Thank you, Chair and committee, for having my colleague Sarah and me here.
We represent MaRS Discovery District in Toronto. Our centre focuses on the marketplace for impact investing, predominantly in Canada.
We engage in numerous activities that research, build awareness for, or help develop this relatively new type of investment model that blends financial and social objectives. Our clients range from governments to investors, but most of our work is geared around social enterprises that are looking for new ways to raise money for the work they do.
I will mention that since 2010 we've published several reports on impact investing that might be of interest to you. I will make these publicly available, and I'll also provide a brief, following this appearance, for the purpose of this study if it is something you're looking for.
An innovation centre like MaRS is involved in impact investing for a few main reasons.
First, particularly in the current fiscal environment, government budgets have significant constraints. Notably, the ability of government to meet demands on social services from an aging population is inadequate, and importantly, the ability for government to focus on and pay for prevention across a range of policy areas is limited. More than ever, government requires a partnership approach to harness the assets of other sectors to improve social outcomes of communities across Canada.
Second, governments and philanthropic donors alike are increasingly focused on shifting performance standards away from reporting on programs and towards outcomes. Appropriate metrics measuring social change are being prioritized yet still remain elusive. Many consumers and individual donors are requesting transparency regarding organizations' social and environmental practices, yet there are challenges related to standardizing how these are reported.
Fortunately, there are new tools, new players, and new thinking about how we can tackle social issues using market-based approaches. There is a new breed of investor who sees complementary investment channels with the potential to augment more traditional philanthropic approaches to tackle these social issues. Opportunities that generate social improvements in addition to financial returns are appealing to them.
We are optimistic that, with some dedicated intermediation between demand and supply functions and constructive awareness-building about the opportunities and the risk, new investment opportunities could emerge that will move the needle on many social policy challenges in Canada, including crime prevention.
Our centre has a comprehensive strategy for exploring impact investing in Canada. We have very practical initiatives, such as the SVX, that connect social ventures looking for capital with investors who have the capital. We certify ventures that agree to measure and report their performance against social benchmarks. We advise on the development of new financial products, including social impact bonds, which I understand to be of keen interest to this study. We also develop policy advice and connect to global policy development conversations through a G-8-endorsed social impact investment task force.
I've already mentioned that we produce a significant amount of research and thought leadership, which is available for public consumption.
An important finding in our early days as a centre was that there is no one approach to solving the capital problem that non-profit and for-profit social enterprises face. We support a range of initiatives that channel efforts towards increasing the amount of capital available for social purposes as well as measurable intentional social impact.
One way we are doing this is through a dedicated effort to analyze the use of social impact bonds. Until it is proven otherwise, I think it is fair to say that this tool could have utility in prevention areas where there is a potential to save money or improve service delivery. Non-profit organizations are interested in exploring social impact bonds with us because they offer a revenue model to pay for operational growth or to sustain service delivery, and impact investors are attracted to the dynamism of connecting outcomes and a financial return.
Our centre has an accelerator program that seeks to determine the feasibility of using this tool in specific issue areas. It analyzes interventions that could improve outcomes in these issue areas, and if the conditions are met, helps develop the multi-sectoral partnership agreement required to get these off the ground.
While our centre is issue-agnostic, meaning all positive social and environmental impact is viewed favourably, the social impact bonds we are currently working on are in three project domains: diabetes, hypertension, and supportive housing for homeless individuals facing mental health challenges.
We have not proved or disproved the model in any of these areas yet, and quite frankly, the model globally is too new to make any definitive or general conclusions. However, we are motivated to learn whether a social impact bond could be used as a tool to support growth where government does not have the resources to scale an impactful intervention, as a tool to help government transition from paying for activities to commissioning outcomes, as a tool to help break down existing silos between government agencies that are seeking similar outcomes for a similar population group, and as a tool to reward non-profit organizations that are generating positive social outcomes.
We are not, however, blind to the real or perceived challenges that exist with impact investing and the SIB approach. In an ideal scenario, government would have enough scale capital to adequately fund prevention and what is working in particular issue areas. In the case of social impact bonds, it's often a more expensive, or certainly a more complex way to fund a service provider than a direct grant or donation. But bringing it back to our fiscal constraints, the tool could be used where government resources are not available to test, scale, or replicate innovative programs. It could also be used as an alternative accountability framework, which we may find is more conducive to achieving results.
I now will turn over the floor to my colleague to describe some of the potential benefits more fully.