In 2010, Social Finance pioneered the world’s first Social Impact Bond in Peterborough. The response was unexpected; governments, social organisations and investors contacted us to understand: How did it work? How did we design the intervention? Why choose that prison, those offenders?
– Guest blog by Hannah Butler from Social Finance
It became clear that we had hit a nerve. The project had several interesting dimensions: risk capital might be made available to allow government to focus more on prevention; the freedom resulting from turning the traditional contracting model on its head, and an excitement that problems that seemed intractable might be investable.
Social Impact Bonds, public-private partnerships that fund social services through a performance-based contract, have become the subject of much debate. These programmes are also the focus of our recent White Paper,“Social Impact Bonds: The Early Years”. The paper is a culmination of the collective experience gained across the three Social Finance entities, in the UK, US and Israel, and informed by our work to support other markets, including Europe. It demonstrates the growing influence of the model, now across multiple jurisdictions, revealing a rich pool of information from which the next round of programmes can be developed.
Social Impact Bonds are increasingly understood globally and now span many social issues. The sector has achieved an impressive amount since the seminal project in 2010. To date, more than 60 Social Impact Bonds have been launched, across 15 countries, together raising more than $200 million in investment to address social challenges. Interim or final results are available from 23 projects, of which 22 have reported positive outcomes for beneficiaries. These projects range from helping disadvantaged young people find employment or reengage with their education, to avoiding entrance into care for at risk children.
The diversity of issues that have the potential to be tackled by Social Impact Bonds is becoming clearer – and is exciting. Nevertheless, it’s also clear that some conditions make certain fields more suited to these instruments than others. As we discuss in “Social Impact Bonds: The Early Years”, for the model to succeed – or at least be tested – in a new area, the government, social sector and funding community must be open to the concepts of paying for outcomes, sharing risk and playing new roles in which they come together in genuinely collaborative cross-sector partnerships. Moreover, our challenge, and that of the actors involved in the field, is to continually show clearly, convincingly and sensitively, the value in bringing socially motivated capital to support public sector investment in tackling prevention.
At the beginning, many doubted that Social Impact Bonds would translate from their Anglo-American roots to new markets. We think that this misconception has now been laid to rest by the ‘second wave’ of projects, most notably within other European countries. Aside from the UK, there are now eight other European countries that have launched Social Impact Bonds, The Netherlands, being one of them (including the first example of a cross border programme). A third wave of projects has not yet arrived, but is on the horizon. These may become the most interesting and impactful of all to date, involving middle-income countries in South Africa and Latin America, where work has already begun. The magnitude of challenges in these locations are daunting, as with the adaptation of the model to developing countries. However, as we have seen from examples to date, every new example and context tests and evolves the model, adding to our understanding of how we can invest in tackling entrenched social problems, often among the most vulnerable people at the margins of our society.
Alongside the White Paper, we have released an online global database of Social Impact Bonds. The database can be sorted by country, issue area, investor, payer and service provider, and gives a comprehensive overview of Social Impact Bonds launched to date as well as a snapshot of the many in development. We hope this will be seen as a valuable open platform for the community of global practitioners and others who are actively following this rapidly evolving field. We encourage practitioners and users to give feedback.
It is remarkable that a single pilot project, pioneered six years ago at a prison in Peterborough, has prompted so much debate and innovation. In“Social Impact Bonds: The Early Years”, we reflect on the lessons learned and share our ambitions for the future in the hope that more and different individuals, organisations and governments will be encouraged to come on this journey with us. In the end, the goal is simple: better social outcomes which evidently improve the lives of less advantaged or vulnerable groups of people.
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