Social Impact Investing

In February 2013 Allia, a charitable social investment organisation, announced the first
public opportunity in the UK to invest in a social impact bond. Although the product was
later withdrawn from sale due to lack of investors, the Future for Children Bond
combined a relatively low-risk ethical investment into affordable housing to provide the
funds to repay capital to investors, with a higher risk investment into a social impact
bond with the aim of delivering a high social impact and providing an additional variable
return.
It would have invested into the Social Impact Bond for Essex County Council to
‘improve the life outcomes’ of children aged 11–16 at risk of going into care.
Definitions
There are a range of interpretations of what the term ‘Social impact bond’ means.
Third Sector Capital Partners describes Social impact bonds as:
'A social impact bond is one potential financing option available to support Pay for
Success programs. Social Impact Bonds brings together government, service providers
and investors/funders to implement existing and proven programs designed to
accomplish clearly defined outcomes.
Investors/funders provide the initial capital support and the government agrees to make
payments to the program only when outcomes are achieved. So government pays for
success.'
Social Finance UK describes Social impact bonds as:
‘A Social Impact Bond is a public-private partnership which funds effective social services
through a performance-based contract.’
The Young Foundation describes Social impact bonds as:
‘a range of financial assets that entail raising money from third parties and making
repayments according to the social impacts achieved.'
The Non-Profit Finance Fund describes Social impact bonds as:
PFS financing agreements, in which private investors provide upfront capital for the
delivery of services and are repaid by a back-end, or outcomes payor (usually a
government), if contractually agreed upon outcomes are achieved, are often referred to
as "Social Impact Bonds" (illustrated and described below). Social Impact Bonds (SIBs)
are a mechanism by which to shift financial risk from service providers to investors, with
investors underwriting service providers’ based on their ability to deliver on positive social
outcomes.
Social Finance therefore specifies that the investment is from non-government bodies,
whereas the Young Foundation envisages that public bodies could be potential
investors.
Page 83 of 140