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The Honourable Diane Finley, Minister of Human Resources and Skills Development, today announced that the Government is taking action to find new initiatives to shape social policy in Canada. The announcement was made at MaRS’ fifth annual Social Finance Forum in Toronto.
“Our Government recognizes that we must take steps to enable communities to tackle local challenges,” said Minister Finley. “By harnessing private sector capital and business practices, we can better respond to social challenges such as homelessness, unemployment and poverty.”
Social finance is about mobilizing private capital to achieve social goals, creating opportunities for investors to finance projects that benefit Canadians and realize financial gains. As announced in Economic Action Plan 2012, the Government has been exploring social finance, with the goal of eventually testing new methods of addressing existing social and economic challenges in Canada.
“MaRS is committed to advancing new models of finance that will provide measurable social and environmental outcomes as well as financial returns," said Ilse Treurnicht, CEO, MaRS Discovery District. "Policy makers have an important role to play in enabling the growth of this emerging field in Canada, and we are encouraged to see this reflected as a priority by the Government of Canada."
The Government will partner with organizations, businesses, and not-for-profit organizations to build further momentum in Canada around social innovation and social finance tools. Interested organizations are invited to submit their innovative ideas to help shape future social policy in Canada. Ideas will be accepted until December 31, 2012. Those interested in participating should visit: hrsdc.gc.ca/socialfinance.
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On November 8, 2012, Minister Finley announced that the Government is taking action to address social challenges through social finance initiatives, and launched a Call for Concepts for social finance. The Call for Concepts is designed to invite interested parties to submit innovative ideas; it is not an application process for federal funding.
Social finance is about mobilizing private capital to achieve social goals. Social finance creates opportunities both for investors to finance projects that benefit society and for community organizations to access new sources of funds to take great ideas to a new level. For example, individuals or organizations could invest in affordable housing projects or social enterprise such as a café that employs at-risk youth.
Social finance includes a new approach to investing, often referred to as “impact investing,” which the Canadian Task Force on Social Finance describes as, “actively placing capital in businesses and funds that generate social and/or environmental good and (at least) a nominal principal to the investor.” This means that investors can use their money to fund projects that will support social goals and expect some financial gains out of it.
The Government of Canada has already started to test new ways of developing and funding innovative solutions to complex social challenges through pilot projects. For example:
- Community Innovation pilots will support projects that address economic and social issues in rural and northern communities. Through leveraged support, the Arctic Children and Youth Foundation delivers a project that helps Arctic children and youth obtain standards of education, opportunities and health equal to those of other Canadians.
- A Community Partnerships pilot, Calgary’s Community Kitchen Program, mobilizes public and private funding to train volunteers to complete a simple needs assessment for clients and links them to appropriate community supports and address social exclusion.
- Third Party Leadership pilots test whether grant-making organizations can leverage federal funding at a ratio of 1:3. For example, the Hamilton Foundation will leverage funds for a project to enhance community social and health services support to young, marginalized, low income first-time mothers.
Social partnerships are about building stronger, more effective government-community partnerships that present more sustainable, performance-based solutions to addressing social issues.
Economic Action Plan 2011 stated “the Government will take steps to complement community efforts by encouraging the development of government/community partnerships, enabling communities to tackle local challenges and testing new approaches to improve performance”. Economic Action Plan 2012 reiterated the Government’s intention to support momentum around social finance initiatives and further explore social finance tools for use in Canada.
The Minister of HRSDC established a Voluntary Advisory Council on Social Partnerships in 2011, composed of key individuals from the private and not-for-profit sectors, to provide advice on matters related to social partnerships and social finance in Canada.
Social Impact Bond (SIB)
A Social Impact Bond is one example of a social finance tool that is currently being explored or tested to address social challenges in many communities around the world and this tool is now being explored in Canada.
Essentially, a SIB is a contract between a government and an external organization(s), in which the government identifies desired social results and commits to pay the external organizations an agreed-upon amount of money if these results are achieved. External organizations involved in this arrangement may include charitable and/or for‑profit investors and service delivery organizations. Typically, investors provide the money to finance an organization to deliver a service. If the agreed-to results are achieved, investors may receive up to 100 percent of the original investment as well as a financial return. If the results are not achieved, the government does not pay.