Saskatchewan Chamber of Commerce P3 Summit Social Finance Overview September 9, 2014.
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Transcript of Saskatchewan Chamber of Commerce P3 Summit Social Finance Overview September 9, 2014.
© Deloitte LLP and affiliated entities.
What is social finance?
2
Approach: Impact investing is an investment approach across asset classes (e.g., public and private equity, debt, etc.)
An investment approach that intentionally seeks to create both
financial return and positive social impact that is actively measured
Source: From the Margins to the Mainstream: Assessment of the Impact Investment Sector and Opportunities to Engage Mainstream Investors; A World Economic Forum Report supported by Deloitte.
Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview
© Deloitte LLP and affiliated entities.
Although estimates vary, there is general consensus that the impact investment sector will grow significantly by 2020
3
$500
$400
$650
$1,000
Monitor Institute estimates the potential for impact investing at 1 percent of total managed assets, estimated at US$50 trillion
JP Morgan estimates the impact investing market through 2020 by sizing Base of the Pyramid market opportunities across five sectors: housing, rural water delivery, maternal health, primary education, and financial services
Calvert forms an estimate through a representative survey of investment managers, applying prospective adoption rates to a global investment management industry of US$26 trillion
Bil
lio
ns
(U
S$)
Sources: The Monitor Institute, Investing for Social and Environmental Impact, 2009; GIIN, JP Morgan, Impact Investments: An Emerging Asset Class, November 2010; Calvert Foundation, Gateways to Impact, June 2012
Monitor Institute (2009) JP Morgan/GIIN (2010) Calvert Foundation (2012)
Analysts project that the global market could grow as large as $1 trillion, up from a current estimate of approximately $50 billion in committed capital.
Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview
© Deloitte LLP and affiliated entities.
Estimates of growth are also high in the Canadian impact investing market, with organizations already making significant commitments
4
• 42 Canadian signatories across sectors, with $215B in assets under management, to the Principles of Responsible Investment (PRI).
• Ontario and BC have both recently released strategies of promoting social enterprises.
• Ontario released a Social Impact Bonds Call for Ideas and a $4M Social Enterprise Demonstration Fund.
• The Government of Canada completed and reported on a National Call for Concepts for social finance, followed by a literacy and essential skills pilot.
Potential Canadian Market Growth Recent Canadian Initiatives
2011 2021
2
30
Ma
rke
t s
ize
, bill
ion
s C
DN
31%CAGR
Source: MaRS Center for Impact Investing 2011
Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview
© Deloitte LLP and affiliated entities.
Impact Investing
Opportunity
Examples of impact investing applications:• Direct investment into social enterprises
• Community bonds• Crowdfunding• Microfinancing
Enabling Trends
Advancement of Related Concepts
• Public-Private Partnerships (PPP)• Corporate Social Responsibility (CSR)• Double / Triple Bottom Line• Social Return on Investment (SROI)• Social Innovation• Social Enterprise
Environmental Context and Enabling Trends
• Social Impact Bonds (SIBs)
5
The developing impact investing market is opening a range of new opportunities
Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview
Spotlight on Social Impact Bonds (SIBs)
6 Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview
© Deloitte LLP and affiliated entities.
How Social Impact Bonds (SIBs) are structured
7
4. Based on the degree to which the social outcome is achieved (as determined by an independent evaluator), government pays
investors as negotiated in contract
$$$
Independent Evaluator
2. Based on the contract, the intermediary raises upfront investment from socially-minded investors and foundations
Investors
$$$
Service Delivery
Organization(s)
3. The social service delivery organization(s) receive(s) the funds to address social issue
$$$
1. A contract is negotiated where the government agrees to pay a rate of return on invested capital for improved social outcomes
Government Department or Agency
Intermediary
Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview
© Deloitte LLP and affiliated entities.
• Develop new funding stream, including for preventative measures
• Participate in payment for outcomes (not activity)
• Clearly demonstrate results to citizens
• Enable steady revenue stream
• Achieve longer planning horizon
• Create and apply innovative approaches to complex problems
• Enhanced levels of performance management and measurement
• Establish socially-minded capital deployment
• Gain the potential for blended financial and social returns
• Demonstrate innovative philanthropy
There are a variety of benefits for the different participants in a SIB model
Social Impact bonds allow each participating organization to bring their best expertise to the table to deliver social services with
more innovation and flexibility
GovernmentsService Delivery Organization(s)
Investors
8 Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview
© Deloitte LLP and affiliated entities.
Social impact bonds continue to gain momentum and are being rolled out in over 20 countries as we speak
Columbia (1 SIB in Design)
United States(20 States with Pay For Success Deals
in Progress)
Australia(2 SIBs in Design; 1 in
Implementation)
India (1 SIB in Design)
Israel(3 SIBs in Design)
Mozambique(1 SIB in Design)
South Africa(1 SIB in Design)
Swaziland(1 SIB in Design)
Uganda(1 SIBs in Design)
United Kingdom(11 SIBs in Design; 4 in
Implementation)
South Korea(1+ SIB in Design)
France, Germany & Spain(Actively Considering SIBs)
Sources: http://payforsuccess.org/learn-out-loud/activity-map, http://www.instiglio.org/sibs-worldwide/ and input from Deloitte practitioners
Canada(Actively Considering SIBs)
Rwanda(1 SIB in Design)
9 Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview
© Deloitte LLP and affiliated entities.
Canada’s First Social Impact Bond (SIB) was announced in May 2014 in Saskatchewan
“Sweet Dreams” SIB for a supported living home for at-risk single mothers
House between 8 to11 adults and 8 to 15 children, for a period of 2 month to 2 years
$1 million investment between one private investor and one credit union
Basic pay-for-performance contract where government reimbursement occurs if social outcome is met to keep children out of foster care
Independent assessor measures success at 2nd, 4th and 5th years
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“… expected to result in savings to the Government of Saskatchewan of between $540,000 and $1.5 million over five years.” – Government of SK
“…[there is] value of looking at old problems in a new and innovative way.” - The Star Phoenix
“This program gives at-risk mothers and children a chance at a better life…” - Government of SK
Up to 5% return
$1M
EGADZ’s Saskatoon
Downtown Youth Centre
5 year term
Saskatchewan Ministry of
Social Services
Conexus Credit Union; Wally &
Colleen Mah
TBD
Independent evaluationReporting/
project management
SIB Overview Saskatchewan SIB Model
Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview
© Deloitte LLP and affiliated entities.
SIB Profiles: First major implementations in UK & US
HMP Peterborough, United Kingdom, September 2010
• Aim to reduce recidivism by 7.5% among short-term male offenders.
• “Through the gate” support to offenders for drug and alcohol addiction, mental health, educational and job skills training, and post-release accommodation.
• Resettlement planning with families of offenders.• Formative evaluation released May 2011.
Rikers Island Prison, New York City, August 2012
• Aim to reduce recidivism by 10% among adolescent offenders aged 16-18 years.
• Adolescent Behavioral Learning Experience (ABLE) Program interventions focused on developing personal responsibility and decision-making skills through in-class instruction, recreation, and community building.
Up to 13% return
£5M paid upfront
St. Giles Trust & OrminstonChildren &
Families Trust
Steady funding over 6=year term
UK Ministry of Justice & Big Lottery Fund
Social Finance UK
Coalition of investors
(charities and foundations)
Social impact bond
QinetiQ and the University of
Leicester
Independent evaluation
Up to 22% return
US$9.6M loan
Osborne Association &
Friends of Island Academy
Steady funding over 4=year term
New York City Department of
Correction
MDRC
Goldman Sachs
Pay for Success bondVera Institute of
Justice
Independent evaluation
US$7.2M loan guarantee from Bloomberg Philanthropies
11 Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview
© Deloitte LLP and affiliated entities.
Recent SIB Profile: Largest US Social Impact Bond
Massachusetts Juvenile Pay for Success Project, United States, February 2014
• A $27 million, 7 year social impact bond that targets at-risk young men in the Boston, Chelsea and Springfield areas who are in the probation system or exiting the juvenile justice system.
• The objective of the program is to reduce the number of days participating young men spend in prison, improve their job readiness and increase their employment – the specific target is a 40% reduction to days of incarceration
• Other investors include Kresge Foundation, Living Cities, Laura and John Arnold Foundation, New Profit, and Boston Foundation – New Profit is also providing additional management support.
Independent Evaluator:
Sibalytics LLC/ PCG
Senior Investor: Goldman Sachs
Service Provider: Roca, Inc.
Commonwealth of Massachusetts
Intermediary: Third Sector Capital Partners Inc. US$27 million
investment7 year term
(with potential 2 year
extension)
Social Impact Bond
Success payments made between years
2 - 7
12 Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview
Public Private Partnerships vs. Social Finance: Social Impact Bonds
13 Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview
© Deloitte LLP and affiliated entities.
Comparison of Market CharacteristicsPublic Private Partnerships vs. Social Finance: Social Impact Bonds
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Market CharacteristicsPublic Private Partnerships
Social Finance: Social Impact Bonds
Performance based contract Utilizes private finance / third party funding Captures private sector innovation and focus High order, transparent transaction processes Supports government transformation agenda Requires stakeholder management and education processes in order for success to be achieved Provides for an alternative method of service delivery Level of market maturity High Very Low
Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview