YMCAs of Québec - Alternative Suspension Social Impact Bond (SIB)

YMCAs of Québec ○

Offering Description

Image result for ymcas of quebec logoThe YMCAs of Québec is a registered charity whose vision is to inspire and mobilize each person to achieve their full potential, to thrive, and to contribute to their community. 

Founded in 1999, the YMCA Alternative Suspension Program supports secondary-level students who have been temporarily dismissed from the school setting. Through a 3-5 day offsite program conducted by the YMCA, students build autonomy and self-esteem through support with schoolwork, group workshops, and individual counselling. 

The YMCAs of Quebec’s Alternative Suspension (AS) Social Impact Bond (SIB) is Canada's first national community safety SIB. AS works to prevent school dropout rates among at-risk youth aged 12-17 by reducing incidences of repeated suspensions. Funded by Public Safety Canada (PSC), this SIB enables the YMCAs of Québec, and their partner YMCAs in communities across Canada, to enroll an additional 2,000 youth in the Alternative Suspension program. As an outcomes-based funding agreement, investors provide upfront capital for the AS program, and the outcomes payer, PSC, commits to making payments to investors if the agreed-upon outcomes are achieved. 

As the YMCA Alternative Suspension program recently celebrated its twentieth anniversary, its achievements have been recognized by the awarding of an honorary YMCA Peace Medal in october 2019.  Moreover, its development team has also received multiple awards, such as the YMCA Innovation prize.

Investment Highlights

Investment Offering:
$4.2 million in outcomes-based Social Impact Bonds, with a management case IRR of 7.91% and a maximum of 10.54%.

Structure:
The YMCAs of Québec is raising funds through an outcomes-based funding instrument with a 4-year term. Under this structure, investors pay in advance for the program, and the outcomes payer commits to making payments to investors only if the program is successful and pre-agreed outcomes are achieved.

The two outcomes triggering payments to investors relate to reducing school dropout rates at secondary schools: improved behaviour following participation in the Alternative Suspension program (calculated as the percentage of participants who demonstrated positive behaviour change, in comparison to a control group; anticipated target 16.00-21.98%), and the number of students who successfully complete the program (anticipated 1,845 completions). If outcomes are attained at or above the anticipated targets by the conclusion of the SIB term (4 years), investors could achieve an IRR range of ~7.91% to 10.54%.

Use of Proceeds:
The YMCAs of Québec aims to scale-up and enroll 2,000 youth in the Alternative Suspension Program in 10 sites across Canada over the next 5 years (2020-2024). The pay-for-success nature of the SIB project will allow YMCA to focus on supporting at-risk youth, with ongoing and rigorous performance tracking built directly into the financing instrument. 

The expansion will begin in 5 target communities: Abbotsford, Kelowna, Kitchener, Montréal, and Québec City, and grow to other regions in British Columbia, Quebec, Ontario, and Atlantic Canada based on need and demand. 

Target Close:
April 30, 2020. 

Please note that this is not a complete investment summary. Investors should read all associated documentation including the Contribution Agreement and associated securities agreements before considering or making any investment.
 

The Alternative Suspension Social Impact Bond

The Alternative Suspension Program 
School suspensions are an early indicator of a student’s potential disengagement in education. Those who do not have a high school diploma typically earn ~15% less than those who do graduate, are more likely to be unemployed, and are more likely to be arrested or incarcerated in the future.  The Alternative Suspension Program helps address the problem by transforming youth’s time on suspension into a positive experience.

How it Works: 

  • Youth are referred to their community AS Program by their school. The program acts as a substitute for suspension (or used to prevent a likely suspension). 
  • YMCA youth workers develop a personalized intervention plan for each student.  
  • The program is delivered off school grounds and lasts 3-5 days (the average length of a school suspension), and consists of support with schoolwork, individual counselling, and group workshops.  
  • Students are accompanied in their reintegration to school. 
  • Follow-ups with the student are conducted by the AS youth worker at the 1-month and 3-month marks. 
  • Students are monitored to determine if their behavior improves.  

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The Alternative Suspension Social Impact Bond (SIB)
In the Social Impact Bond model, all stakeholders are incentivized to achieve the  pre-established outcomes metrics: investors gain a financial return only if outcomes are achieved; the outcomes payer, Public Safety Canada, has a vested interest in using taxpayer dollars wisely to support social outcomes; and the service provider, the YMCAs of Québec, has staked its reputation on meeting expected outcomes. Service delivery risk is effectively transferred to the investors, and final return on investment is linked with target outcomes. This SIB partnership with Public Safety Canada has unlocked a large funding commitment enabling the Program to scale and innovate more quickly, and in more geographies, than smaller, year over year tranches of capital would.  


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Outcome Metrics
Change in Behaviour: Measured as the difference between the proportion of a cohort that exhibits a positive change in behavior after participating in the AS program, and the proportion of a comparison group that exhibits a positive change in behavior without the program. School administrators will compare the student’s behaviour in the 3 months after participating in the program, to the 1 month prior to participating in the program. Using an adapted version of the AS Program’s survey tool, administrators will record whether or not the student saw a positive change in behaviour.

Program Completions: The number of individuals who complete the Alternative Suspension program over the four cohorts of the entire SIB. A complete stay by a participant is defined as completing a minimum of three (3) days in the AS Program. Completion data will be actively collected, tracked, and reported on by YMCA over the life of the Alternative Suspension program, and validated by the 3rd party evaluator. 

Returns to investors are calculated using the following payment scenario chart: 

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Depending on the number of total Program Completions, if Behaviour Change shows 0.00-7.64% improvement versus the control group, investors can expect a return multiple between 0.000x to 1.020x. If Behaviour Change shows 15.28-33.14% improvement versus the control group, investors can expect a return multiple ranging from 0.816x to 1.100x. 

Impact

The Challenge 
Suspensions from school increase the likelihood of dropping out, increasing the likelihood of interacting with the justice system.

  • Students that have a history of suspension are 78% more likely to drop out
  • School dropouts are ~8x more likely to end up in jail or prison
  • The prison system costs Canada ~$25B / year

Traditional suspensions are typically ineffective, as they leave students to their own devices.

Impact Track Record
In operation since 1999, Alternative Suspension has engaged 230+ school partners, provided 150,000 hours of support to 3000+ youth participants annually, and realized an 85%+ rate of improved behaviour at school following participation. Given the long track record of the initiative, YMCA has been able to validate the assumptions in their logic model. In a study conducted by Malatest in 2015 in three Alternative Suspension program sites, analyses found that “students who completed the AS Program were significantly less likely to have dropped out of school by the end of the year...[where] approximately 4% of completers had dropped out, compared to 14% of non-completers.”

Risks

All private securities listed through online investment platforms and Exempt Market Dealers (EMDs) like SVX are likely to carry more risk than those available on the public markets. Our goal is to make you aware of those risks before making an investment. For further details on the risks in the private markets, refer to the SVX Risks section. Some of the offering specific risks are identified below:

Performance Risk  
Returns for investors are solely dependent on the performance of the Alternative Suspension Program. Performances inferior to the Management Case’s outcome rates will result in IRR lower than the anticipated 7.91%. Maximum returns of 10.54% are only achieved if each Program cohort demonstrates a behaviour change of 35% and 2,000 participants complete the Program. Failure to achieve an average 7.64% in Behaviour Change and/or failure to provide the Program to 1818 youth will result in a loss of capital. 

Regulatory Risk  
The success of the Alternative Suspension Program may rely on regulations, specifically in the education and community safety sectors. Drastic changes in policy in these sectors could materially impact the Alternative Suspension project performance, thus affecting the investor return.   

Default Risk  
This investment is at risk if the YMCAs of Québec, national and local, are unable to continue organizationally for any reason. 

Political Risk  
Changes in government policy on community safety interventions and social finance may affect investor returns if they were to change in the duration of the investment term. A key risk mitigant is that the federal government (via Public Safety Canada) has approved and signed the Alternative Suspension SIB Outcomes Agreement between PSC and the YMCAs of Québec. This Outcomes Agreement outlines some of the key rights, obligations, and parameters of the AS SIB (between PSC and the YMCAs of Québec), and will be complemented by the pending Investor Agreement (to be negotiated between the YMCAs of Québec and investors). 

Liquidity Risk  
This investment is a private investment, where no public market exists and units are not transferable. However, this SIB has liquidity features, whereby 3-4 outcomes payments are made during the life of the Program.  

Conflict of Interest Risk 
This SIB was developed by the YMCA with the help of the MaRS Centre for Impact Investing. Until May 2019, MaRS was the parent of SVX. Grace Lee Reynolds, MaRS Chief business officer, sits on the SVX Board of Directors.

Management Team

Andrew Borrelli

Andrew Borrelli

Director of Development, School Perseverance Sector

Andrew joined the YMCA School Perseverance Sector in 2009 at the onset of the national expansion of the YMCA Alternative Suspension program. Andrew also sits on the board of a Montreal-based non-profit organization. Over the last 10 years, Andrew has worked with YMCAs across the country to develop programs in over 30 communities. He continues to oversee the sector’s development through the implementation of programs both domestically and internationally.

George Kalimeris

George Kalimeris

National Director, School Perseverance Sector

George has been with the YMCAs of Québec for almost two decades. He is co-founder of the YMCA Alternative Suspension program and led the creation of the School Perseverance Sector of the YMCAs of Québec. George has overseen the development of more than a dozen initiatives and more than 60 service sites for community-based education programs in Québec, Canada and Europe.

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*Capital raised figures include amounts raised both on and off platform. Amounts raised off platform or committed have not been independently verified by SVX.