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.

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