Social Finance Ltd.

Social Finance Ltd. is an organisation seeking new approaches to entrenched social problems. Social Finance has a team of 70 individuals with substantial expertise in finance, strategy consultancy, public and the social sector. It works with government, investors and delivery partners to develop new models of social change.

Social Finance's initial team supported the work of the Commission on Unclaimed Assets, which recommended the establishment of a Social Investment Bank in March 2007 and in turn developed the blueprint for what is now named Big Society Capital, a social investment institution with £600m to invest. ^[1][2][3][4]

Funding

Initially financed by a group of philanthropists, later financial support included charitable trusts and foundations including: Esmée Fairbairn Foundation, Rockefeller Foundation and the Big Lottery Fund.^[5]

Social impact bonds

Social Finance UK has been central to the development of social impact bonds.^[6][7][8] A Social Impact Bond, also known as a Pay for Success Bond, is a contract with the public sector in which a commitment is made to pay for improved social outcomes that result in public sector savings.^[9] The expected public sector savings are used as a basis for raising investment for prevention and early intervention services that improve social outcomes.^[10][11]

Social Impact Bonds are not bonds in the conventional sense. While they operate over a fixed period of time, they do not offer a fixed rate of return. Repayment to investors is contingent upon specified social outcomes being achieved and therefore in terms of investment risk Social Impact Bonds are more similar to that of a structured product or an equity investment.^[12]

Offender Rehabilitation

On 18 March 2010, then Secretary of State for Justice Jack Straw announced a six-year social impact bond (SIB) pilot scheme run by Social Finance to 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 was initially used to pay for the services, which were delivered by Third Sector providers with a proven track record of working with offenders. If re-offending is not reduced by at least 7.5% through all tranches the investors will receive no recompense. In August 2014, the first set of results were released, showing that the SIB reduced reoffending by 8.4 per cent. This was not high enough to trigger any repayments to investors at this point (10% reduction would have been necessary for payments to investors by August 2014) but was on track for payments to investors in the next tranche - as an 8.4% reduction is in line with the overall reduction rate needed.^[13]

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.^[14][15]

Children and Families

Social Finance worked with UK local authorities to assess the potential for social impact bonds to improve family support services. These studies assessed the potential of social impact bonds to fund preventive and early intervention services which improve outcomes for children and generate cost savings for Local Authorities.^[16][17]

In March 2012 Manchester City Council announced a social impact bond to fund Multi-dimensional treatment foster care.^[18]

Homelessness

In March 2012, Housing minister Grant Shapps and London Mayor Boris Johnson launched a £5m social impact bond to help London’s most persistent rough sleepers. The department of communities and local government will pay charities who deliver services within the bond on a payment-by-results basis. Social Finance worked with the GLA and the DCLG to design the metrics and organise the procurement exercise. The criteria they are being measured against include reducing the proportion of regular rough sleepers returning to London’s streets; increasing the number of rough sleepers moved into settled accommodation and employment. The original plan called for a further metric around reducing admissions to hospital accident and emergency units. The fund is administered by the Greater London Authority.^[19]

Drug rehabilitation

Social Finance is currently assessing the feasibility of establishing a Social Impact Bond to fund drug rehabilitation services.^[20]

Health

Evidence suggests that considerable savings could be made if health budgets allocated more funding for preventative measures.^[21] Social Finance is looking into the potential of funding such measures through a Social Impact Bond. A health orientated Social Impact Bond could be developed internally by the National Health Service (NHS) or by an external provider such as a social enterprise or a civil society organisation.^[22]

Financial inclusion

Financial exclusion refers to the inability, difficulty or reluctance to access appropriate ‘mainstream’ financial services including banking, savings, affordable credit and insurance. In 2010 Social Finance worked with the Family Fund, True Colours Trust and Council for Disabled Children to develop a tailored solution to financial exclusion among families with disabled children in the UK.^[23]

Development impact bonds

A Development Impact Bond (DIB) is a variation of the SIB model that would provide new sources of financing to achieve improved social outcomes in developing country contexts. As with SIBs, investors would provide external financing and only receive a return if pre-agreed outcomes are achieved. Funds to remunerate investors would come from donors, the budget of the host country, or a combination of the two. Financial returns to investors are intended to be commensurate with the level of success. DIBs have the potential to improve aid efficiency and cost-effectiveness by shifting the focus onto implementation quality and the delivery of successful results.

In October 2013, Social Finance and the Center for Global Development released a report outlining the findings of a high level working group set up to explore the potential of this new mechanism.

Sister Organizations

US

In January 2011, Social Finance, Inc. was launched to bring social impact bonds to the U.S. market.^[24]

In May 2011, Massachusetts became the first state in the nation to formally explore social impact bonds when Governor Deval Patrick's administration issued a Request for Information (RFI) to seek public input into how best to implement SIBs in the Commonwealth.^[25]

In December 2013, New York State and Social Finance US announced a $13.5M social impact partnership to reemploy formerly incarcerated individuals, making it the first state-led Social Impact Bond to launch in the nation.^[26] The team received a grant from the US Department of Labor to support the pay for success project .^[27]

Israel

Social Finance Israel was established in 2013 to help build a social investment market in the Israel.

Publications

• A New Approach to Banking: Extending the use of Jam Jar Accounts in the UK (2011),
• Towards a New Social Economy: Blended value creation through Social Impacts Bonds (2010),
• Social Impact Bonds: Rethinking finance for social outcomes(2009),
• Charity mergers: Tackling the issues in practice(2009),
• Bringing Social Impact Bonds to Massachusetts (2011),
• A New Way to Invest in Better Healthcare(2011),
• Technical Guide to Commissioning Social Impact Bonds(2011),
• Social Impact Bonds: The One Service. One Year On(2011),
• Financial Inclusion: Families with Disabled Children. Understanding their financial needs(2011),
• A New Tool for Scaling Impact: How Social Impact Bonds Can Mobilize Private Capital to Advance Social Good(2012),

References

External links

• Social Finance