Social Impact Investing

UK
On 18 March 2010, Secretary of State for Justice Jack Straw announced a six-year
Social Impact Bond (SIB) pilot scheme run by Social Finance that will see around 3,000
short term prisoners from Peterborough prison, serving less than 12 months, receiving
intensive interventions both in prison and in the community. Funding from investors
outside government will be initially used to pay for the services, which will be delivered
by Third Sector providers with a proven track record of working with offenders. If
reoffending is not reduced by at least 7.5% the investors will receive no recompense.
The Social Impact Bond in Peterborough was launched by Secretary of State for Justice
Kenneth Clarke MP and Prisons Minister Crispin Blunt on 10 September 2010.
US
New York City: On February 2012, the City of New York issued a $9.6 million social
bond for prisoner rehabilitation to be run by The Osborne Association with support from
Friends of Island Academy. Goldman Sachs bought the bond and will profit if recidivism
decreases. [47] While the City of New York didn't actually issue bonds or put up-front
capital for MDRC to run the program (this was done by Goldman Sachs directly with
MDRC), the City may be liable for some amount if the program is successful,
presumably to be paid with savings associated with reduced recidivism. An independent
evaluation, performed by the Vera Institute of Justice, found the goal of reducing
teenage recidivism by ten percent had not been met, at all, and the city paid nothing to
Goldman Sachs.
New York State: In mid-2012, the New York State Department of Labor (DOL) selected
Social Finance US as its Intermediary partner in structuring an application for federal
funding for a Social Impact Bond. In 2013, New York approved $30 million in its budget
to support Social impact bonds over the subsequent five years. In September 2013,
New York State received a $12 million grant from the United States Department of
Labor (USDOL) to fund a Pay for Success project designed to increase employment
and reduce recidivism among 2,000 formerly incarcerated individuals in partnership with
Social Finance US and the Center for Employment Opportunities. This was the largest
grant awarded by USDOL for Pay for Success projects.
Massachusetts: On August 1, 2012, the Commonwealth of Massachusetts announced
that Third Sector Capital Partners will serve as lead intermediary, in partnership with
New Profit Inc., for the youth recidivism initiative. Roca, United Way of Massachusetts
Bay and Merrimack Valley, and Youth Options Unlimited will also participate in the
youth recidivism project.The program, called Social Innovation Financing, operates on a
simple “pay for success” model, in which nonprofits must demonstrate that by keeping
youth from being reincarcerated. According to the state’s press release, the juvenile
justice contract “will be designed with the specific goal of reducing recidivism and
improving education and employment outcomes over several years for a significant
segment of the more than 750 youth who exit the juvenile justice system, and the
several thousand who exit the probation system annually.”
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