Human Resources Committee on May 26th, 2015

[Lars Boggild]

Yes. I think where we see these projects coming forward from community level organizations, from collaboratives of foundations and service providers, from various community constituents that they're actually coalescing around, this is a tool that can provide—I would really focus on—additionality to what exists now. This isn't about a transfer of what already exists into these tools; it's around that additionality.

Just to be clear, because I think there are a few concepts that have swirled around, we acknowledge that social impact bonds will be more expensive than direct contracting; therefore, they should be understood as a tool where greater value for money can be achieved where there are uncertain outcomes. We don't know what's going to happen, and it can serve as an on-ramp where we can beta test things, we can trial, we can experiment, so that when there is that certainty, it may make sense to expand and invest with public sector dollars.

I think there have been some misconceptions raised. Overall, only four out of 44 social impact bonds globally use a principal guarantee, and those were some of the first ever launched. That's less than 10%. None have used it since 2013, which is when most SIBs were launched.

When we think about the kinds of returns that people are talking about, we often hear our critics cite this notion that these are uncapped returns. It's false. It's not true. In every single social impact bond there's a capped return, a maximum payment that can possibly be paid. Equally, people will often cite that maximum payment. They won't cite the actual target returns that are expected from these vehicles. So let's look at that a little bit.

The first social impact bond in Canada, if successful in an outcome, will pay a 5% return. I don't think that's audacious. Overall, target rates of return have usually been between the 4% and 7% band, again, not really outrageous.

Even in the Peterborough case, at its minimum performance threshold it would pay only 2.5% as a rate of return. Now, it has an upside. It can do better, but that rate of return is entirely linked with its performance. We think that's a very good thing. We think that incentivizes everyone around the table to actually focus on the sort of change we want to see in our communities.

[The Chair, Conservative, Phil McColeman]

Thank you.

Members, I'm going to finish off, if you don't mind, with a couple of questions, because my orientation is about this additionality that's talked about here.

I'm very familiar in my community with individuals who have intellectual disabilities—I'm talking about Ontario—and they fall off the map at about age 18, so as soon as their high school is done. They've had educational assistance all the way through, and they may still be working on cognitive improvement in terms of their language skills, reading skills, computer skills, whatever it might be, but all of a sudden, they fall off the map.

When I speak to my provincial member of Parliament, who is the Speaker of the Ontario legislature, he openly admits that there's a lack of government-funded programming to pick these people up.

What typically happens is that they spend their time at home with their parents. They become adults. First they're young adults, and then they're older adults. You'll often see them in my community going down the aisles in a grocery store, a 70-year-old or 80-year-old parent with a 50-year-old or 60-year-old child.

When I think about the solutions that some tools could provide, they would be around the area of finance, because the provincial authorities are not prepared to take on the initiatives for the need that exists. There are groups of parents who get together to try to create a learning environment for these individuals on a day program basis. Beyond that, realizing they're not going to outlive their children, they need residential support to transition those individuals as adults into something that is affordable, so they can live out their lives in that context.

I'm describing this to all of you, and I'm wondering if I might seek a couple of comments back from each of you on the fact that this can perhaps provide the additional tools for organizations, parents in those situations, to come together, create new innovative models with which to create not only the learning environment, but also potentially a living environment, because government funding is limited to the services currently being provided, and this is a gap that's easily recognizable.

I like to think of social finance as offering at least something to consider for those groups that aren't currently receiving government funding for those services.

Could I have a brief comment from those who wish to weigh in on this?

[James Mulvale]

I'll just comment briefly. I spent many years working in the associations for community living in Ontario. It's a great story, I think, of how governments, including the government of Bill Davis in the 1970s, worked with parents, allied professionals, and people in the not-for-profit sector to build a very effective system of community-based supports and services. Pieces of it were, if you will, a bit market driven. They started up employment programs to employ people with intellectual disabilities. They partnered in some cases with the private sector to build housing, but it was operated on a not-for-profit basis.

I think the lesson to be drawn from that example is the absolutely fundamental importance of enlightened political leaders working in conjunction with concerned citizens to look at the big picture and move the whole field forward. I see social enterprise as kind of a mechanism filling in gaps, but in the context of that well-supported, publicly financed support system for people.

I'll leave it there.

[The Chair, Conservative, Phil McColeman]

Anyone else?

[Sally Guy]

I would say that would be a perfect example where social enterprise, a form of social finance or social investment, would be perfect, but we would limit that to turning a profit. We would want to stop at the point where our private investors make a profit.

[The Chair, Conservative, Phil McColeman]

Gentlemen, does anyone want to speak to that?

[Justin Bertagnolli]

I think Mr. Mulvale's comment about government leadership is an important one. Overall, SIBs or social finance are tools to reach an end and to hopefully reach great outcomes for our citizens who are ultimately at times vulnerable and are not being served. There could be an opportunity for social impact bonds, but I think in many cases social enterprise as a vehicle is a very appropriate tool to connect those individuals together to create those outcomes that we seek.

The last point I would like to make is that I think the motive of profit is not necessarily bad. It can create accountability and create a lot of opportunity, as some of the work, such as Pathways to Housing, has been able to achieve. I think profit in itself is a very effective means of being sustainable. When we look at our communities as a whole, creating long-term sustainable structures and infrastructure is an important thing for a government to be able to achieve.

[Lars Boggild]

I'd like to add, what we see when we talk about additionality—and we think about how this idea of our talking about not just philanthropic resources, but also social investments as well—is that it quite genuinely grows the pie. We're not in any way against the growth of philanthropy. We obviously are hugely supportive of that, but we've recognized we often will come up to limits there. When we talk about profit motivations of the kind of order that I'm talking about, which can afford a 7% and that kind of reasonable rate of return, it opens up a different pool of money. Foundations can talk about investing through their endowment capital. It doesn't just have to be from their grants budget. High net worth individuals may engage. Even everyday citizens might somehow collaborate to invest. In that regard, we generally tap new resources that are also additional. I think that's pretty critical for a lot of the issues you raise.

[The Chair, Conservative, Phil McColeman]

Thank you for taking the time to come back to be our witnesses today. We appreciate your input. It has been a very good discussion and thank you for your time.

With that, I'll quickly end this part of the meeting, but members, I'd like to point out a couple of things after I adjourn this section of the meeting.

Members, I want to remind you that on Thursday, the minister will be coming. It will be a televised meeting. The purpose of his visit is on the main estimates. He will be here for an hour and the government officials will be joining him. We will have them for the second hour on Thursday. I want to remind you of that coming up this Thursday.

Thank you.

The meeting is adjourned.