Saskatchewan Chamber of Commerce P3 Summit Social Finance Overview September 9, 2014

© Deloitte LLP and affiliated entities. What is social finance? 1 Approach: Impact investing is an investment approach across asset classes (e.g., public and private equity, debt, etc.) An investment approach that intentionally seeks to create both financial return and positive social impact that is actively measured 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

© Deloitte LLP and affiliated entities. Although estimates vary, there is general consensus that the impact investment sector will grow significantly by $1,000 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$26 trillion Billions (US$) 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 Monitor Institute (2009)JP Morgan/GIIN (2010)Calvert Foundation (2012) 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. Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

© Deloitte LLP and affiliated entities. Estimates of growth are also high in the Canadian impact investing market, with organizations already making significant commitments 3 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. Potential Canadian Market Growth Recent Canadian Initiatives Source: MaRS Center for Impact Investing 2011 Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

© Deloitte LLP and affiliated entities. Impact Investing Opportunity Examples of impact investing applications: Direct investment into social enterprises Community bonds Crowdfunding Microfinancing Enabling Trends Advancement of Related Concepts Public-Private Partnerships (PPP) Corporate Social Responsibility (CSR) Double / Triple Bottom Line Social Return on Investment (SROI) Social Innovation Social Enterprise Environmental Context and Enabling Trends Social Impact Bonds (SIBs) 4 The developing impact investing market is opening a range of new opportunities Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

Spotlight on Social Impact Bonds (SIBs) 5Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

© Deloitte LLP and affiliated entities. How Social Impact Bonds (SIBs) are structured 6 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 $$$ Independent Evaluator 2. Based on the contract, the intermediary raises upfront investment from socially- minded investors and foundations Investors $$$ Service Delivery Organization(s) 3. The social service delivery organization(s) receive(s) the funds to address social issue $$$ 1. A contract is negotiated where the government agrees to pay a rate of return on invested capital for improved social outcomes Government Department or Agency Intermediary Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

© Deloitte LLP and affiliated entities. Develop new funding stream, including for preventative measures Participate in payment for outcomes (not activity) Clearly demonstrate results to citizens Enable steady revenue stream Achieve longer planning horizon Create and apply innovative approaches to complex problems Enhanced levels of performance management and measurement Establish socially- minded capital deployment Gain the potential for blended financial and social returns Demonstrate innovative philanthropy 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 7Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

© Deloitte LLP and affiliated entities. Social impact bonds continue to gain momentum and are being rolled out in over 20 countries as we speak Columbia (1 SIB in Design) United States (20 States with Pay For Success Deals in Progress) Australia (2 SIBs in Design; 1 in Implementation) India (1 SIB in Design) Israel (3 SIBs in Design) Mozambique (1 SIB in Design) South Africa (1 SIB in Design) Swaziland (1 SIB in Design) Uganda (1 SIBs in Design) United Kingdom (11 SIBs in Design; 4 in Implementation) South Korea (1+ SIB in Design) France, Germany & Spain (Actively Considering SIBs) Sources: and input from Deloitte practitioners Canada (Actively Considering SIBs) Rwanda (1 SIB in Design) 8Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

© Deloitte LLP and affiliated entities. Canada’s First Social Impact Bond (SIB) was announced in May 2014 in Saskatchewan “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 9 “… expected to result in savings to the Government of Saskatchewan of between $540,000 and $1.5 million over five years.” – Government of SK “…[there is] value of looking at old problems in a new and innovative way.” - The Star Phoenix “…[there is] value of looking at old problems in a new and innovative way.” - The Star Phoenix “This program gives at- risk mothers and children a chance at a better life…” - Government of SK “This program gives at- risk mothers and children a chance at a better life…” - Government of SK Up to 5% return $1M EGADZ’s Saskatoon Downtown Youth Centre 5 year term Saskatchewan Ministry of Social Services Conexus Credit Union; Wally & Colleen Mah TBD Independent evaluation Reporting/ project management SIB OverviewSaskatchewan SIB Model Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

© Deloitte LLP and affiliated entities. SIB Profiles: First major implementations in UK & US HMP Peterborough, United Kingdom, September 2010 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 Rikers Island Prison, New York City, August 2012 Aim to reduce recidivism by 10% among adolescent offenders aged 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. Up to 13% return £5M paid upfront St. Giles Trust & Orminston Children & Families Trust Steady funding over 6=year term UK Ministry of Justice & Big Lottery Fund Social Finance UK Coalition of investors (charities and foundations) Social impact bond QinetiQ and the University of Leicester Independent evaluation Up to 22% return US$9.6M loan Osborne Association& Friendsof Island Academy Steady funding over 4=year term New York City Department of Correction MDRC Goldman Sachs Pay for Success bond Vera Institute of Justice Independent evaluation US$7.2M loan guarantee from Bloomberg Philanthropies 10Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

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

Public Private Partnerships vs. Social Finance: Social Impact Bonds 12Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview

© Deloitte LLP and affiliated entities. Comparison of Market Characteristics Public Private Partnerships vs. Social Finance: Social Impact Bonds 13 Market Characteristics Public Private Partnerships Social Finance: Social Impact Bonds Performance based contract Utilizes private finance / third party funding Captures private sector innovation and focus High order, transparent transaction processes Supports government transformation agenda Requires stakeholder management and education processes in order for success to be achieved Provides for an alternative method of service delivery Level of market maturity HighVery Low Saskatchewan Chamber of Commerce P3 Summit - Social Finane Overview