A Crossroad between the Public and Private Sectors

Transcription

1 A Crossroad between the Public and Private Sectors X I I I C P C C O L L O Q U I U M N O V E M B E R Visit us at marsdd.com

2 Visit us at marsdd.com Adapted from the State of the Nation Report, 2014, MaRS Centre for Impact Investing and Purpose 2 Capital What is Impact Investing? Also known as social finance, impact investing is an investment in a social enterprise or financial vehicle that is intended to generate a positive social impact and a financial return Differentiated from traditional investment by intention and measurement: Intentionality Social impact measurement Financial impact measurement Is there investor intention to seek both a financial and social return? Is the investee s business model constructed to seek both financial and social value? Are investors and investees able to measure their intended social impact? Is the investment expected to generate and measure a financial return (below to above market rates) or at least a return of capital?

3 Outcomes are measured as proxies for impact Activity: Teach lifeskills and mentor atrisk youth At-risk youth lifeskills program service provider Output: 250 at-risk youth finish lifeskills program Outcome: # at-risk youth who graduate from high school Impact: % increase in income earned over a lifetime Public Safety Canada Visit us at marsdd.com 3 3

4 There are numerous stakeholders in the Impact Investing market Visit us at marsdd.com 4

5 Networks Pillars MaRS Centre for Impact Investing: an intermediary Purpose To unlock the power of private capital to tackle persistent social challenges across Canada CAPITAL ADVISORY RESEARCH & EDUCATION VENTURE SERVICES Support the creation and execution of pay-for-success projects and impact investment strategies. Grow the impact investing market through stakeholder education and government engagement on policy Leverage Exempt Market Dealer status to help impact entrepreneurs raise capital from impact investors 360 Impact. Health Systems Innovations Advanced Energy Centre Corporate Engagement Program Centre for Impact Investing Data Catalyst Solutions Lab Affordable housing Child welfare Employment Poverty Education Environment Health Youth Visit us at marsdd.com 5

6 Stakeholders an intermediary works with (illustrative) Immigration, Refugees and Citizenship Canada Employment and Social Development Canada Public Safety Canada Public Health Agency of Canada FEDERAL GOVERNMENT PROVINCIAL GOVERNMENT FOUNDATIONS Develop impact investment strategies and execute across Canada. Advise on provincial impact investment strategy and lead social enterprise efforts Develop impact investment strategies and build portfolios BANKS NON-PROFITS GOVERNMENT AGENCIES Advise on developing impact investment arm as new bank initiative / department Build capacity to engage impact investments and pitch to impact investors Structure new impact investment products (e.g. Development Impact Bond) Visit us at marsdd.com 6

7 Estimating the impact investment market The global impact investment market is ~$114 BN (USD) Canada s impact investment market is ~$9.22 BN (CAD) Adapted from Global Impact Investing Network s Annual Impact Investor Survey, 2017 Visit us at marsdd.com 7

8 Why Impact Investing? Increase capital Increase awareness Lower risk Charitable sector $223B 1 Capital markets $3,458B 2 While there is not enough money in foundation and government coffers to meet the defining tests of our time, there is enough money. It s just locked up in private investments. - Judith Rodin, President of the Rockefeller Foundation Engage new stakeholders in social and environmental issues: 1) Public 2) Social 3) Private Various impact investments transfer financial risk to investors who are familiar with risk / return analysis. This allows government and social organizations to focus solely on achieving outcomes Visit us at marsdd.com 1/2. Blumbergs Snapshot of the Canadian Charity Sector figure 8

9 Spectrum of impact investing tools Traditional grants Contingent grants Social impact bonds Public or private debt Public or private equity Ideal for: Programs that are harder to monetize Testing new interventions Smaller capital requirements Ideal for: Programs that are easier to monetize Scaled-up interventions Larger capital requirements Visit us at marsdd.com 9

10 Social Impact Bonds: A private and public partnership Example Public Safety Canada Outcome Funder MaRS Centre for Impact Investing Intermediary Investors Foundations, HNWIs, Banks Service Provider(s) Non-profit wrap-around program Evaluator Social research entity At-risk youth Visit us at marsdd.com 10

11 There are 89 Social Impact Bonds around the world 89 IMPACT BONDS $322M CAPITAL RAISED 113,643 LIVES TOUCHED Visit us at marsdd.com Source: 11

12 Criteria for selecting a social issue / program for a Social Impact Bond Criteria for a Successful SIB 1. Pressing problem, gap in current services Considerations A Social Impact Bond (SIB) is intended to bring new funding to meet a gap in service provision or to foster innovation within current service provision where there is margin to improve beneficiaries outcomes 2. Strong evidence-base A SIB works best for extending promising approaches that are backed by some evidence, not pure innovation which has not been tested before 3. Risk transfer, external expertise, and more flexible resources 4. Supports & catalyzes wider service changes 5. Robust outcome metrics with clear attribution A SIB transfers risks of implementation failure away from the public sector and can enable more flexible models of service provision that adapt to individual specific needs A SIB aims to continually improve delivery through rigorous monitoring, evolving service provision and stimulating new forms of collaboration between complementary service providers A SIB relies on a robust outcome metric which can be easily measured and does not entrench any perverse incentives. There are a number of ways through which impact can be measured (for example, using a comparable group) 6. Identifiable target population A target population must be identifiable and accessible. It should be focused in order to provide maximum impact and value for many 7. Sufficient saving / benefit for investors and commissioners 8. Social impact high and attractive to social investors A SIB involves significant risk for investors and new ways of working for commissioners each needs sufficient rewards and appropriate risk sharing is deemed fundamental for successful SIB implementation A SIB will aim to attract investors who are interested in the social impact as well as a financial return Visit us at marsdd.com 12

13 Creating a Social Impact Bond Social issue In-depth understanding of the social issue that the project wants to address Target population Identify individuals that would most benefit from additional services Target intervention Identify what services could improve outcomes for a target population Outcome metrics Define how success is measured and paid for Financial modelling Understand the main costs and potential savings as a result of the intervention Structuring Structure the investment model and engage with investors Procurement and Contracting Engage in a procurement process; develop SIB contract, finalise commissioner arrangements and investor commitments Visit us at marsdd.com 13

14 Thank you Q U E S T I O N S? E M A I L J A Y M I N KIM J K I M A R S D D. C O M Visit us at marsdd.com 11 14