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Panel to call for ‘fund of funds’ in Liberals’ social finance plan: Documents

OTTAWA — Newly released documents are providing a window into an experimental new pillar in federal Social policy to better connect private investors — and their money — with groups that deliver social programs.

A detailed presentation for the two ministers in charge of the Social Finance strategy says an expert panel will call on the government to put money into a “fund of funds” nationwide, in order to calm investors skittish about the risk involved.

The March presentation says federal spending to “capitalize a social Finance fund, injecting significant funds into the marketplace,” would help “those confronting ‘wicked’ problems,” which can cover a range of social and environmental issues that a civil society group is trying to solve.

The Canadian Press obtained a copy of the presentation for Social Development Minister Jean-Yves Duclos and Labour Minister Patty Hajdu under the access to information law.

The panel’s report is expected to form the foundation of a forthcoming social finance strategy.

Governments find social finance schemes attractive because the financial risk for programs is shifted from taxpayers to investors, who in turn underwrite experimental ways of delivering social programs.

The aim of social finance is to leverage billions in private sector financing for public service goals. But that’s easier said than done.

The presentation says there is “mispriced risk that creates high transactions costs,” few organizations or people who can connect “sources of investment capital and projects,” and a “lack of specialized knowledge among traditional lenders” about how to fund socially-focused enterprises.

“Taken together, these factors contribute to the perception of social finance investments as being high in risk, thus inhibiting further growth of a nascent and fragmented market,” one slide reads.

By creating a social finance fund, the government would attract investors hesitant to commit capital by mitigating “the perception of risk” and act as a catalyst to free up capital for projects and programs, the documents read.

Federal officials have also been told that regulatory and tax rules act as stumbling blocks for charities and non-profits who want to try a social financing arrangement.

The expert panel’s report and the government’s strategy are expected to loosen tax rules so community foundations and charities can start up a social enterprise without putting their tax-exempt status in jeopardy.

The Liberals believe the right set of measures could unlock billions in private cash that could finance programs and services and test new ways to deliver them.

But not everyone sees it that way. Briefing notes for senior officials identified concerns that the government’s talk about social finance “is a euphemism for privatization of social services.”

Jordan Press, The Canadian Press

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Panel to call for ‘fund of funds’ in Liberals’ social finance plan: Documents


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