First of all, Mr. Chair and honourable members of the committee, thank you for the opportunity to provide testimony today. As an organization, we certainly deeply appreciate that.
What I intend to provide as testimony today is a little bit of what we do as an organization, the landscape we're seeing in social finance as it applies to crime prevention, and some of the particular initiatives we're seeing in working within and across Canada.
My colleague Denise will speak to how the system of justice—and crime prevention in particular—relates to some of the feasibility constraints that really do apply in social financing, as well as a lot of the interest we're seeing from service providers and what that looks like and why.
To begin with what we do as an organization, to my knowledge we are Canada's only built-for-purpose social impact bond intermediary. As a social impact bond intermediary, we aim to use these instruments as a tool to allow communities across Canada to invest in prevention of various sorts.
As I mentioned, we're primarily a social impact bond intermediary, and there are really two separate functions.
The first is working directly with organizations, usually non-profits, towards a position to feasibly engage in these sorts of instruments and really to get to a state where they can engage in these sorts of contracts and receive investment. It's something that's somewhat temporary, but we work with organizations developmentally against these various challenges, such as measurement, impact attribution, financial modelling, etc. This upfront effort is really necessary if policy priorities or areas of interest, including crime prevention, are to intersect, really, with a social sector that is equally able to step up and begin to deliver on these sorts of outcomes.
The second function that is really involved as an intermediary is that we work with both those non-profits and commissioning governments, as well as investors, to structure, help raise the capital for, and monitor the performance and implementation around social impact bonds. It's something that's more ongoing, and it really lasts over the life cycle of a social impact bond.
I'm just trying to frame what we do.
In speaking about the landscape as it applies to crime prevention, as Gianni mentioned before, there are many models of social financing. Social impact bonds are just one, but by far they're what we primarily do. As a result, we believe there is still a lot of room for innovation in the development of new structures to allow investment for social and environmental outcomes.
A social impact bond, as it's been explained, is really two things. One is an outcomes payment contract, which says that for a certain performance, government would pay as has been indicated. The second is actually the financing itself: providing the working capital up front such that organizations and non-profits can actually deliver these interventions in pursuit of these valuable social outcomes.
As a result of this, much global social bonds activity outside of Canada is actually already focused on crime reduction. In our tracking alone, there are three SIBs that are currently live and focused entirely on reducing recidivism outcomes: in Massachusetts, in Peterborough in the U.K., and in New York City.
There are another three that are focused on mixed outcomes, essentially, targeting things like reductions in recidivism or reduction in crime, as well as things like gains in employment. As well, there is another one currently in design in Israel.
So we can see that there is quite an active community of practice. It's growing. It's small, still, but it's growing in this space as it applies to these instruments. Cumulatively, those seven that I mentioned account for approximately $72.2 million Canadian in private social investment essentially geared towards reducing crime, reducing things like recidivism, and ultimately trying to generate positive social change for incarcerated individuals or offenders of various sorts.
Importantly, in tracking these initiatives, we see that there is actually growing comfort with these investment vehicles. Some of the mechanisms that might have been used to make them less risky in the past are falling out of use, and the actual overall size of investment in these vehicles itself is growing. To us, that indicates both that people are getting more comfortable with this and that they're willing to invest more.
In Canada, as was mentioned, there's one social impact bond so far. It's focused on at-risk mothers and their families. Much of the developmental activity, such as that social impact bond in Saskatchewan, has been at the provincial level, and I think it's noteworthy that governments of many political orientations have actually been very interested in this. In Nova Scotia, where I'm based—in Halifax—the provincial New Democrats, the former government there, wanted to actually be the first jurisdiction in Canada to implement a social impact bond. Meanwhile, in Ontario, a call for concepts has been issued by a Liberal government, and in Alberta the Progressive Conservatives have committed to innovative approaches to social challenges, including these social impact bonds.
So this diversity of interest we are encountering has multiple motivations. Social impact bonds can be a learning tool, a mechanism by which we can essentially engage effectively in research and development within the social sector. The scale is rigorous enough without both the political and public financial costs of failures. The flexibility of this funding can also allow for what we would call “in-process innovation”, and service providers can reactively learn in the process of implementing to drive performance improvements.
Social impact bonds can be a mechanism to allow for greater risk-taking on a scale that's commensurate with major social issues. In some cases there's a recognition that there are many challenges governments have tried to address in the past, don't feel they have full ownership over or the ability to directly address themselves, and see as their priority the mechanisms to address their priorities. Then, equally, they are a tool for new investment in a constrained budgetary context.
In our interactions with many provincial governments we're already seeing this understanding that while this is valuable and that investment in prevention in various forms is very valuable, there's already a lot of spending in acute care, whether or not in forms of incarceration or various forms of justice treatment. So there's often a need for what we call “bridging capital” toward prevention, and social impact bonds can fit in that gap. They can perhaps be that bridge.
We know they're not without concerns, obviously, concerns about whether or not this is government shirking its own responsibilities. As an organization dedicated to this field, we think this is taking accountability around outcomes as a government that that this is quite positive. There are concerns about profiting essentially from social problems, but we recognize that financial return is really compensation for risk. It's compensation for having risk tolerance to engage in what are essentially innovative projects, which is incredibly important.
There are concerns about cherry-picking, just doing the easy issues. I think we have to delineate between what's happening now and what could happen in the future, and how we need to learn from what may be more understandable or legible domains, such as justice and crime prevention, to enable us to begin to expand the scope of tools such as this to things that may be more difficult to measure or track. That's okay.
There are concerns that this may only happen in big population centres. Feasibility constraints around the transaction costs for that, as Gianni mentioned, may make it difficult to apply these instruments to very small populations. We think whether or not it's grouping many small populations together to make larger projects happen or equally.... There are cases already in Perth, Scotland, where a very small social impact bond was implemented. It involved a local community and local businesses; this is possible at that scale.
Overall, there are opportunities to facilitate growth in this area. The developmental requirements are significant and we're very familiar with them and I'm sure Denise will speak to them as well, including the notion of having clarity around intentions and goals on the part of government, so that organizations such as ours and service providers, including those we interact with, know what audience their sort of work will flow into.
Then there's development funding as well, the fact the start-up costs of this new focus on the part of the social sector are not insignificant. In many other jurisdictions, including the U.K., there's an understanding that's a need that needs to be filled.
Finally, there is the question of data and information, A really strong example of this is in the U.K. As they pursued social impact bonds they've developed a tool kit, which includes chargemaster data that says these are figures that government incredibly believes are accurately reflective of its costs, such that organizations such as ours and the non-profits we work with can incredibly construct these sorts of businesses cases that they know can confidently move forward.
Thank you very much for the opportunity to present today.
