Social
Impact Bonds (SIBs) are impact investment*instruments
originating from the UK. It launched the 1st SIB in 2009 for
Peterborough Prison Recidivism
Prevention an innovative approach of the support chain.
The SIB project is
completed and already halfway it's term the government decided to pay
the investors and implemented the model all over the UK.
SIBs
are private capital investments and
usually a government body,
often local or national, repays the
investment. Returns are not fixed,
they depend on success i.e. societal
savings. Note that
structuring SIBs takes time.
Worldwide
there are 108+ Social
& Health Impact Bonds with almost 400million US$
capital raised and almost 750.000
lives touched*. 102
SIBs are in developed countries, 6
in middle income countries. Still
interest in Development Impact Bonds for
developing countries especially within
the UN Sustainable Development Goals framework
is high. (see reports)
The
global SIB champions are the UK
(42), the US
(20) and The Netherlands
(10). Japan has announced it's ambition to invest 200million
US$ in SIBs in 2016 and
already launched three Health Impact Bonds in
2017.
Government
versus Entrepreneurship
Looking
at the Dutch experience the popularity of Social Impact
Bonds can be seen as a follow-up
of privatization
as in selling government
entities or contracting
out state responsibilities
(popular in e.g. It's development cooperation policy). In this
tradition SIBs can be seen as a impact
investment instruments
piloting for societal
challenges & opportunities
with the risk for the private investors and contractors. Most Dutch
SIBS are thematic,
for work, a few are
innovative offering a
chain or a one stop
shop support system.
Great
Britain
The
UK has 42 SIBs,
of which half are completed and it even has a SIB Fund with
SIBs and other social investments:
http://www.columbiathreadneedle.co.uk/investment-capabilities/fixed-income/uk-social-bond/.
The
UK's first SIBs aimed at Work & Youths (Not
in Education, Employment or Training, NEETs). Early,
now completed UK
SIBs, on average ranged
from 0.3 to 1million UK£
(most) and one exception with 5 million UK£.
Maximum
outcome
payment, returns
range from 50
to 500%.
The
operational SIBs on average have
1 million UK£ investment
with maximum outcome
payment,
returns ranging from 150
to 200%.
12
SIBS maximum outcome
payment are
undisclosed.
(Instiglio)
According
to Social Finance UK
database
The
UK: has 40
ImpactBonds, £43.4M Capital raised & 49,060 lives
touched. (£ 884 p.p.).
United
States of America
The
USA has 20 SIBs, of which one
failed and 18 are operational. Six were launched in 2016 and another
six in 2017 for Recidivism (7);
Children, Youths and their Education
(5); and Homelessness. (4).
American SIBs, named ''Pay
for Success'' bonds are
BIG, often amount to millions of US$.
The smallest is 2 million US$,
the mean 10 million US$
and the largest 30 million US$.
Maximum
outcome payment, returns
range from 10% to 200%.
(Instiglio)
According
to Social Finance UK
database
The
US: has 20
ImpactBonds, US$211M Capital raised & 24,316 lives touched. (US$
7650 p.p.) 650.000
residents in the DC Environmental Impact Bond area US$ 25M EIB.
The
Netherlands
The
Dutch with 10
SIBs
take third place globally. It has one of the largest SIBs with
13million Euro for Work
in Rotterdam South and
in
total Dutch SIBs have raised almost
27
million Euro in 5 years. Unfortunately one SIB was halted and 10million Euro less is invested in employment on & in Rotterdam Zuid (South). The
first SIB is successfully repaid, the contractor is now also co-investor
working on 2 more SIBs.
Most
Dutch SIB investments range from (below) one
to two million Euro
with one (Health
Impact Bond for Families)
4.75million
which is also a pilot i.e. potential scaling
catalyst.
Maximum
outcome payment,
returns range from
10 to 25%, most are undisclosed. (Instiglio) Quite
modest compared to the UK & USA maximum
payout ie return.
The
Dutch SIB investors are still cautious about communicating potential
returns compared to other countries (Instiglio
leaves undisclosed). In
early factsheets and press
presentations on average 5%
is suggested up to to 8 & 10%.
Maybe
reflective of a different culture in venture
capital & risk rewards.
And probably influenced by a critical attitude towards profiting
of market failures dealing with societal challenges.
A Dutch Parliamentarian even questioned the Minister for Social
Affairs on his views of ''commercial gains'' of employment seeking
support for refugees SIB. The Minister voiced his support.
7/9
Dutch SIBs have
Employment as the primary goal and most work for (uneducated)
youths, one for former inmates, one for cancer patients i.e. keeping
their job and one for (admitted) refugees.
One
of the SIBs is
crossing borders, helping
Dutch people find employment in Germany.
The
Ministry of Justice has a national recidivism prevention SIB
(which includes finding employment) it resembles the first UK SIB
with it's innovative chain-support approach.
Two
Health Impact Bonds
(HIB) were launched in 2017: Healthier
without Debt for
Families in Hague (one
stop shop support, an innovative
SIB) and Cancer &
Work for cancer patients
support during their treatment and return to work.
Late
2017 saw the launch of the first (with two more intended) SIB
for Refugees. Admitted
refugees, Statushouders,
are supported with very high quality Dutch language classes and 40
hours per week support in seeking employment.
Intermediaries
A
government sponsored intermediary, Society
Impact,
has raised awareness, trained (local) civil servants and now focuses
on Health
Impact Bonds in
an alliance with Health Insurers & Pensionfunds. A ''Falling
Prevention''
Health
Impact Bond
has been researched, but has not yet materialized.
Social
Impact Finance, a
private company is the intermediary for the largest and most recent
SIB, with two more intended.
The
Netherlands: 10
SIBs, capital raised: almost 27million Euro, Lives
touched: 3400 (7900E) SFUK + Instiglio + Alcanne.
DATA
sources:
SocialFinance
UK Database: http://sibdatabase.socialfinance.org.uk/
108
Impact
bonds,
392
Milion US$
capital raised &
738.671
Lives touched.
*The
DC Water Environmental Impact Bond touching 650.000 lives is not
included.
Themes:
Workforce Development (36),
Housing
/ Homelessness (19), Health (18), Child & Family Welfare (13),
Criminal Justice (11), Education & Early Years (9), Environment &
Sustainability (1) Adults with Complex Needs (1).
INSTIGLIO.org
a
Harvard
SIBLab
spin
off focuses on Development
Bonds. It
has an almost
complete
online
global database with
spreadsheets
showing
countries, capital raised, maximum payout, year & duration &
social issue. Global
outlook: Instiglio
also collects data on 36
SIBs in design stage
(4 exploration).
The
global map shows the activity in US & Western Europe, noticeable
is the Middle East
with Israel (4
operational, 2 design)
& Palestine (2
design
stage). Probably inspired by ''the
father of social investment
& SIB inventor''
Sir Ronald Cohen.
Jordan,
Lebanon & Turkey are
home to the International Red Cross''
Humanitarian Impact Bond for
rehabilitation of & by Syrian refugees (10-30million US$).
REPORTS
2018
The
Brookings Institute
& Convergence,
a WEFDavos impact
investing platform
published ''Impact
Bonds in Developing Countries: Early Learnings from the Field''.
Data source, the
SocialFinance
UK database.
Social
Finance UK
SFUK also looked at the potential of SIBs for Development in it's
latest report. It points out there are 24
Impact Bonds in low-and middle-income countries
in design stage and that (Development)
Impact Bonds can learn
from dat 10 years and 42 SIBs experiences in Britain.
Note
that in developing countries the repayment party is not the national
government but a supranational body and / or a philanthropic
foundation.
MATRIX
Social
Finance UK
differentiates
between
Thematic
SIBs
(best intervention for competition) and Innovative
SIBs
such as the Peterborough
Prison recidivism prevention which
introduced an support chain model and is now implemented nationally.
SFUK
stresses ''the
UN SDGs & scaling impact require a rigorous focus on outcomes,
not inputs. A shift to financing outcomes will create space for
front-line innovation, learning, and adaptation.''
Report:
(SUM 6 pag.)
http://www.socialfinance.org.uk/sites/default/files/publications/sf_outcomes_fund_note_feb_2018.pdf
And the Stanford Social Innovation Review on Pay for Success financing
https://ssir.org/articles/entry/pay_for_systems_change
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