Putting the heart in investing

In 2009 I was introduced to the concept of the social impact bond (SIB), also known as the pay-for-success model.

Developed in the United Kingdom and originally applied to the judicial system, this model allowed the government to pay for a program’s services if—and only if—the program reduced the frequency with which criminal re-offenders fell back into the judicial system.

The model hadn’t launched yet, but I felt that there must be a way to use it in Canada.

I researched prevalent social issues in Canada, shared information about SIBs with my colleagues and found that there was a lot of interest. As thoughtful Canadians, we thoroughly debated the merits of SIBs, jotted down our opinions and piloted the approach. In that time, over 60 other expressions of SIBs have been created globally in a range of social policy areas.

On October 28, 2016, the MaRS Centre for Impact Investing publicly shared the details of the Community Hypertension Prevention Initiative, a national pre-hypertension program based on the pay-for-success model. This initiative will reach up to 30,000 individuals, helping them to make lifestyle changes that will enable them to control their blood pressure levels without drugs.

It’s a good start, but the actual need is in the millions. It’s my hope that this initiative will bridge theory and practice, and will help to create more outcome-focused models in our country.

Here are the high-level details of this landmark deal.

Who:

• Service deliverer and performance manager: Heart and Stroke Foundation
• Outcome payer: Public Health Agency of Canada (federal government)
• Structuring intermediary and deal advisor: MaRS Centre for Impact Investing
• Contract developer: Miller Thomson
• Evaluator: Social Research and Demonstration Corporation
• Investors: QBE Insurance Group, RBC Generator, TELUS Ventures, Bealight Foundation, J.W. McConnell Family Foundation, Max Bell Foundation, Mindset Foundation, Catherine Donnelly Foundation, Andrew Cockwell, Ian Cockwell, Guy M. Beaudin and the Heart and Stroke Foundation

What: A $4-million contract between the Public Health Agency of Canada and the Heart and Stroke Foundation to deliver a community-based healthy lifestyle program with the goal of preventing pre-hypertensive individuals from falling into a hypertensive state. Investors will provide the working capital for the HSF to deliver the program.

Measures of success: Volume intake milestones (individuals) and blood pressure (mmHg)

It’s easy to get caught up in the appeal of the financial model. Social impact bonds are very unique and they align incentives between public and private actors neatly—however, there are more to them than meets the eye. In the end, this will change the way that the HSF delivers the program and the ways that staff do their work. Their guiding star will be better blood pressure outcomes—and this is new.

I had a few objectives when I set out to build this model. Here are the outcomes that I’m particularly proud of.

New capacity: The Heart and Stroke Foundation has increased its capacity to think about the outcomes it generates and to manage performance against outcome goals (not simply reviewing activities). Not only will the HSF track performance measures (and report to a separate project board quarterly), but it will also explore where it can improve delivery in other programs it offers.

Modernizing public service: The Public Health Agency of Canada has prioritized which outcomes are most important. It now understands what a meaningful change in blood pressure is, how that change is measured and how long the change should last. The PHAC is now analyzing the other outcomes it seeks to achieve in a range of issue areas, including chronic disease, physical activity and injury prevention.

New money: We did not want to cannibalize existing philanthropies when seeking investment. The Heart and Stroke Foundation would not have received funding from these new investors to deliver a lifestyle intervention through traditional means, but this model allowed them to attract new impact investors.

For those interested in more information about this model, my colleague Duncan and I have written a reflective piece about the development process and some of the tough questions we faced along the way. You can find it here.

I’d like to personally recognize Jordan Gildersleeve and Samer Abughannam, two former MaRS employees who were instrumental in helping to put this deal together.

Congratulations to the Heart and Stroke Foundation and the Public Health Agency of Canada! This is a pioneering partnership model that will surely work to evolve public finance and outcome-focused service delivery.