contracted payments or a pay-for-performance scheme. The second problem, which I think is probably more important at this early stage in social finance, is that in an environment where there's a focus on reducing government outlays, on saving government money, it's a tough environment in which to introduce social impact bonds. It could be used as a way to disrupt or reduce the provision of critical government services rather than improve their delivery or efficiency.
I would encourage only cautious investigation of such programs, but would strongly advocate that you work directly to support the development of a more robust community finance infrastructure in Canada.
This work begins, I believe, with the CRA and changing the regulatory regime that currently makes the merging of private investment and charitable goals exceedingly difficult, from such things as making it clear that charities, foundations, and institutional investors can invest in limited partnerships, to removing any direct or indirect prohibitions on non-profits' creating and holding net revenues.
Non-profits and the community sector in general need to build their balance sheets. If they're going to manage private funds successfully, as has been seen in the United States and in Great Britain, this work needs to begin with a strong focus on building that balance sheet. In both the United States and in Great Britain, there has been great latitude for non-profits and charities to engage their work with private capital as partners. That kind of environment has to be created, and that's front and centre of the primary steps that need to be addressed.
Another important enabling tool would be modestly modifying the reporting requirements for financial institutions, with apologies to Sandra. It should be required of all financial institutions and credit unions to report on their level of investment in community against a common standard. It's not critical that such investment be required; it's just critical that it be reported on. The market itself, as Sandra's pointing out, where so many people under 40 are really interested in making sure that their money is put to good use, will help the more formal financial markets figure out how to do that in the right environment. Creating a regulatory environment that encourages financial corporations to report on more than just a single bottom line is critical.
Finally, the federal government should do more to support the critical role played by intermediaries—which again goes to Sandra's point—such as Royal Bank, Vancity, and entities as small as new market funds in the Community Forward Fund.
As the federal regulations in regard to credit unions are being drafted, I would ask you to keep in mind—and I think this is before Parliament currently—that Canada does not really need more small banks. The requirements of Basel III were designed to overcome the failings of large banks in global finance and should not be the instrument that kills the difference that credit unions bring, namely their focus on building their members' communities.
These institutions and others will become critical to building the community capacity necessary to manage private capital and also necessary to creating the fund managers who can speak and be accountable to private investors.
In the United States and Great Britain, social finance has become robust markets raising and deploying enormous amounts of capital and service of multiple bottom lines. If the Government of Canada successfully creates such an enabling policy environment, it will have big returns.
I'm happy to respond to questions on my remarks around the deck I've provided.
Thank you.