This October, Canada’s Minister of Health, the Honourable Jane Philpott MP, along with Heart and Stroke Foundation of Canada (“HSFC”) and MaRS Centre for Impact Investing, announced Canada’s first ever federally-funded social impact bond (“SIB”). A SIB is an investment vehicle that uses traditional finance models to fund social projects. Through the purchase of bonds, investors finance projects aimed at addressing a particular social issue. The most important factor in structuring a SIB is defining the metrics used to determine the success of the project. If the defined measurables are achieved, a government-funded SIB is structured such that the government, rather than the entity running the program, provides the investors with “outcome payments.” These outcome payments are the investors’ return on investment. If the outcomes are not achieved, the investors do not see a return.
In this case, in collaboration with the MaRS Centre for Impact Investing, HSFC sought and found private and not-for-profit investors to invest $3.4M in a scaled-up version of its Community Hypertension Prevention Initiative (“CHPI”), a project aimed at reducing the onset and prevalence of hypertension in pre-hypertensive Canadians. Participants enrolled in the CHPI are provided with support and guided through a program that combines physical activity, dietary recommendations and lifestyle coaching in an effort to reduce their overall blood pressure. Outcome payments to investors will be provided by Public Health Agency of Canada (“PHAC”) and will be triggered by two outcomes. The first is volume – HSFC will be targeting 7,000 pre-hypertensive participants to enroll in and complete the initiative. The second outcome payment is based on changes in blood pressure that occur in the target population over the course of the initiative. As PHAC has committed $4M to the project, if the CHPI is successful, then investors stand to receive an aggregate 15% return on their investment.
Miller Thomson LLP was afforded the opportunity to serve as the project’s legal partner, lending the firm’s expertise in social finance, corporate law and charity law to structure the SIB. Specifically, Miller Thomson provided advice to HSFC in structuring the unique relationships between HSFC and the SIB’s three major players: the investors, Computershare and the Government of Canada. Robert Stewart (Business Law), Susan Manwaring (Social Impact), Nora Osbaldeston (Financial Services), Andrew Valentine (Social Impact) and Natasha Smith (Social Impact) comprised the Miller Thomson team.
Shoppers Drug Mart will be serving as the project’s pharmacy provider, offering its locations as recruitment, intake and monitoring sites for program participants.
SIB’s are gaining traction in other international jurisdictions, particularly the UK, where there are currently 32 government-funded SIBs used to finance projects aimed at tackling social issues spanning from youth homelessness to recidivism rates to youth unemployment. The implementation of SIBs demonstrates the evolving nature of charitable fundraising and the development of modernized and creative funding solutions for preventative interventions. It is comforting to see that the Government of Canada is onboard with impact investing and is participating in innovative solutions that unlock private funds for public good.