:
Good afternoon, ladies and gentlemen.
Welcome to the 45th meeting of the Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities. We're here to continue with our current study entitled “Exploring the Potential of Social Finance in Canada”.
Here to provide testimony on our first witness panel, and we are pleased to have him with us, is Mr. François Vermette, director of development at the Social Economy Working Group. Also joining us, by way of video conference from Vancouver, is Mr. David LePage, chair of the Social Enterprise Council of Canada. Welcome, gentlemen, to our committee. Thank you for agreeing to be witnesses.
We have a 50-minute time slot for your testimony. Each of you will have up to 10 minutes to present.
Why don't we start with Mr. Vermette?
:
Good afternoon. I am pleased to be here today.
We came here to talk to you about what we do at Chantier de l'économie sociale en finance sociale.
Chantier de l'économie sociale is a network of social enterprises. To us, social enterprises are collective enterprises with a social mandate that use economic activities to achieve their end goals. There are several thousand in Quebec and even more across Canada.
After our creation in 1996, we realized rather quickly how difficult it was to find funding for this type of enterprise. Shortly thereafter, in 1997, we created a fund called the Réseau de l'investissement social du Québec—RISQ—which has $12 million in place. This fund provides risk loans to social enterprises, a bit like its acronym suggests, in other words, investments without any form of guarantee. Initially, this fund was built up through donations from private businesses and by a loan from the Government of Quebec. That loan has since been renewed once, but it has allowed us to build up capital and finance enterprises with a social mandate.
RISQ's loans are relatively small. There are seed money loans that start at $5,000 and can go as high as $200,000. These are loans that financial institutions, banks and caisses populaires have a hard time lending because even though they are small loans, they require an analysis that is almost as involved as for a larger loan. The profitability for such loans is harder to justify for regular banks.
We soon realized that the $200,000 limit was not high enough. We then created another investment tool called Fiducie du Chantier de l'économie sociale. It is a trust fund that can provide loans up to $3.5 million. The trust fund was capitalized in part by the federal government through a program that no longer exists, but allowed us to capitalize part of the fund. The rest came from contributions from labour-sponsored funds, or funds from Quebec unions, the largest being the FTQ labour-sponsored funds and the Fonds d'action de la CSN. Both groups combined put $20 million in the fund.
The trust fund finances the same type of enterprises, those with a social mandate, but differs in that it provides patient capital. In other words, the enterprises do not have to pay back the capital for the first 15 years. What is more, they pay only part of the interest and at year 15, they have to pay back the loan in full, usually by finding financing on the regular market. Since the trust fund has not existed for 15 years yet, this hasn't happened yet. The enterprises are paying back their loans over time.
The interesting thing about this is that those who contributed to the fund through an investment, through the labour-sponsored funds and the Government of Quebec, agreed not to get their interest or capital for 15 years. For the labour-sponsored funds especially, it is a type of investment in their investment portfolio. We understand that they couldn't invest all their money that way, but this still allows us to support enterprises. The fact that it is patient capital, makes more liquid assets available to the enterprises in the critical first years.
We created all these tools. We continue to be in tune with the needs of the enterprises. We are working on developing other fund to try to respond to other needs, when they are expressed. Obviously, we were able to do this thanks to the government's support, which allowed us to provide the initial cash injection.
This allowed us to raise rather significant private capital in a niche that is usually ignored by the big banks.
Soon the trust fund will have invested all its money. It will either have to recapitalize or wait for year 15 to get money again. Some $50 million was invested in enterprises and things are going very well. It is truly a success. This could apply elsewhere.
So ends my presentation. I am available to answer your questions.
:
Thank you very much, honourable Chair and members of the committee.
Thank you for the opportunity to address you on this timely and important issue of social finance and social enterprise.
In this room we all agree that we face a common challenge that was stated in the federal government's 2014 budget, which is that alone government cannot solve the social and economic issues we face. But we believe that social finance and social enterprise are two tools that can help us address the growing complex social issues, the challenges of changing demographics, and the shrinking government budgets.
First of all, I think congratulations to all of you are in order. In some meaningful ways in a matter of a few years the governments across Canada and across parties have moved from an observer of an emerging international social finance and social enterprise sector to a recognized partner and facilitator. In 2013, the Social Enterprise Council of Canada was pleased to partner with the government to host the Social Enterprise World Forum in Calgary and very pleased that at that conference then Minister of Employment and Social Development Canada, the Honourable Jason Kenny, stated government support for social finance and social enterprise. With your leadership and the hard work of dedicated public servants, we're seeing results and impact.
I'd like to give you a couple of minutes of background and then offer five suggestions for moving forward.
Social enterprises are community-based businesses that prioritize the social outcome rather than just a financial return to shareholders. Any profits generated are reinvested into further social impact. They actually seek a blended value return on investment, a social and a financial value. They're operated by non-profits, by charities, hybrid companies, and some non-profit co-ops. They cross every business sector, from manufacturing, retail stores, cleaning services, health care, arts, recycling, and more. They target an entire spectrum of social outcomes, including social inclusion, employment training, poverty reduction, youth at risk, homelessness, and employment for people with barriers and disabilities.
Here are a couple of examples. Starworks Packaging is operated by the Developmental Disabilities Association in Vancouver. Their customers include Finning International, Caterpillar, and BC Hydro. While delivering quality light manufacturing and assembly services on a commercial basis, they employ up to 45 persons with development disabilities.
BUILD, is a social enterprise construction company in Winnipeg and its target is to train and employ youth at risk. The majority of their participants are aboriginal youth. A major customer is Manitoba Housing. BUILD is recognized by the local chief of police as a significant intervention and model for addressing the real needs of youth at risk. While the courts and the police can offer another jail term for a youth with an existing record, BUILD can offer that youth an opportunity for training and future employment in the trades.
The Toronto Enterprise Fund supports up to 15 social enterprises addressing the training and employment needs of youth, adults, and new Canadians who are at risk of homelessness.
But as with any innovation, it's important that we measure and demonstrate the impact. With funding from ESDC, Dr. Peter Hall from Simon Fraser University and Dr. Peter Elson of the University of Victoria have been able to do surveys of social enterprises across Canada. In their latest survey of 757 social enterprises in six provinces and three territories they showed that those 750 social enterprises employed at least 20,000 people, with 75% or 15,000 of those employees targeted as part of the mission of the non-profit organization. The responding social enterprises raised $480 million or 75% of their total revenues from the sales of goods and services.
Now I'd like to offer you five potential solutions for the committee's considerations.
Some of these ideas will cost government nothing. Some will require extending or expanding current program access, some of these will require new or shifting priorities, and a couple involve some potential new investments.
First of all, many non-profits and potential impact investors are used to working in their separate, strictly social service or corporate arenas, but in a blended value business environment—social enterprise and social finance—we need to build the business acumen of the non-profit sector and we need to improve the social impact knowledge of the traditional investors. In other words, we need to create programs that will give social workers business skills and give potential investors social value perspectives.
We've discovered that many of the existing federal programs that support the activity of SMEs are not closed to non-profit-operated businesses by legislation or regulation. They just are not prepared or directed to engage with the social sector. It is very important to continue and expand the existing government initiatives to recognize social enterprise and non-profit ownerships as a business model. A minor budget item in supporting and continuing to support Industry Canada's Canada business network and other government programs will have huge returns.
Second, social enterprises are supply side and social value oriented. They need access to markets, the demand side, because with more customers, they grow their business and they increase their social impact. We recommend that the social procurement policies as outlined in a research paper exploring social procurement, prepared last year for ESDC, be adopted and implemented. Government can create significant social impact at no added cost, no loss of quality, and create a true value and dividend for Canadian taxpayers through social purchasing programs.
Third, as more social enterprises develop, grow, and expand in scale, the appropriate financing at the right stage is necessary. New models of grants, debt, and equity need to be developed.
Fourth, to support the marketplace, engagement of social enterprises and social finance, relevant government policies and programs across ministerial silos will need to be aligned. CRA and the charities division need to be seen as supportive and encouraging, not restricting the appropriate use of social enterprise within non-profits and charities.
Last, government is in a unique role to facilitate and encourage, to initiate, and to partner on cross-sector engagement. The participation and collaboration of government, the private sector, and the community sector are critically needed if we are going to move on any of these efforts.
Thank you very much for your time. I look forward to your questions and our continued work with government on these important issues.
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More and more community organizations are engaging in social economy activities, which is not to say that they are changing their orientation. They provide services of all kinds for a fee. For example, a community centre might decide to make money from the space it has by renting it out for other purposes. That income then allows it to fulfill its mandate better. This happens quite a bit. The enterprises Mr. LePage was describing are also aware of this practice. I could have made the same presentation as Mr. LePage. I think we are completely on the same wavelength.
Many enterprises in Canada, for example, what we call adapted enterprises in Quebec, provide work to people with disabilities. Social integration enterprises hire people who are nowhere near entering the labour market and provide them with training in a work setting that, although not very demanding, in most cases helps these people integrate into the labour market. This approach is working.
As Mr. LePage said, if we are talking about opening government procurement markets, then of course we are talking about a lot of money. The governments—not just the federal, but also city and provincial—spend a lot of money to buy goods and services, including a number that are already being provided by social enterprises.
The tendering process is designed in such a way that these enterprises cannot take part. On the other hand, certain efforts could be made to make this work at an equal or lesser cost. This would also allow these organizations to meet their social objectives.
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I really like the example Mr. LePage used, but we could look at in different ways.
Other countries, in Europe and the U.S. for example, are increasingly using what are called “social clauses”. This is a contract like the one Mr. LePage was talking about, in other words, providing cleaning and maintenance services for all the federal buildings, for example. We know there are costs, and clear cleaning and maintenance expectations, but we could also add that we want to integrate people who are far from the labour market or people with disabilities. Private enterprises can do this too, which would benefit society, but in many cases in Europe, they hire sub-contractors from social enterprises whose mandate falls in line with this. Either way, society benefits. This market remains open to everyone.
That was an example, but we might also say that for a Canada-wide contract, we are pretty sure that only multi-nationals will be capable of meeting the needs and that a limited number of enterprises will be able to bid. Often, if a contract is broken down and limited to a city, or even a building, then the price would not be as good and would allow local enterprises or social economy enterprises to bid, which they cannot do for contracts that are too big. That has to be kept in mind when the request for proposals is being written. The way requests for proposals are defined has an impact.
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I think there are three or four very critical items that Mr. Vermette has mentioned, including the unbundling of contracts and the social clauses.
One of the things that's fascinating in our international work is that we realize that adding a social clause does not inhibit in any way any trade agreements the federal government is involved in, whether that's NAFTA or other emerging trade agreements, as long as the social clauses are clear, straight, and open to everybody to participate in.
So there's the unbundling of social clauses and also, again, the engagement. As Mr. Butt raises, when people understand the value.... There is $685 billion being spent by governments in purchasing goods and services. We need to leverage that to get a better return for Canadian citizens. That can be done when we start to look at the social values. What I can send to your committee clerk is a copy of the report we produced last year for Employment and Social Development, which explored social procurement and delved directly into this.
We're learning from other countries, but we also learn from things here in Vancouver, with the Olympics, and now with the Pan Am Games. How do we leverage this existing purchasing to create a social value?
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The projects are extremely varied.
They can range from a cooperative brewery to a town convenience store. In the region you come from, Saguenay—Lac-Saint-Jean, there is Groupe Coderr, for example, which does waste management. It is a social enterprise. There are such enterprises in the food service industry that offer takeout buffets and meals for seniors.
There are many in the housing field, including seniors' residences. However, because we are not involved in housing, we don't support those enterprises. They are extremely diverse. Some are practically plant schools. I am thinking of Formétal in Montreal. Young dropouts learn about metalwork there and make all sorts of things out of metal: garbage cans, desks and so on. That is the kind of enterprise we support. Some other examples would be cultural enterprises, performance venues and a circus school. These projects came out of community needs and are limited only by people's imaginations.
We don't support a project if it is supported by only one, two or three people. We need to feel that the project is supported by the community, by a real group. That is our guarantee of success and it reduces our risks as investors.
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Thank you very much for that answer.
That brings the first panel to a close.
I want to thank both of you gentlemen for being with us, for taking the time and sharing your expertise.
I know that two things were mentioned by you.
Mr. Vermette, I believe you offered to deliver to this committee a policy manual. I think the members of this committee studying this would like to receive that, if we could. If it's in French, we'll be able to get it translated into English for the English members. We'd appreciate that.
Mr. LePage, I believe you referred to a study that you offered to send to the committee. We'd very much enjoy receiving that as well.
Again, thank you for taking the time.
Committee members, we will break momentarily while we bring in the second panel.
:
Welcome back, ladies and gentlemen.
In the second hour we're continuing with our study to explore the potential of social finance in Canada.
Joining us for this hour we have Mr. Brian Emmett, the chief economist for the charitable and nonprofit sector, Imagine Canada.
We also have Mr. Preston Aitken, director of programs at Enactus Canada.
Finally, joining us via video conference from Surrey, British Columbia, and representing the Planned Lifetime Advocacy Network, we have Mr. Al Etmanski, co-founder and founding partner of Social Innovation Generation. Appearing with Mr. Etmanski we also have Ms. Vickie Cammack, the co-founder and founding chief executive officer of Tyze Personal Networks. We thank you for being here with us this afternoon.
Welcome, everyone.
We have up to 10 minutes of presentation time for each of you, so there'll be three presentations. I'm not sure if our witnesses by video conference will be sharing their time, but we'll find out when it's their turn.
Why don't we start with Mr. Emmett?
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Thank you very much, Mr. Chairman.
I wanted to start with some comments on the scope of the charitable sector in general. Charities and non-profits are an important and expanding economic sector in Canada. Data collected by Imagine Canada and by the Johns Hopkins University Center for Civil Society Studies in the U.S. show that the charitable and non-profit sector in Canada, and in fact in most developing countries, has been growing somewhat more quickly than the gross domestic product has over the last decade or so. It's important to note, I think, that this rapid growth has been driven by demand and by value and generated by fundamental underlying economic and demographic trends. Basically, that is because as Canada's population ages and as it becomes more diverse, and as our economy becomes richer and more service-oriented, people want more of the things that charities do, such as health care and social services, recreation and culture, poverty alleviation, and the care of the natural environment, among many other high-value activities. We expect that growth to continue.
Today charities and non-profits account for roughly 8% of Canada's approximately $2-trillion economy. This means that they generate roughly $160 billion in income each year and employ over two million people. This makes an impressive contribution to Canada's well-being
Of course, it also means that they need $160 billion to finance their operations and if, as we expect, they continue to grow more quickly than the economy as a whole does to meet that growing need, we will need more resources. For example, if demand grows at 4% a year—a little bit more quickly than forecasts for GDP—charities will need an additional $4.8 billion next year, more than $5 billion the year after, and so on compounding. These are big numbers and it's a daunting challenge. The question is, of course, where will the money come from?
Imagine Canada's research shows that today roughly 50% of the revenue of charities—that's broadly defined charities and non-profits including hospitals and universities—comes from grants and payments from government, mainly provincial governments. Thirty-five per cent or so comes from earned income activities of charities, the sale of goods and services, memberships, newsletters, and so on. Another 10% comes from donations from individual taxpayers as claimed on their tax returns. A relatively quite small amount, less than one-half of 1%, comes from donations from the business community.
Looking forward, we can see a little bit of difficulty in many of these streams. Government, our main source of revenue, will be under pressure due to the common economic and demographic challenges we all face. Governments will likely struggle with fiscal pressures for the foreseeable future. Under these conditions, it's importance to stress the necessity of at least maintaining existing levels of financing for charities from government if Canada is to remain an economically successful and socially just country.
Second, charities will look to get more from donors and we will need to expand the population of donors, but donations from individuals are under some pressure. Donations as a percent of GNP have declined slightly but worryingly. Charities are also concerned that new younger donors are not replacing older donors as quickly as they might. This explains why charities have been focused on changes in tax incentives such as the stretch tax credit for charitable giving and why they vigorously continue to support it for the next budget.
Third, constraints on government spending and donations naturally turn charities' attention to the expansion of earned income activities and the exploration by charities and non-profits of what the committee is in fact looking at—new ways to finance their operations—and it assumes a growing importance over time. Growing these financial resources is going to be necessary to meet demand, even if donations and government support remain at existing levels. It's important from our point of view to note that social enterprise and social impact investment are distinct but related concepts.
Social enterprises are organizations or businesses within organizations that sell goods and services as a way of achieving a social good. Many charities and non-profits have been involved in social enterprise for decades and they may or may not take advantage of social financing tools. Social financing encompasses a wide range of instruments. We have a “social good” sector and social impact bonds, demonstration funds that some of the provinces have created, crowd funding and, in particular, debt crowd funding, impact investing, and tax incentives for below market return investments.
You'll note that social impact bonds—while very top of mind, a very topical topic—are only one piece of a larger puzzle. Imagine Canada has identified four things that we need to be in place for charities and non-profits to engage in these new forms of finance. One obviously is access to capital. The second is the human capital and skills to make good use of them. Third is market demand, and fourth is an enabling regulatory environment.
New investment tools may help to address capital needs, but this will only be true if the regulatory environment allows charities and non-profits to take advantage of them and to operate a broader range of revenue-generating activities. It will also be the case only if organizations have access to people with skills and ability and the capacity to navigate new financial instruments, understand their potential, and interact in new ways with governments and investors.
Getting all these fundamentals right will require investment and capacity building at a time when organizations are under severe pressure to reduce overheads to unrealistic levels.
The sheer size and scope of the financial challenges we all face means there will be no one solution, no magic bullet, to ensure financial sustainability of a large and growing and vital sector. Rather we'll all have to work hard to maintain existing levels of government support, maintain donations from individuals, develop partnerships with business, as well as explore and develop new tools such as social impact investment.
Our goal in considering social finance initiatives should be increasing the total resources available to charities and non-profits, not finding ways to move them around, say downloading from government to other sectors. In this picture government remains vital. It's the largest source of finance for charities, and maintaining its commitment to the charitable and non-profit sector is vital. It's also vital in assisting with capacity development and providing an enabling regulatory environment.
The issue goes well beyond the remit of one standing committee or one government department. Given the broad range of regulatory and possible legislative issues that need to be considered to ensure that social finance meets the needs and goals of government, the private sector, charities and non-profits, one could foresee that your colleagues in the finance and industry committees will take note of your work and consider how they can build upon it.
Thank you very much, Mr. Chair.
:
Thank you for having me here today.
My name is Preston Aitken and I'm the national program director for Enactus Canada.
Today, I'd like to provide a brief overview of Enactus and how we're involved in social finance and social entrepreneurship. From there I'd like to offer a few ideas that we have to support the growth of social finance in Canada.
For those of you who don't know, Enactus Canada is a national charity and Canada's largest leadership and entrepreneurship program in the post-secondary space, with almost 3,000 students involved on 66 university and college campuses coast to coast. Our mission is to shape generations of entrepreneurial leaders who are passionate about advancing the economic, social, and environmental health of Canada.
We're also proud to note that we're supported by many companies here in Canada, including Tim Hortons, Scotiabank, Capital One, and BDC, among others.
We are also part of a global network with Enactus operating in 36 different countries with over 70,000 students enrolled.
We establish an Enactus team on every university and college campus we operate on. It is run by students and guided by academic and business advisers. These teams are challenged to identify social and environmental needs in their communities and to create a business-based solution that empowers their target audience. After running its project, the team is tasked with measuring and reporting on the impact that each project has made on the lives of their project beneficiaries.
Last year in Canada alone our Enactus teams ran 259 projects that directly and indirectly impacted over 640,000 people. These projects saw students contribute over 225,000 volunteer hours to make these initiatives happen.
Here are some sample measurements from last year's initiatives. They employed more than 1,600 people through skill development and business creation, reduced over 600,000 kilograms of waste, provided almost 10,000 people with financial education training, assisted 99 individuals to earn an income above the low-income cut-off, and increased the wealth of participants by more than $1.6 million.
To give you some context for what these numbers mean, let me give you a few project examples. Our University of Windsor team created their own impact investment fund for youth-based social ventures in their community. This past year they loaned $10,000 in micro loans of $200 for youth who were starting their own business that had a social impact. The team required a financial return of 15% or a repayment of $230. The team established the fund through a partnership with a local credit union. The businesses started included an environmentally friendly air freshener business, a company that produces furniture out of recycled wood, among others. These businesses generated $60,000 in combined revenue and the Enactus Windsor team reported they earned a 100% repayment rate on the loans. This has allowed the team to reinvest those funds to grow the program and allow more youth to participate and learn about social entrepreneurship and social finance.
Another example is our local team here at the University of Ottawa. The team realized a tremendous need when they noticed that 37% of the world's visible waste is cigarette butts. They decided to launch a social enterprise that collects cigarette butts and turns them into plastics to be resold into the raw materials market. In addition, it also provides employment to individuals with mental illness. In its first year, they've already hired three individuals and are on track to earn $50,000 in revenue by May. They were able to finance the start-up costs through various business planning competitions and grants.
These are just two of the 259 projects that were run last year, and they provide a small snapshot of how our Enactus teams are using social entrepreneurship to improve the lives of people in need here in Canada. The ability to access social finance plays a key role in the success of these initiatives and their ability to scale.
To get a better understanding of what our teams achieve, we invite you to attend one of our regional or national competitions. These events feel like the Olympics of business; teams come together and showcase the impact of their results. Every year we send the best team from Canada to represent Canada at an Enactus World Cup and that moves around year after year. Last year it was in Beijing, this year it will be in Johannesburg, South Africa, and I'm pleased to announce that we just heard that we have secured the Enactus World Cup. In 2016, it will be coming to Toronto.
In essence, Enactus Canada serves as an experiential learning platform for students to realize their potential. We run with an organizational staff of only 10 and work to build a community of experts and mentors around the students so they can be successful in improving the economic, social, and environmental health of Canada through their community outreach projects.
This framework not only allows for incredible community impact; more importantly, it enables the youth in our program to become the responsible business and community leaders of tomorrow by building the skills, talent, perspective, and knowledge they need to tackle the economic, social, and environmental challenges of the future.
I'll now move on to some thoughts on social finance here in Canada from our Enactus perspective. As we are mainly a capacity-building organization, these two recommendations we're offering relate to government building capacity.
The first issue I'd like to talk about is measurement. A significant challenge in getting private capital into the social sector is a lack of common language in measuring social and environmental outcomes here in Canada. As an organization, we have implemented our own standardized metrics using research on such existing frameworks as IRIS and the sustainable livelihoods model. That has been invaluable, as we now have a common framework and language for our Enactus teams to show our impact. We can aggregate and better understand our data nationally. However, these standards do not necessarily align with other organizations, as there are no common standards. This makes it difficult for funders and organizations looking to support different ventures and charities, as it's harder to compare the impact. Therefore, our recommendation is to help support the use of common standards for measuring and reporting social and environmental impact here in Canada.
Second, the field of social entrepreneurship and social finance is emerging and evolving rapidly. This often means there is little awareness and understanding among mainstream investors and organizations that could benefit from social finance. We notice that many post-secondary institutions are not keeping up with educating and training students in these areas. There are a few new programs, but by far and wide it's not common. As social finance and entrepreneurship continues to grow and become a much more significant avenue for Canada to address social challenges, it is important for tomorrow's leaders to be ready for this new challenge. Therefore, our recommendation is to help support programs and initiatives that educate and train the future generation of leaders on social entrepreneurship and social finance. We believe this will build knowledge and expertise for the sector and help increase the investment pipeline down the road.
I would like to thank the standing committee for the opportunity to speak here today. I hope some of the suggestions were helpful.
Thank you very much.
:
Vickie and I have just come back from sharing our work in Europe, particularly in the city of Barcelona, which is quite fascinating. She'll tell you about that in a minute.
We will share the presentation. We are co-founders of the Planned Lifetime Advocacy Network, as well as the other things that were mentioned at the introduction. We're not speaking to you from Surrey. We're actually speaking to you from Vancouver.
I'll very briefly describe PLAN.
PLAN—the Planned Lifetime Advocacy Network—is now over 25 years old. It was set up to answer a question that nobody in history had ever had to answer before: what happens to people with disabilities when their parents die? We started this organization in Vancouver thinking that it would be a small pilot project. It has now spread to over 40 locations around the world. This is the first time in history that people with disabilities are outliving their parents.
PLAN started with a very small grant from the federal government. Once that grant was over, we operated without any government money and have been independent of government financing for over 25 years, so we are a social enterprise.
I'd like to tell you about two particular elements of social financing: one, our work in creating the registered disability savings plan; and two, a social purpose business called “Tyze”, which Vickie started.
Before I do that, I want to share a couple of biases. The first bias is that we are not particularly interested in social finance if it does not get to the roots of our social challenges. We spend an awful lot of money in this country basically remediating poverty, homelessness, and issues facing people with disabilities and the like. If all we're doing is rearranging things and finding other sources of money, we're not particularly interested. We think social finance can be used to actually get to the source, to get to the roots, to go upstream, and to deal with issues of prevention. That's bias number one.
Bias number two is that we are less interested in securing new sources of funding, although that's a worthy effort. We don't think that in the short term there are going to be a lot of additional funds coming from the private sector. We think that will be a much slower process. We are particularly interested in social finance because it gives people an opportunity to leverage the existing resources and to have money coming from different sources working better together.
That brings me to my third point. We think social finance has to be lodged or anchored within the context of what many of us around the world are now calling “social innovation”. Social innovation invites all of us to look differently at our toughest, most stubborn social problems. It invites us to do five things.
One, it invites us to rethink our solutions, to be more open-minded and not simply focus on the way we've always done things. Two, it invites us to work together differently. Three, it invites us to use technology when appropriate but not to become overly fascinated by it. Four, it invites us to use our money wisely, which brings us to social finance, of course. Five, it gives us an opportunity to scale, and another bias Vickie and I have is that already in Canada there are solutions to our toughest social problems: they're just orphans and they're not at scale. Social finance gives us an opportunity to do that.
Let me very briefly talk about the registered disability savings plan. If a family or a person with a disability were to put the equivalent of a Tim Hortons double-double and a doughnut aside every day, in 30 years they would have over $350,000—depending on the interest rates available to them—to spend on what they see as appropriate for their life in the world. The registered disability savings plan is the only one in the world, and it involves leveraging government, foundation, family, and individual contributions to enable the person with the disability to finally have a bank account and to have funds that he or she can control, as opposed to being at the mercy of a service delivery system that's been set up through the non-profit sector.
I won't get into it in a lot of detail, although I'd be happy to answer any questions on it. Today there is over $2 billion in deposits by people with disabilities in RDSP accounts, and they are essentially fomenting a revolution in how we look at supporting people with disabilities. Clawback is being eliminated by most provinces and territories. The ability to earn and accumulate assets is now policy in most provinces and territories in Canada.
Finally, I think it is providing an opportunity for us to rethink how we approach poverty not just for people with disabilities but also for the other tens of thousands of Canadians who are in poverty.
We think this is an example of government, private sector, and the community sector working together to solve a brand new social challenge, which is what happens to people with disabilities when their parents die; and, too, providing some advice and perhaps a model for how we approach some of our other tough social problems.
I'm now going to pass it over to Vickie to tell you about another invention that came out of our work with PLAN.
One of our two core pillars at PLAN was addressing the financial security of people with disabilities, but the other one was addressing the fundamental issue, which was their isolation. At PLAN we created a very strategic and focused process to develop personal networks. We determined that in order to spread this process to people with disabilities and their families and to many people beyond, we could better distribute our solution in the container of a social mission business, which we call Tyze Personal Networks. We took advantage, really, of a trend around technology, so this is all the social networking technologies that are out there, in creating Tyze. Tyze, if you want to think about it, is like a very personal, private Facebook for people to coordinate care around a person vulnerable to isolation. When we created Tyze, we realized that isolation is a 21st century challenge and that isolation is costly. There are many studies that talk about it as a determinant of health, including that its effects are more detrimental than that of smoking. So Tyze as a solution was created for people with disabilities, people who are aging, people who are experiencing challenging diseases and so on, anybody vulnerable to isolation.
Funding to create the business began within the charity. It came from a number of foundations in the United States and Canada. We created the business plan and the prototype, and then we launched the business as a private business, owned primarily by the charity, but also owned by private angel investors. We were actually able to blend funding to launch this business.
The business model was always designed around making the solution accessible in a way that was inclusive, accessible, and affordable. Our model was to sell Tyze to businesses or non-profits and charities that were serving people vulnerable to isolation. As we began to grow, we began to dance between the two worlds of business and charity, which led us to a few more private investors, but also to a number of foundations and so on that wanted to invest, but couldn't because of the nature of the container, the private business container.
In terms of a business model, again, with this inclusive, accessible, affordable design, we were didn't fit into the traditional business world for mezzanine funding. We weren't looking for a fast exit. We weren't looking to make the traditional rapid economic growth. Our distribution was our biggest motivation. Mezzanine funding, a traditional term in business, was really very limited for a business like ours. We grew to 20 employees. Actually, there was some discussion around some investment by government, but, again, being a business was a problem. Project funding in a charitable container was widely available, but investment into the business was not.
Tyze itself was acquired a year and a half ago by a Canadian charity, Saint Elizabeth Health Care, so in that way it's a very good story, and Saint Elizabeth continues to maintain Tyze. The big learning for us has been that the potential of social finance is so great and the potential for partnership with government for really wide-scale distribution is extraordinary. The challenge becomes in the ways and means of these various containers and structures to be able to work together. How does a social mission business work with government, work with private investors, work with foundations, in order to scale it to its largest extent? This is particularly important when we're talking about something like Tyze, which works upstream to effect cost savings into our systems of care.
Thank you.
:
Thank you very much. It's great to hear all the presentations and I wanted to thank all of you.
I think for those of you from Surrey and speaking from Vancouver, you'll be pleased to know that it's -27oC or something ridiculous like that here, so you're probably glad that after Barcelona, you're doing it from Vancouver rather than being here.
One of the questions I have is one I've asked before, but I'm going to ask it again. Often when we talk about social financing, we hear about the importance of target population being engaged in the creation, design, implementation, and evaluation of the projects. That seems to be a core part of social finance, social projects. Can you tell me, based on your own experience or international examples available to you, whether target populations are routinely involved in every aspect of the creation of social finance initiatives and whether they are involved all the way through to evaluation?
I'll ask each of you to make a brief comment on that, please.
:
I've just finished a book on the growth of social enterprise in this country. There is absolutely no shortage of innovation, creativity, and ingenuity in this country. As you've heard from our other colleagues in their presentations, there's no shortage of people who have found a way to prove that what they're doing works. The real challenge—and Bill Clinton said this himself—is to bring these solutions to scale. That's the challenge, as Vickie said.
If that is accepted as the challenge, then I would submit that we have to pay attention to the limitations of our existing welfare systems. Our federal welfare system and our provincial welfare systems are not enabling of that kind of creativity and ingenuity of the social enterprise sector or the non-profit sector generally, and they're not enabling of the so-called clients, the people who are the beneficiaries of these resources. This doesn't build resilience and the adaptive problem-solving capacity of people. We have a welfare system that was designed coming out of the Depression. That is party-line technology, not partisan—you understand what I mean. It's party-line technology, not even dial-up technology, and we are in a smartphone era.
I would invite you to think about social finance as a doorway into how we rethink how we take care of each other in Canada. Earlier, you mentioned the RDSP. When I met with Minister Flaherty around the concept, the first thing he asked me to do was to go and talk to all the other parties in Parliament, because he saw this as a non-partisan issue and as a way to reinvent how we take care of each other, for one small group of people. That, I think, is the magnificent opportunity that we have with social finance. All the other stuff.... Social impact bonds are great, but they're just tinkering. We need to rethink how we take care of each other.
:
That's it, Mr. Wallace.
Thank you, Mr. Emmett. Maybe you two would like to have a conversation off to the side after.
I want to offer the committee's thanks to all of you for taking the time to be here.
I also want to add a personal touch to this. I'm the father of a 28-year-old intellectually disabled son. One of the big issues that my wife and I have at our age is exactly what's going to happen with our son when we're gone, because he will outlive us, no question.
The comments made from Vancouver, via Surrey, were wonderful. Mr. Flaherty and I used to have many great talks about this because the Flaherty family has a son in the same situation as mine.
I just want to personally thank all of you for all you do in the sectors and how you're doing it. I think this study is going to be one of great value to this country, because when we have the quality of people doing the work you're doing on the various aspects of this, it can only turn out well.
Thank you for being here.
The meeting is adjourned.