PUBLIC SECTOR INNOVATION
USING IMPACT BONDS ©	
  2013	
  
SIBs enable public organizations to experiment with new welfare solutions
on challenges they choose using private investor...
MEET US: SOCIALKONTRAKT
3
Competences and experiences in public
policy and administration,public
innovation,investment str...
GLOBAL COVERAGE OF SOCIAL IMPACT BONDS IN SELECTED MEDIA
4
Short articles about Social Impact Bonds
-  Wikipedia article
-...
SIB TO IMPROVE OUR WAY OF DEALING WITH COMPLEX SOCIAL ISSUES
reduce teenage overweightness?
find employment opportunities f...
…public organizations could get money to try additional solutions without risk ?
What if…
…public organizations could involve their community in decision process?
What if…
…public organizations collaborate with innovative companies for welfare solutions?
What if…
INTRODUCING SOCIAL IMPACT BONDS
Repayment
guarantee based
on project success
Receive
services
Determine the
strategic publ...
THE BASIC IDEA: FOCUS ON OUTCOMES,NOT OUTPUT
Traditional public contracting
based on OUTPUTs
Social impact bonds enable co...
ALLOWING TO LEARN CONCURRENT WITH EXISTING ACTIVITIES
SIB projects don’t need to replace existing projects,but provide exp...
BRIDGING THE RISK THROUGH INNOVATION VALLEY OF DEATH
SIBs provide the necessary risk-taking capital in order to facilitate...
ROOM FOR ALIGNMENT BETWEEN PUBLIC GOALS AND CIVIC ORGANIZATIONS
Align public goals with private money and capacity of non-...
SIB FUND ENSURES APPROPRIATE LIQUIDITY FOR SIB REPAYMENT
•  Public institutions make annual payments
to the SIB fund.
•  T...
PROCESS OF ISSUING SOCIAL IMPACT BONDS –HOW TO GET STARTED
SIB projects start with the crucial step of defining the problem...
PROGRESS WITH SEVERAL PUBLIC INSTITUTIONS
*Aalborg,focus on
elderly healthcare.	
  
*København,focus on
preventative healt...
PROCESS OF SOCIAL IMPACT BOND ISSUANCE
17
Problem with a price tag
and clear variable(s) of
success
Executing organization...
PROCESS OF SOCIAL IMPACT BOND ISSUANCE
Problem with a price tag
and clear variable(s) of
success
Align public budgets with...
PROCESS OF SOCIAL IMPACT BOND ISSUANCE
EXAMPLE HYPOTHETICAL SCENARIO
Executing organizations
are matched with
investors
* ...
PROCESS OF SOCIAL IMPACT BOND ISSUANCE
EXAMPLE HYPOTHETICAL SCENARIO
•  Red Cross project focuses on 1000 overweighed kids...
PROCESS OF SOCIAL IMPACT BOND ISSUANCE
EXAMPLE HYPOTHETICAL SCENARIO
•  Final impact assessment shows success with 60% of ...
BUILDING BLOCKS FOR SOCIAL IMPACT BONDS
22
Robust outcome metric(s)
Clearly defined target
group
Issue area a priority for...
EXAMPLES OF BONDS –CASE UNDER DISCUSSION WITH AALBORG
23
Goal
Reduce unnecessary hospital visits by the recent elderly
hos...
EXAMPLES OF BONDS –CASE UNDER DISCUSSION WITH MIN.OF JUSTICE
24
Goal
Avoid traumatic experiences among the detainees
await...
EXAMPLES OF BONDS –VULNERABLE YOUTH IN ESSEX,UK
25
Goal
Provide therapeutic support and improve outcomes for
vulnerable ad...
EXAMPLES OF BONDS –DISADVANTAGED KIDS IN THAMES VALLEY,UK
26
Goal
Help the kids participate and succeed in education or
tr...
EXAMPLES OF BONDS –EX-PRISONERS IN PETERBOROUGH,UK
27
Goal
Reduce reoffending among the short-term ex-prisoners
after they...
EXAMPLES OF BONDS –HOMELESS PEOPLE IN GREATER LONDON,UK
28
Goal
Create sustainable solutions for the homeless in London
Me...
EXAMPLES OF BONDS –ADOPTING VULNERABLE CHILDREN,UK
29
Goal
Family finding for vulnerable children at adoptive families.
Mea...
EXAMPLES OF BONDS –REDUCING YOUNG OFFENCES,AUSTRALIA
30
Goal
Reduce foster care and prevent young criminals from returning...
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Social kontrakt introduction

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  • Change focus to a new way of outsourcing where the focus is on outcomes then output. Tool for finding new solutions while the existing solutions continue. Alolowing more proposals / trials to meet the goals the public sector sets up.
  • Social kontrakt introduction

    1. 1. PUBLIC SECTOR INNOVATION USING IMPACT BONDS ©  2013  
    2. 2. SIBs enable public organizations to experiment with new welfare solutions on challenges they choose using private investors’money as the risk-takers while engaging civic organizations to implement the projects.
    3. 3. MEET US: SOCIALKONTRAKT 3 Competences and experiences in public policy and administration,public innovation,investment structuring, welfare innovation,public private partnerships,startup companies. Collaboration with SocialFinance and Center for Economic and Business Research (CBS) Communities moving forward Our goal is to strengthen the welfare state by providing municipalities with the network and resources to experiment with innovative solutions Team Reach us: info@socialkontrakt.com Twitter: @socialkontrakt
    4. 4. GLOBAL COVERAGE OF SOCIAL IMPACT BONDS IN SELECTED MEDIA 4 Short articles about Social Impact Bonds -  Wikipedia article -  The New York Times (20.06.2012) -  The Economist (18.08.2012) -  The New York Times (02.08.2012) -  Center for American Progress (09.02.2011) -  McKinsey & Company (May 2012) -  Huffington Post (10.018.2012) -  Corporation for Enterprize Development (03.09.2011) -  Non-profit quarterly (17.04.2013) Studies about Social Impact Bonds -  Third Sector Capital Partners (2011) -  McKinsey & Company (May 2012) -  RAND corporation (2011) -  Social Finance: SIB in Essex (21.10.2012) -  Social Finance: SIB in Thames Valley (31.10.2012) -  Social Finance: SIB in Peterborough (2011)
    5. 5. SIB TO IMPROVE OUR WAY OF DEALING WITH COMPLEX SOCIAL ISSUES reduce teenage overweightness? find employment opportunities for the disabled population? increase ratio of public transport (or bicycles)? ensure hospitals are not crowded with unnecessary doctors visits? reduce smoking (or alcohol use)? Social issues are complex => that creates need to find new mechanisms to deal with them integrate ex-prisoners to society and avoid high re-offending? How do we…  
    6. 6. …public organizations could get money to try additional solutions without risk ? What if…
    7. 7. …public organizations could involve their community in decision process? What if…
    8. 8. …public organizations collaborate with innovative companies for welfare solutions? What if…
    9. 9. INTRODUCING SOCIAL IMPACT BONDS Repayment guarantee based on project success Receive services Determine the strategic public goals Investment into the providers Return based on outcome Pay for the service Service delivery commitment Service delivery Program success assessment by independent auditors
    10. 10. THE BASIC IDEA: FOCUS ON OUTCOMES,NOT OUTPUT Traditional public contracting based on OUTPUTs Social impact bonds enable contracting based on OUTCOMEs “Deliver the target group of overweighed kids the following services: > 100 hours of outdoor activities > 100 hours of lectures on healthy diet” Service provider focuses on delivering services just as contracted –even when they know it’s not working Service provider measures its own performance frequently and adjusts project performance example example “Reduce the number of overweighed kids: > Improve body mass index to less then 25 > Ensure that kids do not undergo social, psychological or health problems” vs ⇒ 
    11. 11. ALLOWING TO LEARN CONCURRENT WITH EXISTING ACTIVITIES SIB projects don’t need to replace existing projects,but provide experiments alongside. Family consultations Special lectures at school Example: How do we reduce the number of overweighed kids? Kids in a selected school Outdoor sports activities New computer game involving exercise Heavy computer users between 13-15 Existing projects New projects realized with SIBs All kids with the problem
    12. 12. BRIDGING THE RISK THROUGH INNOVATION VALLEY OF DEATH SIBs provide the necessary risk-taking capital in order to facilitate the learning process time Perceived project risk Municipal willingness to invest Project 1 Project 2
    13. 13. ROOM FOR ALIGNMENT BETWEEN PUBLIC GOALS AND CIVIC ORGANIZATIONS Align public goals with private money and capacity of non-public organizations using SIBs Service delivery Service delivery Pay for the service Service delivery commitment ? Lack of collaboration Interested funds include: •  Obelske Familiefond •  Velux Fonden •  SociaKapitelFond
    14. 14. SIB FUND ENSURES APPROPRIATE LIQUIDITY FOR SIB REPAYMENT •  Public institutions make annual payments to the SIB fund. •  The payments are sourced from savings and/or from preventive or innovation public budgets. •  In case the SIB project doesn’t achieve the highest performance,some of the project payments are saved in the SIB fund for future SIBs,or paid back. •  The investors pay for service providers during the course of project. •  The impact bond fund accumulates necessary money to cover investors. •  Investors are paid at the end based on project success level. Payments during project Payments during project Repayment upon impact assessment
    15. 15. PROCESS OF ISSUING SOCIAL IMPACT BONDS –HOW TO GET STARTED SIB projects start with the crucial step of defining the problem –by public organization Projects worth 3-20m DKK per year over 3-7 years period
    16. 16. PROGRESS WITH SEVERAL PUBLIC INSTITUTIONS *Aalborg,focus on elderly healthcare.   *København,focus on preventative healthcare   *Probation services for temporary inmates, Odense Area.   *Ikast-Brande, ongoing discussion   *Middelfart, ongoing discussion   *Halsnæs, ongoing discussion  
    17. 17. PROCESS OF SOCIAL IMPACT BOND ISSUANCE 17 Problem with a price tag and clear variable(s) of success Executing organizations are matched with investors Projects are delivered on pre-agreed budget and timeline Investors are funded based on the Impact assessment Align public budgets with public vision. * What are crucial goals? * How much are they worth? * Which specific parameters indicate success? * Invite companies and NGOs to submit projects. * Prequalify projects with public organization * Open the projects for funding by investors * Monthly performance reviews,and adjustments to project methodology * Investment is released to service providers upon milestones * Project efficacy measured by independent auditors * Investors receive pay-back based on projects’success * Projects adopted by public institutions
    18. 18. PROCESS OF SOCIAL IMPACT BOND ISSUANCE Problem with a price tag and clear variable(s) of success Align public budgets with public vision. * What are crucial goals? * How much are they worth? * Which specific parameters indicate success? EXAMPLE HYPOTHETICAL FIGURES AND STATEMENTS Problem: “Too many overweighed kids between age 6 and 12 in the district” Value to public sector: •  Highly overweighed persons cost the health system over 1m DKK over their lifetime as they are more prone to diabetes,and require operations •  Overweighed kids are more likely to require study help and additional teaching •  Overweighed kids are less likely to find a job when they finish their education ⇒  Total current public value of reducing overweigh issue is 0.8m DKK per head as a combination of the impacts in various public budgets ⇒  Municipality agrees to pay to projects 0.4m per person whose overweigh problem is resolved with a cap of 14% in annual return Success parameters: •  Number of persons in target group whose body mass ratios has reduced to from “extremely high”to “normal”. •  Number of persons in target group whose body fat ratio has reduced to less then 30%. •  The normal weigh status needs to be sustained over 18 months. •  No increase in behavioral or health problems during treatment.
    19. 19. PROCESS OF SOCIAL IMPACT BOND ISSUANCE EXAMPLE HYPOTHETICAL SCENARIO Executing organizations are matched with investors * Invite companies and NGOs to submit projects. * Prequalify projects with public organization * Open the projects for funding by investors 1.  Service providers are invited to make their bid to carry out projects concerning the overweigh issue. a.  Red Cross Youth applies with a project to engage target group with outdoor activities b.  Mobile app developer company Shape applies to develop a mobile app which will get the kids to work out and earn badges c.  Therapists association apply to carry out a new child-centric therapy method with the target group and their teachers,families and friends. 2.  Municipality pre-approves all projects based on their ethical and political fit. 3.  During a 3-month period,investors are invited to finance each of the projects a.  80% of the money is raised from foundations and CSR funds with social objectives. b.  95% of the investors are private individuals who have some kind of experience with or exposure to the overweighed kids. c.  Projects (a) and (b) receive adequate funding for pilot and start implementation
    20. 20. PROCESS OF SOCIAL IMPACT BOND ISSUANCE EXAMPLE HYPOTHETICAL SCENARIO •  Red Cross project focuses on 1000 overweighed kids between 6-12 divided into two cohorts based on their age. •  Red Cross Youth finds out that in order to move the overweighed kids to enjoy and compete on outdoor sports such as kayaking,the kids need to have peers who do not have the overweigh problem •  They also find out that finding appropriate equipment for the target group is essentially a major part of the problem,and they make necessary arrangements to procure the equipment. •  They receive project payments in 3 steps; initially (40%), upon reaching the desired body-weight with the first cohort (30%) and upon sustaining the body- weight for one year with the first cohort (30%). •  The interim impact assessment reports show encouraging results,but some delays in the execution. •  By adjusting program activities and calendar,Red Cross manages to deliver above the minimum impact threshold. Projects are delivered on pre-agreed budget and timeline * Monthly performance reviews, and constant adjustments to project methodology * Investment is released to service providers upon achieving milestones
    21. 21. PROCESS OF SOCIAL IMPACT BOND ISSUANCE EXAMPLE HYPOTHETICAL SCENARIO •  Final impact assessment shows success with 60% of the target group •  Red Cross project receives enough funding to cover project costs plus a return which corresponds to 7% annual return on investment •  Funds and private persons who funded this project are encouraged to fund other social impact bonds •  Project assessment studies show that the method employed creates 3 times more value for society then its cost •  Municipality decides to implement the project with scale with all target group •  Red Cross leads implementation by training municipal employees that implemented SIB,as well as others. ⇒  The public workers are convinced about the efficacy of the new approach proven project carried out by civic sector –which they previously resisted ⇒  A new method/approach to help kids with overweigh problems considered risky by municipality is implemented 21 Investors are funded based on the Impact assessment * Project efficacy measured by independent auditors * Investors receive pay-back based on projects’success * Projects adopted by public institutions
    22. 22. BUILDING BLOCKS FOR SOCIAL IMPACT BONDS 22 Robust outcome metric(s) Clearly defined target group Issue area a priority for public sector Promising and innovative interventions and service providers exist Issue area a priority for investors Cost of intervention is small relative to potential public sector value Considered interventions are currently not viable for public sector to invest in
    23. 23. EXAMPLES OF BONDS –CASE UNDER DISCUSSION WITH AALBORG 23 Goal Reduce unnecessary hospital visits by the recent elderly hospital patients Measurement Variables y  Reduction in the number of unnecessary doctor visits y  Maintain health conditions Elderly people with recent hospitalization record Aalborg Kommune Social Kontrakt TBD TBD Budget and Period ~15m DKK Stakeholders 2014 -2016 Contact SocialKontrakt for more information
    24. 24. EXAMPLES OF BONDS –CASE UNDER DISCUSSION WITH MIN.OF JUSTICE 24 Goal Avoid traumatic experiences among the detainees awaiting trial in detention prisons Measurement Variables y  Reduction in the number of sick-days by prison guards y  Improved health conditions and days necessary for psychiatric of detainees. Detainees in Fyn,Syd- og Sønderjylland Arresthuset I Odense Social Kontrakt TBD TBD Budget and Period ~20m DKK Stakeholders 2014 -2017 Contact SocialKontrakt for more information
    25. 25. EXAMPLES OF BONDS –VULNERABLE YOUTH IN ESSEX,UK 25 Goal Provide therapeutic support and improve outcomes for vulnerable adolescents at risk of going into care Measurement Variables y  Reduction in days spent in care by the adolescents y  Improved school outcomes y  Wellbeing (health) y  Reduced reoffending 380 vulnerable young people between 11-16 & families Essex County Council Social Finance Big Society Capital, Bridges Ventures,& others Action for Children Commitment £ 3.1 million Stakeholders 2012 -2017 Contact SocialKontrakt for more information
    26. 26. EXAMPLES OF BONDS –DISADVANTAGED KIDS IN THAMES VALLEY,UK 26 Goal Help the kids participate and succeed in education or training and thereby improve their employability Measurement Variables y  Improved behavior y  School attendance y  Educational qualifications y  Employment opportunities 2,500 vulnerable young people between 14-15 Department of Work and Pensions Social Finance Big Society Capital, Bridges Ventures, Barrow Cadburry Trust and Impetus Trust Adviza (Energize Program) Commitment £ 7 million Stakeholders 2013 -2016 Contact SocialKontrakt for more information
    27. 27. EXAMPLES OF BONDS –EX-PRISONERS IN PETERBOROUGH,UK 27 Goal Reduce reoffending among the short-term ex-prisoners after they leave the prison Measurement Variables y  Reduction in re-offending rate 3,000 short- sentenced male ex- prisoners from Peterborough jail Department of work and pension Social Finance Blue Sky,RAPt, St Giles Trust YMCA, St Giles Trust, Ormission Trust Commitment £ 5 million Stakeholders 2010 -2016 Contact SocialKontrakt for more information
    28. 28. EXAMPLES OF BONDS –HOMELESS PEOPLE IN GREATER LONDON,UK 28 Goal Create sustainable solutions for the homeless in London Measurement Variables y  Reduction of individuals bedded on the streets y  Confirmed tenancy y  Confirmed connection to a country with social connections y  Decrease in A&E episodes per person per year 830 homeless people in London Department of Communities and Local Government (DCLG) Social Finance Greater London Authority Two providers (TBD) Commitment £ 5 million Stakeholders 2012 -2014 Contact SocialKontrakt for more information
    29. 29. EXAMPLES OF BONDS –ADOPTING VULNERABLE CHILDREN,UK 29 Goal Family finding for vulnerable children at adoptive families. Measurement Variables y  Number of children adopted 300 vulnerable minority children with clinical conditions or over 4 years of age Department for Work and Families BakerTilly & LSE HNWIs Consortium of Voluntary Adoption Agencies Commitment £ 5 million Stakeholders 2012 -2014 Contact SocialKontrakt for more information
    30. 30. EXAMPLES OF BONDS –REDUCING YOUNG OFFENCES,AUSTRALIA 30 Goal Reduce foster care and prevent young criminals from returning to prison Measurement Variables y  Number of days spent in foster care y  Reduction in young offenders 500 young adult repeat offenders Government of New South Wales Mission Australia (Ongoing) Benevolent Society, Westpac Corporation and Uniting Care Burnside Commitment $ 20 million Stakeholders 2013 -2018 Contact SocialKontrakt for more information
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