This past May, Saskatoon became the first city in Canada to embark on an innovative project between government, investors and a nonprofit organization. As pioneers of the country’s social impact bond, all eyes are now on Saskatchewan’s largest city to see how it unfolds.
A social impact bond (SIB) is a social finance tool whereby a social program — typically reliant on government grants and donations — is funded by private investors, be they companies, individuals, banks etc. The SIB agreement sets a fixed time period by when specific outcomes are to be achieved by the organization running the social program. If the target is met in its allotted timeframe, the government repays the investors. If it doesn’t, investors receive nothing.
The social program at the heart of Canada’s first SIB foray opened its doors this June. Sweet Dreams is a home for at-risk single mothers with the goal of keeping children out of foster care, while providing employment opportunities for their moms and hope for the future.
A small but giant leap
“We had this idea that the province wasn’t in a position to fund,” explains Don Meikle, executive director of service provider EGADZ, a nonprofit that provides programs and services to children youth and their families. The government suggested a SIB. Before you could say, “sweet dreams are made of these”, the initiative was set in motion, with private investors Wally and Colleen Mah and Conexus Credit Union giving $500,000 each.
For many, it’s about time the financial tool finally made its mark in Canada. Though small, Saskatoon’s step was, in fact, a giant leap. “They took many people by surprise because they moved forward so quickly but I think we’ll see more SIBs over the next few years,” says Lars Boggild, Vice President at Finance for Good, a social impact bond intermediary.
Those looking for lessons learned before jumping on board can turn to the US and the UK where SIBs began (with a focus on recidivism). But, says Boggild, “Whereas the US and UK are seeing second generation SIBS, what you’re seeing in Canada is a first generation learning from the second so they’re more advanced in spirit - and more specific to Canada.”
The real innovation with SIBs is not the finance piece, Boggild adds. “That’s the simplest part,” he says. “The innovation is the outcomes-based financing because that’s ultimately where exciting things happen when we think about incentives and opportunities.”
To be sure, the SIB was consistent with EGADZ’ outcome-driven approach, says Meikle, adding, “If you provide good outcomes, clients always win.” That the terms set out by the bond were reasonable made it even more appealing. Those terms include: 22 children kept out of care in the next five years and ensuring once they leave, they don’t return for a minimum of six months (they can be in the program between six months and two years). If 17 children are kept out of foster care, investors will still receive a portion of their investment. Anything less, however, and they won’t.
Creating a win-win-win situation
Reaching those targets isn’t of concern to Conexus, for whom the agreement was a no-brainer. As a financial cooperative, concern for community is an important principle, says Jacques DeCorby, EVP of Marketing. “If we get back our investment in five years — and we’re confident we will — we’ll recycle that money back in the community,” he says. “There’s a stated return in the contract but it’s not what we’re doing this for. This is an amazing opportunity to try and stop the cycle of foster care.” Conexus will also help women in Sweet Dreams with financial literacy training, a further sign of their commitment to the process. “It’s not a traditional investment so you have to be passionate about the project.”
For the Saskatchewan government, the SIB allowed them to support an important social program, while producing cost savings for the government and saving taxpayer’s money. Win-win-win. As for the speed with which this process came together, it demonstrates how Saskatchewan’s pragmatism prevails over bureaucratic tendencies, says Ken Kolb, ED of Strategic Management in the Ministry of Social Services. Though too soon to comment on the efficacy of the SIB itself, the agreement provides for an evaluation process he’ll be watching closely. “We want to know, ‘does it really prevent children from coming into care and, if it does, how can we scale it up to make it bigger?’”
As for the government’s definition of success, Kolb is clear about the far-reaching but attainable results: “That the children aren’t in our care, are with their mothers, mothers are employed, have found stable housing, are participating in positive lifestyle and parenting children in a way that will break cycle of dependence and poverty.” Kolb acknowledges that, despite the significance of those outcomes, Saskatchewan’s step is a smaller one. “It’s a prototype.” But all the studies and discourse in the world will only get you so far. “How do you learn unless you do?” he asks rhetorically.
What's next for Canadian SIBs?
With that SIB gauntlet thrown down, who will be next? Boggild has been watching the Canadian landscape carefully. He anticipates seeing a few more in Saskatchewan soon and says Alberta may be the province to watch since it recently launched the $1-billion Social Innovation Endowment, of which SIB may represent a small portion. In Nova Scotia, a recent throne speech included a vow to be the first province to move forward. While this proclamation will not come to be, SIB interest lives on.
In Ontario there’s been much activity too. “We just completed a province-wide call for Social Impact Bond ideas,” shares Ryan Lock, Director, Social Enterprise at the Ministry of Economic Development, Employment and Infrastructure (MEDEI). Over 80 submissions were received addressing three priority areas: housing, youth-at-risk and improving employment opportunities for persons with disabilities and other barriers to employment. Soon they’ll select the ones with the highest potential. “This will ultimately lead to one or more actual Social Impact Bond pilots launching by the end of 2015,” Lock says.
But lest you think it’s a simple process, think again. “The SIB model is still quite new and complicated,” he says. Despite over 20 SIBs in operation across the world, most are less than two years old, necessitating MEDEI’s focus on capacity building as part of the SIB strategy. This past June, for example, MEDEI worked with the Mowat Centre, the MaRS Centre for Impact Investing and the Harvard SIB Lab to provide executive training on SIB implementation for senior staff from all levels of government and nonprofit leaders.
They also sponsored a discussion paper on SIBs, released August 2014, to identify issues of shared concern and to promote interest and Lock says he’s optimistic about SIBs in Ontario, citing a recent study by MaRS and Deloitte that found over 90% of investor respondents would participate, or would want to learn more.
A bright future ahead
That interest may be good news for Linda Eagen, President and CEO at Ottawa Regional Cancer Foundation, where they designed a new health and social care service for people with cancer called cancer coaching. The program — the first in Canada — launched three years ago and has already helped more than 3,000 families. “We discovered this new service that is literally changing lives,” she says proudly. In fact coaching in chronic disease management has been proven to represent numerous benefits and cost savings, including keeping people out of hospitals, reducing emergency visits etc.
Their problem is a familiar one: their sole source of revenue is philanthropic and is not enough to support their goals. They want to provide a coach for everyone who wants one – and to take it a step further. “We need capital for growth and expansion and to build our own body of knowledge to create tools, to take it beyond geographical boundaries and to other chronic diseases,” she explains.
So Eagen has been researching other methods of financing. “SIBs are brilliant,” she offers. “It’s a way to support the expansion of this innovation without asking for more money from the healthcare system.” The good news is they’re past the proof of concept stage. Though more steps are needed, Eagen is feeling positive. “I think it’s the right fit and I know there are people in community who want to do things to change the cancer journey,” she says. Besides, she adds, “We’re very bullish about changing circumstances for people with cancer; this will make it happen faster.”
Bullish just may be the right approach for SIB success. Only a few months after opening, seven mothers and 11 children call Sweet Dreams home, with one mother already moving out on her own. EGADZ is moving toward its goals and Meikle has every confidence it will succeed. “We’re not scared of providing outcomes for our clients. We’re not scared of saying, ‘we can do this,’’’ he says. “And we will do it’.”
Elisa Birnbaum is a freelance journalist, producer and communications consultant living in Toronto. She is president of Elle Communications and Publisher & Editor-in-Chief of SEE Change Magazine and can be reached at: email@example.com.
Photos (from top) via iStock.com. All photos used with permission.
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