Mr. Chairman, committee members, I would like to thank you for this opportunity to appear before the committee to discuss using private and institutional financing as part of the strategy to improve social outcomes and strengthen communities across Canada.
I have served as vice-president of community investment at Vancity since September 2010. Vancity has over $18 billion in assets and half a million members. It's based in B.C. and is the largest credit union in Canada.
It was founded 68 years ago to provide financing to community markets that had been denied traditional access to capital, in this case, potential homebuyers who could not get loans on the east side of Main Street, in Vancouver. As a cooperatively owned financial institution that views itself as a social enterprise, Vancity continues to take the role we play in community investment very seriously. There are not many credit unions that have a VP of community investment, let alone one with a staff of 30. I'm quite pleased to be doing this work.
Currently the community investment team is working, on many levels, to increase access to capital for our members' communities in B.C., with a focus on affordable housing, local food, energy efficiency, renewable energy, and social finance and social venture.
Three years ago, with the support of the Province of B.C., and with the leadership of such people as Gordie Hogg, whom you will hear from shortly, we, with the help of the Vancouver Foundation, launched a resilient capital program to provide social enterprises and blended value businesses with access to capital, in the form of equity investments in loans. We participate and help guide the multi-sectoral B.C. partners for social innovation, which I'm sure Mr. Hogg will speak to. We are playing a role as a participant on the national advisory task force for the G-8 and G-7 on social finance, and are co-convening a national social finance investment funds table, with a particular focus on existing funds and supporting the existing social impact fund infrastructure.
Prior to coming to Canada, I also served as CEO and president of Housing Vermont. It included the Green Mountain housing equity fund, and Vermont Rural Ventures. This was a non-profit investment fund. It managed assets of over $350 million of private and institutional capital, which was in the service of community investment goals. Again, these were social needs being met in connection with federal and state incentives that were created to encourage the private sector to invest in community.
Social bonds offer some promise, but based on my experience in B.C. and the United States, I remain skeptical of the current enthusiasm for the deployment of social impact bonds as a financial instrument to address intransigent social problems in Canada. My first concern is the general lack of clarity about what is meant by social impact bond. Most of what people are considering is not really in the form of a bond. I'm much more comfortable with pay for performance, or pay for success, but even those terms tend to have a jingoistic quality of a slogan.
From an investment point of view, we're talking about contracted payment schemes. Again, these can make for very successful investment structures, but I think we should call them what they are.
The second problem comes from the current fiscal environment with the focus on reducing government outlays. In such an environment, it's particularly likely that SIBs, social impact bonds, could be used as a way to disrupt or otherwise reduce the provision of critical government services rather than proven delivery and effectiveness. I know this committee is focused on delivery and effectiveness, but it is a tough environment to be discussing these sorts of new and innovative approaches.
Finally, the entire field of social finance in Canada, and this is probably my main point, is just beginning to get organized. There is very limited capacity in the community to respond with the sophistication and service delivery infrastructure necessary to deliver on pay for performance schemes and then scale such programs once they're successful.
There are a lot of consultants out there who will offer to do this work for you, but that will not be the path to a successful program. I would encourage cautious investigation of such programs, while working diligently to develop the community finance infrastructure in Canada.
This work needs to begin 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 and foundations may invest in limited partnerships, to removing any direct or indirect prohibitions on non-profits creating and holding revenues. We need to build balance sheets in the community sector if you're going to try to move towards a social impact bond regime.
In the U.S. this work began in the 1980s and picked up speed in the 1990s. In Great Britain it began in the early 1990s and has involved a great deal of government support and focus. In both Great Britain and the United States there is great latitude for non-profits and charities to engage in work with private capital. This is the enabling environment that needs to be created if this type of innovation—the innovation potentially offered by pay for performance—can be successfully pursued.
Another important enabling tool would be to create a regulatory environment that tracks and reports publicly on investments made by federally regulated financial institutions. Just tracking and reporting on the activity, not requiring that it be made in any particular vehicle, would have the effect of elevating access to that capital within a community. Creating a regulatory environment that encourages financial corporations to serve more than a single bottom line is, in our experience, critical to the success of this kind of program.
That said, there are a number of interesting social impact bond-like innovations and initiatives ongoing in British Columbia and elsewhere. For example, I've been part of a group that is working to structure a bond for the Aboriginal Mother Centre in Vancouver. There's the Saskatchewan Sweet Dreams project, which most of you have heard about, and the BC Association of Aboriginal Friendship Centres, which I believe Mr. Hogg will speak to. The B.C. government is exploring a number of other potential involvements around employment of people with disabilities. Since most of these issues impact funding streams from various levels of government, it's going to be critical for collaboration and coordination between levels of government.
Finally, there's a critical role for intermediaries such as Vancity, New Market Funds, the Community Forward Fund. There are a number of existing, what I'd call intermediaries, in Canada that need to be strengthened and supported if this work is going to be successful.
Governments should focus on creating an enabling policy environment. It has had big returns in Great Britain and the United States.
Thank you.