Social Impact Investing

Development released a report outlining the findings of a high level working group set
up to explore the potential of this new mechanism.
History
Social impact bonds are a non-tradable variant of social policy bonds invented by
Ronnie Horesh, a New Zealand economist, in 1988. The idea of the Social impact bond
has been promoted and developed by a number of agencies and individuals in an
attempt to address the paradox that investing in prevention of social and health
problems saves the public sector money, but that it is currently difficult for public bodies
to find the funds and incentives to do so.
The first Social impact bond was announced in the UK on 18 March 2010 by then
Justice Secretary Jack Straw, to finance a prisoner rehabilitation program. In the UK the
Prime Minister’s Council on Social Action (a group of ‘innovators from every sector’
brought together to ‘generate ideas and initiatives through which Government and other
key stakeholders can catalyse, celebrate and develop social action’) was asked in 2007
to explore alternative models for financing social action. The group began to develop
the idea of a Social Impact Bond, and the work is being taken forward by a number of
organisations including Social Finance, an organization committed to increasing
investment in the third sector, the Young Foundation, the Center for Social Impact in
Australia, and other NGOs and private firms.
The idea of a Social Impact Bond has generated significant interest from across the
political spectrum in multiple countries, including U.S., UK, and Australia. .
Social impact bonds have also generated interest in the United States. In February
2011, Barack Obama’s proposed 2012 budget stated that up to $100m would be freed
up to run Social impact bond pilot schemes. In August, 2012, Massachusetts became
the first state in the nation to use a competitive procurement process to secure social
innovation financing for social services. The state legislature authorized spending up to
$50 million on the initiatives.
In Australia, the intention to trial Social impact bonds was announced in New South
Wales in November 2010 by Premier Kristina Keneally of the Australian Labor Party.
The policy direction was continued by the Coalition (Australia) after a change in
Government in 2011.
In November 2012 Essex County Council became the first local authority in the UK to
commission a Social impact bond in Children’s Services, with the aim of providing
therapeutic support and improving outcomes for adolescents at risk of going into care.
Nick Hurd, the minister for civil society, commented: "Social impact bonds are opening
up serious resources to tackle social problems in new and innovative ways. This is
about communities, businesses and charities all working together to change people's
lives, whilst at the same time making savings for the taxpayer."
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