Saskatchewan Chamber of Commerce P3 Summit Social Finance Overview

1. Saskatchewan Chamber of Commerce P3 SummitSocial Finance Overview September 9, 2014

2. What is social finance? An investment approachthatintentionallyseeks to create both financial return and positive social impact that is actively measured Approach: Impact investing is an investment approach across asset classes (e.g., public and private equity, debt, etc.) 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

3. Although estimates vary, there is general consensus that the impact investment sector will grow significantly by 2020 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. Monitor Institute (2009) JP Morgan/GIIN (2010) Calvert Foundation (2012) $1,000 Billions (US$) • 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 Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview 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

4. Estimates of growth are also high in the Canadian impact investing market, with organizations already making significant commitments Potential Canadian Market Growth Recent Canadian Initiatives • 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. Source: MaRS Center for Impact Investing 2011 Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

5. The developing impact investing market is opening a range of new opportunities Advancement of Related Concepts Environmental Context and Enabling Trends • Public-Private Partnerships (PPP) • Corporate Social Responsibility (CSR) • Double / Triple Bottom Line • Social Return on Investment (SROI) • Social Innovation • Social Enterprise Enabling Trends Impact Investing Opportunity • Examples of impact investing applications: • Direct investment into social enterprises • Community bonds • Crowdfunding • Microfinancing • Social Impact Bonds (SIBs) Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

6. Spotlight on Social Impact Bonds (SIBs) Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

7. How Social Impact Bonds (SIBs) are structured 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 Government Department or Agency 1. A contract is negotiated where the government agrees to pay a rate of return on invested capital for improved social outcomes Independent Evaluator Intermediary $$$ $$$ 2. Based on the contract, the intermediary raises upfront investment from socially-minded investors and foundations 3. The social service delivery organization(s) receive(s) the funds to address social issue Investors Service Delivery Organization(s) $$$ Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

8. 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 Governments Service Delivery Organization(s) Investors • Develop new funding stream, including for preventative measures • Participate in payment for outcomes (not activity) • Clearly demonstrate results to citizens • Establish socially-minded capital deployment • Gain the potential for blended financial and social returns • Demonstrate innovative philanthropy • Enable steady revenue stream • Achieve longer planning horizon • Create and apply innovative approaches to complex problems • Enhanced levels of performance management and measurement Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

9. Social impact bonds continue to gain momentum and are being rolled out in over 20 countries as we speak Canada(Actively Considering SIBs) United Kingdom(11 SIBs in Design; 4 in Implementation) France, Germany & Spain(Actively Considering SIBs) United States(20 States with Pay For Success Deals in Progress) Israel(3 SIBs in Design) South Korea(1+ SIB in Design) India(1 SIB in Design) Uganda(1 SIBs in Design) Columbia (1 SIB in Design) Rwanda(1 SIB in Design) Mozambique(1 SIB in Design) Swaziland(1 SIB in Design) South Africa(1 SIB in Design) Australia(2 SIBs in Design; 1 in Implementation) Sources: http://payforsuccess.org/learn-out-loud/activity-map, http://www.instiglio.org/sibs-worldwide/ and input from Deloitte practitioners Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

10. Canada’s First Social Impact Bond (SIB) was announced in May 2014 in Saskatchewan SIB Overview Saskatchewan SIB Model “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 TBD Independent evaluation Saskatchewan Ministry of Social Services Reporting/ project management Up to 5% return EGADZ’s Saskatoon Downtown Youth Centre Conexus Credit Union; Wally & Colleen Mah $1M 5 year term “…[there is] value of looking at old problems in a new and innovative way.” - The Star Phoenix “… expected to result in savings to the Government of Saskatchewan of between $540,000 and $1.5 million over five years.” – Government of SK “This program gives at-risk mothers and children a chance at a better life…” - Government of SK Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

11. UK Ministry of New York City Justice & Big Department of Lottery Fund Correction QinetiQ and the Vera Institute of University of Social impact bond Pay for Success bond Justice Leicester Independent evaluation Social Finance Independent evaluation MDRC UK £5M paid Steady funding Steady funding upfront US$9.6M loan over 6=year over 4=year term term Coalition of St. Giles Trust & Osborne investors Up to 13% return Up to 22% return Orminston Association & Goldman Sachs (charities and Children & Friends of Island foundations) Families Trust Academy US$7.2M loan guarantee from Bloomberg Philanthropies SIB Profiles: First major implementations in UK & US HMP Peterborough, United Kingdom, September 2010 Rikers Island Prison, New York City, August 2012 • 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. • 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. Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

12. Recent SIB Profile: Largest US Social Impact Bond Massachusetts Juvenile Pay for Success Project, United States, February 2014 Commonwealth of Massachusetts Independent Evaluator: Sibalytics LLC/ PCG Social Impact Bond Intermediary: Third Sector Capital Partners Inc. US$27 million investment 7 year term (with potential 2 year extension) Success payments made between years 2 - 7 Senior Investor: Goldman Sachs Service Provider: Roca, Inc. • 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. Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

13. Public Private Partnerships vs. Social Finance: Social Impact Bonds Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

14. Comparison of Market CharacteristicsPublic Private Partnerships vs. Social Finance: Social Impact Bonds Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview