The House of Commons Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities has issued a report on the potential for social finance to mobilize capital towards social and economic outcomes in Canada.
Exploring the Potential of Social Finance in Canada follows a study where the Committee heard from 51 witnesses, including many CCEDNet members and partners and our Executive Director, Michael Toye.
Many of the Committee’s recommendations echo the social economy policy priorities identified by CCEDNet and partners.
Some of the Committee’s observations include:
- the use of social finance instruments by governments around the world is increasing
- momentum toward greater stakeholder engagement and social finance capital investment is building in Canada and internationally
- social finance can contribute to the development of genuinely new and innovative approaches to addressing complex social issues
The Committee noted that there was a general consensus among witnesses for the potential of social finance to tackle persistent social challenges, but opinions varied with regards to the ways in which social finance tools should operate. Most comments centred around regulatory changes that would allow charities and non-profits greater flexibility to engage in revenue-generating activities, the necessity and challenges of measuring social outcomes using adequate metrics, the need to build capacity within the market, and the government’s role – both financial and otherwise – in developing the social finance market. Dissenting opinions by the New Democratic and Liberal Parties also emphasize concerns related to social impact bonds.
The Committee made the following recommendations
The Committee recommends that Employment and Social Development Canada build on the work of Canada’s National Advisory Board to the G-8 Social Impact Investment Taskforce by creating an advisory panel, involving stakeholders from the public, private, non-profit and charitable sectors, to help define a national strategy on the development of the social finance marketplace in Canada.
The Committee recommends that Employment and Social Development Canada with other departments examine the structure and fund sourcing of catalytic capital funds in other jurisdictions and make recommendations with respect to how such a fund might best be established in Canada.
The Committee recommends that the federal government consider legislative and policy measures, as appropriate, to allow charities greater flexibility to conduct business activities for the purpose of re-investing profits back into their charitable missions.
The Committee recommends that the Department of Finance and the Canada Revenue Agency review current regulations with respect to the profit-generating activities of non-profit organizations, and consider options to allow some non-profits with a clear social purpose to generate surplus revenues in some circumstances.
The Committee recommends that the Department of Finance and the Canada Revenue Agency conduct a review of current policies with respect to program-related investments, with a view to improving the communication and/or clarity of these measures, as necessary.
The Committee recommends that Employment and Social Development Canada work with the provinces and relevant stakeholders to create national guidelines for defining and measuring the impacts of social finance projects in order to ensure reliable and consistent standards for social outcome measurement across Canada.
The Committee recommends that the federal government expand eligibility criteria for existing programs to support small- and medium-sized enterprises, such as Industry Canada’s Canada Business Network, to expressly include charities and non-profit organizations working in the field of social finance, where appropriate, and consider the creation of programs aimed at developing the technical capacity of these actors to participate in the social finance market.
The Committee recommends that Employment and Social Development Canada, in collaboration with relevant federal departments and agencies, explore social procurement.
The Committee recommends that Employment and Social Development Canada continue to encourage cross-sector collaboration on social finance by convening regular meetings of stakeholders from the for-profit and the non-profit and charitable sectors, in order to encourage partnership development and to share information and best practices.