Members, I'd like to call the meeting to order. Thank you so much.
This is meeting number 56 of the Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities. We're here for our final meeting with witnesses today to wrap up our study on exploring the potential of social finance in Canada.
First of all, I'd like to introduce you to Andrew Lauzon. He is substituting today for Jessica, who has a family matter to deal with.
I'd also like to welcome our witnesses. Good afternoon. I know we had a previous engagement with you. We didn't keep our end of the bargain, but proceedings in the House of Commons prevented our being here with you.
Joining us today, representing Finance for Good, we have Mr. Lars Boggild, the vice-president for eastern Canada, and Justin Bertagnolli, a partner in that enterprise. Also, we have with us live—I have you listed as video conference, but actually you're here—Sally Guy, the policy and communications coordinator for the Canadian Association of Social Workers. We have by video conference, Mr. James Mulvale, dean and associate professor from the faculty of social work at the University of Manitoba.
Again, welcome to you all.
Each of your organizations has up to 10 minutes of presentation time, and you can split that between witnesses if you wish or use it however you choose. I will give you a warning at about the nine-minute mark to start to wrap up. You will have about a minute left at that time. Then we'll move to our questioning by the members assembled.
Why don't we proceed, starting with Finance for Good. I'm not sure if it's going to be you, Mr. Boggild or Mr. Bertagnolli, but please proceed.
Thank you very much, Mr. Chair, for welcoming us back. Let me first say how much I appreciate the opportunity to speak to you today. We really value opportunities to work together with partners in government, the community sector, and the private sector to improve the lives of Canadians in our communities. I mean that quite truthfully.
We will explore two areas in our testimony today regarding how we can leverage the best of all sectors in social finance, and a road map for this market, but first we will provide some context as to how we arrived at our perspective. We submitted a brief to the committee on March 11, which I believe has been circulated. It addresses some of the more tactical and specific recommendations we have, which we would be pleased to discuss during the question period.
I'll begin with context about our organization, Finance for Good. We are a non-profit with a vision of a Canada in which investments in prevention and early intervention are a strong priority and appropriately valued for the impact they can create. We believe there is tremendous social and economic value in finding mechanisms through which we can identify, resource, and grow effective programming that is targeted upstream on social issues so that we don't have to deal with negative health, social, and environmental ramifications later.
With this focus we are foremost a pay-for-performance and social finance intermediary. We have advised provincial governments, foundations, and social sector delivery organizations across Canada since our founding in 2012 as they pursue innovative approaches to financing the implementation of new or growing preventative and early intervention programming. ln particular, we are a leading Canadian organization on the use of social impact bonds, SIBs, and outcomes-based financing, which is what our testimony will focus on today. We have worked and are working actively with partners to overcome the hurdles that have actually limited SIB development in the past, such as issue selection, intervention design, and impact valuation.
We provide this technical assistance as partners to organizations so that they can have the strategic clarity on the social and economic dimensions of the outcomes they produce, and they can measure what matters and have performance management systems to support effective execution.
With that in mind, we have worked with clients in the public sector, such as the Edmonton Police Service, and the social sector, such as the Mennonite Central Committee, to build the impact analysis, evaluative strategy, and economic modelling to have confidence about the feasibility of social impact bond initiatives so we can move forward as partners together in implementation.
With that context of the practitioner perspective we'll bring, I'll focus on what we see as a best-of-all-sectors approach and a road map for the potential for outcomes-based finance as a part of social finance in Canada.
First, we believe a best-of-all-sectors approach to accomplishing needed social change is necessary. We have seen first-hand that social finance initiatives such as SIBs are collaborative. This isn't purely about the social sector getting more business-like, but rather about leveraging the best of what each sector brings and designing these partnerships to work best for all stakeholders.
For example, we can learn from the best of the private sector when we move away from a status quo where funding is often provided with little data to support a program's ultimate effectiveness. This has been validated by our work conducting assessments on dozens of organizations through workshops where we've seen the relative scarcity of useful outcomes-based information.
I would contrast this with approaches where programs that are effective receive additional resources to grow in scale to reach more people perhaps becoming policy. Those that aren't effective should adapt, or, we believe, they should attract fewer limited resources over time. As a result, data-driven evaluation is a core functional area of these projects, providing increasing levels of confidence as to what works for specific populations and what does not on a more continuous basis.
We can also tap the best of the social sector when there is space created by these tools for local leaders across sectors to assess programs and choose what they can support as best for their beneficiaries. Because government is buying outcomes, not processes, it leaves the sector to innovate freely in that pursuit. For example, engagement levels by ex-offenders in the first SIB supported program in the U.K. which focused on recidivism rose from 37% to 71% between its first two years and second two years of operation. That's obviously remarkable process improvement, which those service providers credit to the outcomes focus and analytical capacity of partners that the Peterborough SIB brought to bear.
We can also see the best of the public sector where it focuses on public accountability to articulate social priorities and focus on addressing long-standing social challenges with a value-for-money lens. This can be addressed by moving from a status quo where data is sometimes gathered but often not linked across departments or associated with service providers, to an approach where we leverage this institutional opportunity to collect and track data on acute systems use, and work wherever possible to understand the value created for the expenditure in those services delivered.
Additionally, we have been told in many conversations with public servants that substantial funding decisions are made for service providers based on their processes. Providers will often be asked to come forward with logic models and theories of change, and are held accountable to their adherence to that initial idea. We contrast that with an approach where government can act as an outcomes buyer—paying for successful outcomes, not adherence to process—in areas where additional experimentation is needed.
These benefits are not exclusive to social finance—we know that—but these initiatives do bring about the partnerships and resourcing necessary to focus all parties on these shared, positive improvements, in our opinion.
Second, regarding a road map for this market, we highly recommend taking a long-term view in knowing that you are supporting a market's creation. I think it's appropriate to keep sight of what is possible as the market matures and all market players learn to collaborate more efficiently. Our work focuses on a more effective use of public dollars that can overcome some of the risks and challenges of channelling more resources to early interventions when our systems of acute care, such as prisons and emergency rooms, are often already strained, and there's uncertainty about whether upstream investments will yield the outcomes desired. This is also about a more socially impactful use of private dollars. For example, I know you've heard from Mr. Stephen Huddart of the J.W. McConnell Family Foundation, and others, that there is an interest in more socially impactful investments that align capital with organizational missions. Intergenerationally, this is also true. Accenture has estimated that over the next two decades, an estimated $30 trillion will be transferred intergenerationally in North America. This transition comes with emerging investor values that are willing to accept a higher risk profile or lower return for social and environmental impact. There's real value placed on those concerns.
Despite that capital supply side, in Canada there is only one SIB so far, the Sweet Dreams project in Saskatchewan, which I know you've heard about. It's a positive enough experience by their public sector that MLA June Draude has been named their legislative secretary for SIBs.
Global growth trajectory for this innovative policy is remarkable, with the first pilot SIB launched in the U.K. in 2010. There are now 44 SIBs actually live globally, with $245 million Canadian of private capital deployed. Meanwhile, in the United States there are at least 40 initiatives that are getting serious developmental support, leading to a next generation of these tools that we can actively learn from as we draw their road map here in Canada to address many of the concerns of critics.
We strongly recommend considering the more mature contracting approaches that have emerged in the U.K., in particular the fair chance fund and the youth engagement fund. Both of these public funds created a dedicated pool of outcomes payments with a defined measurement approach and defined payment cap for particular outcomes. Providers were invited to bid on that pool, defining how many individuals they intended to serve and what they'd require as payment for particular outcomes up to that cap, if successfully achieved.
This lets the market work where it can best do so, allowing organizations to articulate what is a fair payment for outcomes, given their risk of producing those outcomes, which helps drive better public sector value. Equally, by spreading out the internal burden of data teams and public servant time, it makes these approaches lower cost as a commissioner. We believe this approach can meaningfully address concerns about transparency.
Sector readiness is essential for these tools to be usefully deployed. This readiness is valuable beyond simply outcomes finance by driving the strategic clarity and performance management that will lead to better social spending overall. We strongly believe that the recently announced social finance accelerator initiative should build from positive examples, such as the U.K.'s investment and contract readiness fund that has been used in a variety of social finance transactions, from non-profit social enterprises to social impact bonds as well.
ln summary, following are a few recommendations we draw from our ongoing work in this field as to how the Government of Canada can best achieve the potential of social finance in Canada.
These collaborative partnerships are about bringing the best of all sectors forward, so governance should enable that. Public accountability is essential, but that accountability needs to have focus on ensuring the responsiveness of systems such as public data as well.
Contracting can learn from the positive experiences of our peer jurisdictions. Focusing on what the public sector has a willingness to pay for, with a strong focus on value for money, is extremely important.
An enabling ecosystem for social impact bonds is also an enabling ecosystem for more evidence-driven decision-making in the social sector. Contract and investment readiness is a temporary issue that can and should be addressed now.
Thank you very much, Mr. Chairman.
I'll be starting. Good afternoon.
On behalf of the board of the Canadian Association of Social Workers and our provincial and territorial partner organizations, I'd like to thank the HUMA committee for hearing the perspective of social workers in this dialogue on the potential of social finance in Canada.
Today, I will be sharing my time with Dr. James Mulvale, who is joining us from Winnipeg.
I will present a few fairly general principles, while Dr. Mulvale will speak a little more specifically about our recommendations.
To begin, the Canadian Association of Social Workers, or CASW, is deeply concerned about growing inequity in Canada and has focused it advocacy efforts in recent years to highlighting very realistic ways that all levels of government can work together to support a more equitable Canada.
CASW has often reaffirmed the importance of a pan-Canadian vision of social policy based upon a concept of coordinated federalism in which the federal government negotiates with the provinces and territories and helps to finance social programs under certain guiding principles. It's a vision that would ensure that all Canadians' basic rights were met and that there would be a common minimum standard of service across the country.
CASW appreciates that the intention behind social investments is to hold those investments accountable to benchmarks of achievement, in other words, a return on investment. To this end, CASW is advocating that the federal government ask of itself what it's expecting from others.
As you know, the Canada social transfer is a primary source of federal funding in Canada that supports the provincial and territorial social programs. The CST funds many programs that are very important to maintaining a good quality of life for all of us. At present, the CST is largely an unconditional transfer, meaning it lacks agreed-upon principles of accountability to ensure equity of social programs across Canada or, again, in other words, a common return on investment.
As this committee deliberates on the potential of social finance in Canada, CASW asks that it entertain principles of accountability that can be applied to all investments by government, whether it is the CST or the financial backstopping of other different forms of social investment.
The Government of Alberta has adopted a social policy framework complete with principles that guide decisions and program delivery. We suggest that Canada adopt a similar vision when it comes to the Canada social transfer as well as to social enterprise.
As you know, the Canada Health Act guides the delivery of healthcare in Canada. Similarly, a Social Services Act, with broad principles including need, comprehensiveness, accessibility, fairness, portability, universality, and public or non-profit administration—if adopted—would guide all investments in social services in Canada.
I now will pass my time to Dr. Mulvale.
Thanks, Sally, and thanks to the committee once again for hosting our presentation.
I think it's good to start by mentioning that the spectrum of social finance being reviewed by this committee is very broad. In thinking about this broad spectrum, CASW is fully in support of social enterprise as a model in which not-for-profit organizations and foundations can play a vital role in service innovation and partnering with governments and other funders to address social needs and problems in innovative ways. All the solutions to our social problems are not one-size-fits-all or bureaucratic.
As this committee has heard from other presenters, social enterprise offers opportunities for individuals, communities and organizations to leverage social and financial support to meet identified needs. We think a key principle in this process is accountability for the success of social enterprise, with the end being a social good.
With that being said, the Canadian Association of Social Workers does have deep reservations about the overall stated profit motivations behind social investments or finance, including social impact bonds. CASW understands that the intention of these types of social investment is to move forward with pay-for-performance agreements, which would see public dollars cover premiums to businesses that invest in social services, which provide, if you will, a return on investment. The CASW notes that the experiences and results in jurisdictions that have adopted for-profit models of human service delivery in areas such as health care, corrections and delivery of social assistance are not encouraging.
One problem that has arisen in for-profit health care, for instance, is what's sometimes referred to as cream skimming. Profit seekers will address the needs that promise the quickest and largest return on investment, thereby diverting financial and human resources, as well as policy-makers' attention away from the needs that don't have such readily available solutions.
The great moral and ethical challenges that we face as a country—and these include health for all, the elimination of poverty, the full inclusion of our indigenous peoples—are public policy questions in which governments and elected officials must take the lead. It is our view that business has an important but subsidiary role to play in addressing these challenges. The responsibility of the business sector includes paying their fair share of taxes to underwrite the cost of necessary public services provided in public and not-for-profit ways.
We have mountains of research now that indicate that highly unequal societies are not healthy ones. They have a lower quality of life. The social determinants of health literature indicates this as well. We know there are negative social outcomes for high levels of economic and social inequality. One of the best-known sources in this regard is the work of Wilkinson and Pickett, The Spirit Level: Why Equality is Better for Everyone.
Measuring the impact of long-term public investment can be done in our quest for a more equal society in which tax burdens and responsibility for service delivery is shared broadly. We worry that social impact bonds that have a three- or four-year investment cycle may not always get us where we want to go. Our association, the Canadian Association of Social Workers, contends that longer-term public investment in addressing the root causes of social distress might ultimately have more impact in addressing social problems and creating opportunities for individuals and a better quality of life for all.
In conclusion, I'd like to make three recommendations, and maybe we can get into some more discussion later. First, the Government of Canada should pool financial resources to fund projects that show promise as innovative and more effective ways of meeting social needs. Second, the Government of Canada should make a binding commitment that existing public services provided by community organizations and not-for-profit organizations will not be reduced in order to engage in social investment bonds or other social finance initiatives. Third, the Government of Canada, working cooperatively with the provinces and territories, should develop a social care act with broad principles that include need, comprehensiveness, accessibility, fairness, portability, universality, and public and not-for-profit administrations.
We feel these principles would be good guides to ensure transparency and accountability for all our investments, both public and private, in securing a better future for people in Canada.
I think I must be at the end of my time, so I'll wind up there.
Thank you to the witnesses for being here today.
The issues around social services are quite broad, so I want to focus some of my thoughts, because I don't know if social finance fits all of the services that are provided.
One case, for instance, is the fact that the Government of Canada transfers moneys for youth skills training. That was not working well. The outcomes were not good and so, of course, we came out with our Canada skills funding and partnered with business, partnered with the provinces, and partnered, of course, with the federal government so we could have those outcomes.
I think one of the challenges we have in Canada is that we're such a large country. The regions are all different and the needs are different. It makes it difficult to really have a program that fits every province or every region. In saying all of this, I really agree with what Dean Mulvale said about making sure that we do have the outcomes, that the goals are met, and are met in a timely fashion.
Then there was an interesting thought from Lars that was a value-for-money lens, and I just thought right away, whose lens are you looking through? That's the challenge: what lens do we look through to evaluate value for money? Are we having successes in the programs that we are moving forward on? I'd like to ask how you see that framework and how we could provide a good way of evaluating the programs. As I say, there are some programs you just cannot include. They're ongoing. But I think taxpayers definitely need to see value for money and see outcomes.
Maybe I could turn that over to Madam Guy to give us some thoughts about that.
Certainly. Thank you for the question.
I'll start with an anecdote that benchmarking and applying market logic or market rationale to social services can often put the client in a position they shouldn't be in. I was going to bring up, but you already brought it up, that we are very concerned about operating through a market- or a profit-focused lens as opposed to a client-focused lens.
One of my former supervisors said they've really had to cut back the fat at their job. She was working at mental health and addictions in New Brunswick, and was operating under new benchmarking systems that are really quite profit and fiscally driven. She was going from a system where she could holistically understand her clients, be around them in the community, and know when someone needed to come in twice in a week or know that she needed to see this person for 45 minutes instead of half an hour. When she was moved over to a system where being observed from the outside or from 36,000 feet, as Mr. Cuzner put it, it would look as though they were being quite successful, because she was seeing way more clients in a day in 30-minute intervals than she was before, but to her and her observation of the community it was not as successful.
In terms of creating those benchmarks you have to engage with the people who are being served, get that lived experience perspective as well as ask the front-line workers what those benchmarks should be, which is why we're so concerned about implementing even more of a market rationale into the provision of social services.
I won't go too long, but one of my colleagues put the social impact bonds in the example of payday loans. They might be exactly what you need up front; they might be that godsend, but then you get into that cycle of poverty. What saves you after you pay off that payday loan? You still don't have that job. You don't have that sustainable architecture around you to help prevent you from getting into the same position where you needed a payday loan in the first place.
We don't want the Government of Canada to get into a similar cycle where they're paying into these payday loans, taking out a loan, and then someone pulls out and they're left to pick up the pieces or to put into place again what had been put in or financed through a private corporation.
I hope that answers your question a little.
I would not like to be contrasted or compared to a payday lender. I don't think that's how we think about this at all.
Fundamentally, most of our clients are service delivery organizations. We designed this from their intentionality, with their perspectives at the table guiding the process from day one. Absolutely that is true.
From there when we think about whether or not the government is targeting savings, monetizable savings, or value for money, that decision, and it is a priority, there's a spectrum there, is in the court of government to decide.
Some SIBs have been designed with a very careful focus on exclusively variable costs. They had been driven by producing savings. There are also social impact bonds that have been driven and designed by social situations that haven't seen change in a long time. These issues have been stagnant, and we wished there was some kind of innovative capacity in that sector that these can drive.
As we think about that on-ramp and we think about the legacy of these tools, we think about that very consciously. We think there's a very strong role to say let's use these tools based on this standard, with these standards in place, but use it where we can see a bit of an on-ramp through that evidence-building process of policy change as well.
Things that work do grow in that respect.
I guess it's a bit of a coincidence that Professor Mulvale just mentioned the housing first program, with which I've had a tremendous amount of experience, both in my life prior to being elected as a member of Parliament and being very involved in the program At Home/Chez Soi, through the Mental Health Commission of Canada, in Toronto. I actually think that's an excellent model and an excellent example of how social enterprise can work.
There is a component of that, you could argue, where someone makes a bit of a profit, and obviously that's the owner of the apartment building. He's providing an apartment unit at a market rent. The rent is subsidized through a government program. The clients who participated in the At Home/Chez Soi program were actually selected through a research project done through St. Michael's Hospital in Toronto, and social workers were very much involved as partners in that very successful program.
When I think of a social enterprise model, that's what I think of. There might be one or two partners who might make a little bit of money out of it, but it is the outcomes that are important here. We housed 300 people with severe mental illness issues in permanent, solid housing, and in most cases we turned those people's lives around. That is a successful social enterprise model.
I want to ask Professor Mulvale, would you not agree that this is exactly the kind of model we're talking about here? We're not talking about social enterprise or social finance taking over public health care or public community support services that are being publicly funded and administered. We're talking about trying to do things a little bit better, and encourage collaboration and cooperation among a whole bunch of agencies.
I remember when we had the first meeting. There were groups that sat there in Toronto City Hall—I'll never forget the meeting—when I was running the apartment association. Organizations were there that had never spoken to each other ever, because they all worked in silos until this project was launched by the Mental Health Commission of Canada. It actually brought those people to the table to ask whether there was a better way to help people with mental illness who are homeless, turn their lives around, get the medication and support they need, and make sure they have a roof over their head.
Would you not agree, Professor, that that's an excellent example of the kind of thing we should be supporting as the Government of Canada?
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.
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?