GIA Singapore - Financing social innovation (Mulgan)

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GIA Singapore - Financing social innovation (Mulgan)

  1. 1. FINANCING SOCIALINNOVATIONGeoff Mulgan
  2. 2. WHAT KIND OF MONEY? 1 Prompts2 Proposals 6 Systemic3 Prototypes change 4 Sustaining 5 Scaling
  3. 3. Most money, fewestconstraintsLeast money, mostoutcomes
  4. 4. HighRiskLow Low Impact High
  5. 5. MONEY AND VALUE
  6. 6. EARLY STAGE –speculative, open,stage-gate … forindividuals, teams,organisations
  7. 7. centralised Corporate Venturing Innovation lab Open Sourceexternal internal Open Innovation Skunkworks Movements, campaigns decentralised
  8. 8. centralisedexternal internal decentralised
  9. 9. • Inducement prizes – Big Green Challenge• Accelerators
  10. 10. SUSTAINING AND SCALING
  11. 11. Analysing ventures from a commercial lens
  12. 12. •Developing a business model Intellectual•Securing initial funds – Developing Building operational property strategy protection customers and investment systems and processes to deliverDistribution Business planning Money and for users channels and systems Banking and business model Know-how working capital Management Pricing information Sales and business Purchasing systems development Leasing•Acquiring the premises Co-operatives and equipment to Physical INNOVATION People and deliver the innovation Resources governance Community•Accessing the raw xxxx chain Supply Interest •Setup up Company management Advertising Independent materials the innovation evaluationgovernance and Industrial and requires Reputation •Recruit benchmarking Provident •Evaluating effectiveness and leadership and Society •Building brand, profile, Non-executive Partnerships effectiveness team reputation Directors Charities •Switching from previous Shareholders solutions PR agreements
  13. 13. Impact vs financial return
  14. 14. High XRisk Social investorsLow Commercial funding Low Impact High
  15. 15. FoundationsGovernmentCrowdfunding
  16. 16. EXAMPLES OF SOCIAL FINANCE• Banca Etica and Banca Prossima in Italy• Big Society Capital in the UK• Acumen in the US
  17. 17. MOBILISING PROCURMENT AND PRIZES Articulate Procure need and outcomes & send clear solutions, signals to not the market products and services Variable tariffs Widen the pool of suppliers and innovators
  18. 18. WHAT DEGREE OF COMPETITION?Competition isgood forinnovation…up to a pointHow open tomake publicmarkets?
  19. 19. MOBILISING PROCURMENT AND PRIZESVery efficientCost efficienciesLess efficient Small Size of organisation/unit Large
  20. 20. The pattern for public services, and national governments:replication is not always best served by organisationalgrowthVery efficient Cost efficiencies Less efficient Small Size of organisation/unit Large
  21. 21. FUTURE VALUEFrom ‘we need more money’ to ‘how do we createfuture value and turn it into present money’. Thisis where social finance overlaps with public fundingand pressures.
  22. 22. A long history of tools ....• Commissioning for outcomes• Payment by results• PPPs• Shared savings models• Publicly created markets (carbon, housing)
  23. 23. Cost-benefit analysis stated preference revealed Social Impact Assessment methods preference QALYS Best Available Charitable Option Social Return on Life (BACO) Investment satisfaction DALYs Education value Blended value addedWARM public value Social value PROMs Index of Civic Health Satellite environment National time bilan societal accounts i5 accounts bilancio sociale
  24. 24. FINANCING SOCIALINNOVATION – two examples
  25. 25. 1. Social Impact Bonds
  26. 26. Social Impact Bonds• Finance from A programme • Commitment to Foundations, or of actions pay on achieving Commercial outcomes • Implemented by a investors • Benchmarked range of providers, against control coordinated by a group, and lead organisation, separated from intermediary or an "environmental" Raising a sum SPV risk factors for investment A commitment to repay
  27. 27. Peterborough SIB•First SIB contract signed with the Ministry of Justice inMarch 2010. Social Finance raised £5m to fund work with3,000 male, short-sentence prisoners.• Nationally, 60% of such prisoners re-offend within 1year.• Social sector organisations provide intensive support toprisoners and their families.•Investors will receive a return if re-offending among theprison leavers falls by 7.5% or more• If there is a drop in re-offending beyond 7.5%,maximum is capped at 13% over eight years.
  28. 28. Australia: New South Wales(Social Benefit Bonds)US Federal Government(Pay for Success Bonds)
  29. 29. 2. Preventive investment at the level of a city: Greater Manchester
  30. 30. Elements• collaboration of municipalities and nationalgovernment combining:• evidenced actions to reduce costs (in this casemainly on prisons and courts)• a Financial Incentive for reductions in prisonnumbers• a range of commissions to NGOs and others
  31. 31. Grounded in analysis of where crime could bede-escalated with savings Young Young Young Adults at Adults at1 People at risk of conviction 2 People at risk of reoffending 3 Adults at risk of reoffending 4 risk of short custodial sentences 5 risk of reoffending Police-led Restorative Intensive Alternative to Custody Disposals Restorative Youth Choose Change Conferencing Multisystemic Therapy
  32. 32. Combined with options for greater integration1. A single assessment process2. A single plan for offenders3. A single leader of each plan4. Shared outcomes5. Shape the pattern of resource allocation6. Shared savings
  33. 33. Questions• how to align interests of payers, funders, delivery agencies, beneficiaries?• will this spur or hinder innovation?• is it worth the transaction costs?• what are the political risks?

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