Thank you, Chair.
Good afternoon, members and members' staff.
I represent the MaRS Centre for Impact Investing at MaRS Discovery District in Toronto. We partner with governments, non-profits, and investors to direct capital to social problems. We advise governments on how to deliver better outcomes and results for vulnerable populations in Canada.
We cannot speak to the experience of indigenous women in the justice system. I was listening to the questions in the last session and I would have been able to answer none of them. However, what we can speak to is the chance to approach the problem in a new way.
I'd like to make two hypotheses to this committee: an outcomes-focused approach to the issue will enable those working with indigenous women to get better results, and a new tool, called a “social impact bond”, can facilitate the transition to an outcomes-focused approach.
Let me explain. Our public and philanthropic funding system spends an extraordinary sum on programs designed to rectify social problems. Governments pay non-profits to deliver many of those programs. How does the government pay for these programs? It writes a list of activities in which the non-profit may engage. The non-profit also has a list of eligible expenses.
The non-profit runs the program, stays within the bounds of the sanctioned activities, and submits its eligible expenses. The government pays those expenses and asks for a report on how many people went through the program, and it may hear something about how the program has helped those people.
Let me give you an example to bring this to light. A homeless shelter is funded based on its activities—namely, the number of clients housed. Shelters take in individuals in need, but do not have the resources to treat the underlying causes of their homelessness, such as illness or chronic depression, for example. Because the system does not focus on making the individuals better, but rather simply on whether the shelter filled its quota, the cycle of homelessness continues.
At the end of projects like these, we know the non-profit spent the public's money on the items on which it promised to spend the money. We can check off that basic accountability box, yet at the end of the project we very often don't know what the project achieved for the people it was meant to serve. We cannot check the accountability box that asks the value the program earned in return for the public's money.
That is way too simple a story, of course. Non-profits sometimes report on outcomes and academics and governments sometimes study social problems, but day-to-day social service delivery rests on what non-profits do, not on what they accomplish. That approach leaves too much potential—community potential, non-profit potential, government potential—on the table.
How else might the government pay for a social problem? The government might pay for social programs based on a program's results. It might pay for a program to the extent the program achieves the result it is set to achieve. Let me give you an example.
Roca Inc., a U.S.-based non-profit, has spent many years keeping young men out of prison. Roca is now delivering some of its services under what it calls a pay-for-success contract, which you may know as a pay-for-performance contract or a results-by-payment contract. Under that contract, Massachusetts agrees to pay Roca on its success in reducing prison days among young men already involved in the justice system. Roca, unlike many non-profits delivering social programs, knows its precise goal: to steer its clients away from prison. At the end of the program, Roca and Massachusetts will know about how to accomplish that goal. This is very similar to what Don was talking about earlier.
Another example is closer to home but is on a different social issue: heart disease and stroke, which kill many in Canada each year. High blood pressure puts people at risk, yet we know the modifiable behaviours that can curb this negative trajectory. In two weeks, the Heart and Stroke Foundation of Canada will kick off a program designed to stabilize and reduce blood pressure among people approaching high blood pressure. The Public Health Agency of Canada has promised to pay for the program depending on how well the program actually helps people stabilize and reduce blood pressure. At the end of the project, the agency and the Heart and Stroke Foundation will know more about how to combat rising blood pressure in an aging society.
Both Roca and the Heart and Stroke Foundation did something unusual. They asked investors—foundations, financial institutions, corporations, individuals—to invest in their programs—not donate, not grant, but invest.
Like most non-profits, Roca and Heart and Stroke cannot take the financial risk that their programs do not work. They need money up front to pay the costs of their programs. They cannot wait a month or a year until they report results, so they ask investors to put up this upfront money.
The investors—and not the non-profits—are taking the risk that the programs do not work. If the programs work, the governments will pay a return; if the programs do not work, the investors will lose their money. This arrangement is called a social impact bond.
Social impact bonds in particular, and paying for outcomes in general, come with their own share of problems. Picking outcomes is not easy. Deciding the metrics to capture the change is difficult. Tracing cause and effect between a program and its results is a nuanced task. These steps are additional to the current grant and contribution process, and yes, when a program works, the government pays more: the cost of the program, plus a return to investors.
Might the benefits outweigh the costs? That's what we are here to find out. Social impact bonds are a tool devised to reframe how we think about funding social problems. The real value is not in the investment but in putting results first. If we put results first and build our response to a social problem with constant reference to a precise goal, won't we do better by the people we're meant to serve?
We have not answered that question yet, but given the stasis in too many social problems, we think it's a question worth exploring. We believe a focus on outcomes may help communities better serve indigenous women in the justice system.