SPEECH: The Federal Role in a Social Finance Fund – New Report from the Senate’s Social Affairs Committee

Hon. Ratna Omidvar: Honourable senators, I too rise today to speak to the Social Affairs report, The Federal Role in a Social Finance Fund. I want to thank all members of the Social Affairs Committee, in particular our chair, for so enthusiastically embracing the conversation of the ideas and the study.

As Senator Eggleton has pointed out, social finance is not a new idea in Canada. It has certainly been around for some time, but it has been tested and tried in many pilots in micro-ways. This report takes it to the next level and proposes a macro-project and a macro-solution to the testing that has been done in the field over the last 10 years or so. The report gives the government very timely, productive, constructive and practical advice on how to go about doing this.

I will start by saying that the challenges of our times continue to evolve. We have old challenges, such as affordable housing, but we also have new emerging challenges such as the development of products for a low-carbon economy. And all of these challenges need to be financed and resourced in one way or another.

So it is important for us to address the challenges and also think about new streams of revenue, and social finance provides a very interesting idea to do this.

As Senator Eggleton has said, let’s think of social finance as profit with purpose. It encourages private investors, banks, pension funds, investment firms and wealthy individuals to commit their money for a project or enterprise that has a social purpose. Not only do investors get a return on their investment, but they also leave a legacy of public good. I believe there are many such institutions and investors that could be brought into this conversation. For example, an investor could invest in a fund that builds housing on reserves or a fund that supports the employment of marginalized people in small-scale businesses.

It is important to note that the social finance fund does not look for donors. It’s not looking for the charitable dollar. It’s looking for investors, and investors demand a return on their investment.

In 2017, the investment firm All Street looked at some of the returns generated and found that certain funds with a social mission generated returns of up to 33 per cent. Now I admit that is out of the box; I’m taking the best example. But I believe investors can generate a profit at the same time as leaving a social impact.

The report identifies a problem and a solution. Witnesses told us that Canada has many good ideas. There are many wonderful projects and initiatives. We heard about the Huron-Wendat project that builds housing on reserves. There are many projects, but there is no ecosystem that supports taking them to scale. We’re not just talking about 10 houses or 100 houses; we’re talking about 1,000 houses, and that requires serious money.

So our committee recommended that the government create and capitalize a pan-Canadian social finance fund. As Senator Eggleton pointed out, it would run at arm’s length. Maybe it’s the Business Development Bank. Maybe it’s CMHC, but it would leverage private capital, from coast to coast, to be used for such ideas. It would bring together private and institutional investors with proven, tried, tested and evaluated initiatives. These would be led sometimes by charities, sometimes by not-for-profits and sometimes by businesses so that their scope would be amplified.

The committee recommended that the government should explore different ways of capitalizing this fund. However, one especially intriguing idea — and Senator Eggleton has pointed it out — is thinking of using dormant bank accounts. Using a portion of the dormant bank accounts in Canada, as Senator Eggleton pointed out, the figures range from $628 million to $750 million currently invested in low-yield savings bonds and Treasury bills, and I believe that a portion of these funds could be used to capitalize such a market, such an ecosystem for social finance, and also provide a better return for Canada than low-yield savings bonds.

This is not an idea that we have plucked out of fantasy. This idea comes from the U.K. In 2008, the United Kingdom passed the Dormant Bank and Building Society Accounts Act. It established a process by which British financial institutions could transfer unclaimed balances into a fund called Big Society Capital. Many banks in the U.K. have contributed to this, including Barclays, HSBC and others.

As one example, Big Society Capital invested 50 million pounds in the Real Lettings Property Fund. That fund buys London apartments and then leases these apartments to a homelessness charity, which then leases these apartments to people who may be at risk of homelessness. The investors earn a return from the rent paid by the tenants and from the apartment sale after seven years.

Honourable colleagues, I believe that Canada is brimming with such good ideas, but they need access to capital, not $10,000, not even $1 million. They need access to big pools of capital. For that, we need a social finance marketplace. I have always maintained that money follows good ideas and not vice versa. This is a very good idea. I hope you will support sending this report off to the government for a response, as required, and I am wondering if at some other time the National Finance Committee would do a study on dormant bank accounts and see whether, in fact, this idea resonates appropriately in Canada.

Read the Senate Social Affairs Committee’s study here.