How to mobilize private funds for the public good

Posted on June 20, 2012 in Inclusion Delivery System

Source: — Authors: – opinion/editorialopinion
Published On Tue Jun 19 2012.    By Carol Goar, Editorial Board

If anyone understands the nexus between business and government in Canada, it’s Stanley Hartt. The 74-year-old lawyer spent 18 years as a partner at Stikeman Elliot, served three years as deputy finance minister and two years as chief of staff in the Prime Minister’s Office. After his stint in government, he became chairman and CEO of Campeau Corp., then chairman of Citigroup Global Markets Canada. He is now chairman of Macquarie Capital Markets Canada. He holds a long list of corporate directorships.

But there is a side of the high-powered financier that few of his blue-chip associates know. He serves on a task force aiming to channel private resources into the public good. The idea is to create tools that will allow investors, philanthropists and foundations to use a portion of their money to tackle deeply entrenched social problems such as persistent poverty and environmental degradation. The concept is known as “social finance.”

Hartt is not the only prominent member of the task force. Former prime minister Paul Martin also serves on it. So do non-profit leaders such as Sam Duboc, chairman of Pathways to Education, and Nancy Neamtam, president and executive director of Quebec’s Chantier de l’Économie Social. It is chaired by Ilse Treurnicht, CEO of Toronto’s MaRS Discovery District.

Six months ago, it released a blueprint entitled Mobilizing Private Capital for Public Good. Since then its members have been out publicizing the concept and lobbying policy-makers, pension fund managers and philanthropic investors.

Last week, Hartt spoke at a panel discussion at the YWCA Elm Centre, the newly opened housing centre for 300 low-income women and their children — hardly a place one would expect to find “one the 25 most influential business people in Canada,” according to Canadian Business magazine.

“We’re still living in a world in which charitable organizations are not supposed to be raising money” he said. That means Revenue Canada “could come down hard” on non-profit agencies seeking to earn the returns investors need to put their money into a non-profit housing development, an environmental venture or an innovative job creation project.

Nevertheless, Hartt believes, charitable organizations willing to take the risk have a strong argument to make. “You say to the government: You’re in straitened circumstances. You can’t afford to give money to these causes. If you change the rules, we will.”

He also believes the private sector will be an ally. “Businesses benefit,” he said. “They all have charitable budgets. If they could say: I will invest in an 8 per cent bond, they’ll make money while doing good.”

This new market will take time to develop, he acknowledged. “The first couple (of bonds) will be a novelty, but you can get to a place where there is room in an investment portfolio for social impact bonds.” According to the task force, the pool of funds could grow to $30 billion within 10 years.

Like other panellists, Hartt emphasized that social financing will never — and should never — supplant basic charity. It works well for infrastructure such as affordable housing, environmental projects and enterprises that employ low-income individuals. It is the wrong way to meet the primary needs of the poor, unemployed, disabled and frail seniors.

The task force does not claim to have invented social financing. The trailblazers — VanCity Credit Union, the Community Forward Fund in Ottawa, the Edmonton Social Enterprise Fund and Social Capital Partners — were doing it before Hartt and his colleagues arrived on the scene.

Its role was to give the embryonic movement legitimacy, momentum and friends in high places. Hartt is ideally placed for the job.

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