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social impact bonds hold promise, especially in health care. Right now, all eyes are focused on accountable care organizations and the Medicare Shared Savings Program. Probably the biggest obstacle to the program's success is the high cost of forming ACOs, with many organizations dismissing ACOs out of hand due to the lack of available capital. If, however, we inserted another party into the equation - the private investor to whom the government would agree to share cost savings - that investor would become the source of much-needed capital. The chance of success improves dramatically, but at absolutely no cost or increased risk to the government.

As proposed, the Medicare Shared Savings Program permits non-providers to hold up to a 25 percent interest in an ACO, thus allowing private investors in on the game. The shared savings payments, if any, still would go to the ACO, and it would be up to the ACO's governing body to determine allocation among participants, including investors. Under the social impact bond model, however, the full payment would go to the investor, creating a greater incentive for the investor to provide necessary capital.

Social impact bonds could help drive health reform by lining up incentives and providing necessary resources while reducing government spending care and improving overall health. While the concept is new and relatively untested in health care (but has demonstrated success in other areas), we need to explore whether there are investors who would value an opportunity to drive health care reform. With CMS soliciting comments on the proposed Advanced Payment Initiative - under which CMS would make advances on shared savings payments to ACOs to cover development costs - it makes sense to consider private investors as the source of such funding at the same time.  

For a new Conservative government looking to make a tangible and lasting mark on our society, there would seem to be no better alignment of values and opportunity than that represented by the burgeoning social finance movement. It represents a ready-made opportunity, rooted in values of community-building, support for small scale entrepreneurship, and the role of private investment in delivering public good, that the government would do well to seize.

At its core, social finance (or its semantic cousins: “impact investing”, “mission-based investing”, etc.) is about incenting innovation. Let’s face it, we all assume that the large challenges facing our society (things like child poverty, climate change, health care, etc.) can only be solved by government or big corporations.

The Task Force, in its report, identified a number of concrete steps that governments could take in this regard, primarily around the tax treatment of such investments. As an example, the report points out that Canadian foundations are specifically prohibited under the Income Tax Act from conducting any “unrelated business activity”, while similar provisions in the U.S. and U.K. tax codes have been removed in recent years. Canadian governments have indicated a growing level of interest in the potential that social finance holds. The federal government made a supportive statement for social finance in its 2010 Speech from the Throne, and provinces like Nova Scotia and Quebec have set up their own social finance funds. Ontario very recently inaugurated a Social Innovation Wiki, through which social entrepreneurs can share lessons on things like access to capital.But governments can and should do more, starting with the federal government. The upcoming Speech from the Throne would seem a perfect opportunity for a government looking to define its vision for the country to re-affirm the potential of social finance, and to lay out a roadmap for how Canada will move forward on this opportunity.