Canada's first health social impact bond was a risk - did it pay off?

Since first launching in the United Kingdom 10 years ago, social impact bonds have piqued curiosity and debate around the world. Championed by high-profile advocates and denounced by impassioned critics, the conversation has often been wrapped in hype and misinformation from both sides.

Often called a “pay for success” model, social impact bonds usually involve a partnership between a government and private investors. The latter will fund a social program, and the government will then pay them back according to its outcomes. If successful, the investors’ risk is rewarded with returns.

In 2016, Heart & Stroke launched Canada’s first health social impact bond. In partnership with the MaRS Centre for Impact Investing and the Public Health Agency of Canada (PHAC), the foundation is testing an intervention to reduce hypertension, which can cause strokes and heart disease. As of the start of 2020, 176 social impact bonds have been contracted around the world, with just a handful now active in Canada.

Future of Good spoke to the people who made the country’s first health social impact bond happen. How has the project progressed, and what future do these tools have in Canada? 

Designing a new tool

Following interest in the UK’s project, the Canadian government wanted to test the concept but struggled to find the right project. Fortunately, the MaRS Centre for Impact Investing had been exploring ideas with Heart & Stroke, and approached PHAC.

“MaRS’ responsibility was the architect of the partnership,” said Adam Jagelewski, the centre’s founder and executive lead. MaRS supported Heart & Stroke in designing the intervention, determining the metrics and evaluation model, managing negotiations and raising private capital.

“The biggest challenge was rallying around an instrument that had never been tested before,” Jagelewski said. “Nobody knew how to design a social impact bond.” That meant deciding on the metrics of “success,” i.e. the terms on which investors would be paid back, and the level of risk they would be taking.

In public health, this idea of delivering tangible impacts in a measurable and deliverable way was not obvious, said Rodney Ghali, who was at that time a Director General at PHAC. “You would know if a road was fixed, or a bridge was built,” he explained. “You need to set targets that are reasonable, meaningful and in line with the type of return you’d be looking at getting.” 

To tackle this, the project was designed in close consultation with leading cardiologists, who helped to design the project and define the targets, based on the available evidence base. 

The Heart & Stroke’s “Activate” program was born: a new six-month wellness program for at-risk people, including exercise, nutrition counselling and incentives. Its task: preventing any increase in participants’ blood pressure readings.

Built-in flexibility

More than 4,000 people have participated in the project, and Heart & Stroke have the funding for 7,000. Early results have surpassed the targets: of the first 500 participants, 90% completed the program, and blood pressure readings for 112 of them showed an average 5mmHg drop in the systolic rate, beating the target to keep blood pressure stable. If these results continue, investors can expect to receive a return of between 6.5% to nearly 9%.

By focusing on outcomes instead of deliverables, Heart & Stroke had the flexibility to make adjustments as the program developed. “If you have the right data collection infrastructure in place, and the right metrics,” Ghali explained. “You’ll know why things aren’t working and then you can change course.”

The program has not always been smooth sailing, though. For example, Heart & Stroke and MaRS had to work at the pace of the government, which is sometimes slow. “You’re talking to your partners who might typically have a several-month planning cycle,” explained Doug Roth, Heart & Stroke’s Head of Social Enterprise.

Nor is working with a new model easy, especially when working with cross-sector implementation partners such as shops like Shoppers Drug Mart and digital platform providers. “This isn’t something you can do off the side of your desk,” Roth said. “We needed business strategists, finance acumen, and mission expertise.”

The verdict

Now a few years in, all three partners came to a similar conclusion: social impact bonds can be a useful tool when public or philanthropic capital needs to be made less risky for a policy experiment, such as when a social program is unproven or is being attempted in a completely new place. 

“If you are selecting an intervention which you know works 100%, then there’s actually no good rationale to ever put it within a social impact bond structure,” explained Ghali. In a number of situations, bonds have been criticized for adding extra costs to governments and other organizations through generous returns, in the absence of a genuine risk to investors.

Going forward, social impact bonds could make some headway in early intervention and prevention, said Jagelewski. A healthy pipeline of organizations are looking for capital, such as those helping vulnerable youth or providing mental health support in remote locations.

And as more organizations use social impact bonds, they can be improved. For example, governments often just grant funding to one organization, or a small number of them, which “could be more democratic,” said Jagelewski. Potential solutions include “rate cards,” where governments can effectively put outcomes out to tender for a certain price.

Navigating the internal culture

According to Roth, the social impact bond structure is not applicable to most of the Heart & Stroke’s projects. Its central purpose is to spend several million dollars of philanthropic capital on research each year. 

Therefore, working with the private sector has required an internal culture shift. Many colleagues were healthily sceptical, Roth said, asking him things like: “but we’re a charity, so why do we have to worry what we charge?” 

In response, Roth made it clear that “this is a way to drive mission. It’s not about the business model and it’s not about the money.”

For their traditional research projects, there isn’t a suitable social enterprise business model. But in the right scenario, using private capital can maximize the scale and impact of their expertise, Roth said. “It’s a springboard to jump off of the work we’re doing with philanthropic dollars, not in any way to replace them.”

The key to aligning Heart & Stroke behind the project was by focusing on outcomes. “When people see we’re getting real results from Activate, and we wouldn’t have been able to do this program without this type of funding, people get excited,” Roth said. Vitally, he also had the support of the board and senior management team.

“I’m pretty sure that the concept of paying for outcomes is going to continue to gain traction,” said Roth. 

Roth advises organizations considering social impact bonds to “be willing to take some risks and learn along the way. It’s not going to be a linear path, but most innovation isn’t.”

Tell us this made you smarter | Contact us | Report error