Social impact bonds


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Social impact bonds

  1. 1. INTRODUCTION TO SOCIAL IMPACT BONDS – BRISTOL LIF EVENT 14TH JANUARY 2014 Tom Symons, Associate Social Finance is authorised and regulated by the Financial Conduct Authority FCA No: 497568
  2. 2. INTRODUCTION TO SOCIAL IMPACT BONDS • What is a Social Impact Bond? • Why a Social Impact Bond? • SIB Case Study – the Essex Edge of Care Social Impact Bond • Support available through the Big Lottery Fund ‘Commissioning Better Outcomes fund’ Social Finance are the support provider for the Commissioning Better Outcomes fund and this presentation is part of our intensive support offer ©Social Finance 2012 2
  3. 3. INTRODUCTION TO SOCIAL IMPACT BONDS CONT. • The Social Impact Bond is a means of investing in intensive prevention services where improved social outcomes are likely but not certain. • Social Impact Bonds are contracts with public sector commissioners under which government commits to pay for improved social outcomes. • On the back of this contract, investment is raised from non-governmental investors. • This investment is used to pay upfront for a range of interventions to improve social outcomes. • Investors are repaid only if successful outcomes are achieved. Investors stand to lose some or all of their capital if positive outcomes are not achieved. • The investor takes the risk that the interventions do not deliver the desired outcomes. The greater the improvement, the greater the financial return to investors. ©Social Finance 2012 SOCIAL IMPACT BONDS BRING NEW INVESTMENT TO BEAR ON SOCIAL ISSUES, AND ALIGN ALL PARTIES AROUND A COMMON GOAL. 3
  4. 4. WHAT IS A SOCIAL IMPACT BOND? • Social Impact Bonds invest in preventative services to improve social outcomes 4 • (3) Social outcomes are measured over time • Investors are repaid only if desired outcomes are achieved • (1) Public sector commissioners commit to pay for improved social outcomes for a target population • (2) On the back of this contract, investment is raised from social investors • This investment is used to provide working capital for intervention services ©Social Finance 2013 • Investors risk losing their money if the intervention does not deliver the desired outcomes • The greater the improvement in outcomes, the greater the financial return to investors
  5. 5. WHY WOULD A LOCAL COMMISSIONER EMBARK ON A SIB? • Innovation: trying a new intervention that doesn’t fit with existing funding buckets and only paying if it succeeds. This helps to be more outcomes-focused, filling a service gap or addressing intractable problems • Flexibility: SIBs offer the flexibility of how a programme is delivered and allow services to respond to individual need as well as real-time learning about what works • Rigour: focus on performance data and management to ensure programmes are delivered effectively and where relevant with fidelity to the evidence based model • Partnership: multiple service providers, investors and commissioners working together towards a common goal • Early Intervention and Prevention: enables new up-front funding to help shift resources and services to earlier indicators of need • Social Investment: accessing additional capital to try new things and partner with new funders ©Social Finance 2013 5
  6. 6. EXAMPLE OF IMPACT DELIVERED SO FAR 6 Social Impact Bonds are demonstrating an ability to create systemic change. 2nd stage implementation Scaling Initial SIB model Criminal Justice Adolescents in or on edge of care Peterborough SIB Further PbR pilots -Doncaster -Local Government Incentive models Essex, Manchester and Liverpool feasibility studies Essex children at the edge of care MST SIB launched ©Social Finance 2013 Procurement support in Manchester Announcement of large-scale PbR focused on recidivism and including short-sentenced prisoners Work on additional four SIB models in Essex, including drugs and social isolation Feasibility studies started in five other local authorities on children in care
  7. 7. SIBS: UK AND INTERNATIONAL ACTIVITY Launched 7 In development (illustrative) Reducing reoffending x2 * x9 Children in care Early childhood Employability skills Older people * Self management of chronic health conditions x2 Homelessness Adoption Addiction Other ©Social Finance 2013 * Demonstration project
  8. 8. CASE STUDY: ESSEX EDGE OF CARE SIB • • 8 The Essex SIB was the first example of a SIB being used in a local authority context It is designed to prevent vulnerable adolescents entering the care system • Social Finance Board of Directors CSSL (an SPV) 3 Funds released to pay for service delivery. CSSL contracts with service provider in Services Agreement 4 ECC makes payments based on reduced care placement days 1 Outcomes Contract 4 Service Contracts Investors fund CSSL 3 2 £3.1 million CSSL and ECC enter Outcomes Contract 2 Investors 1 Ongoing operating funds ECC Essex SIB Investors Action for Children Evolution Fund Services David Burnett through Service Users ©Social Finance 2013
  9. 9. DEVELOPING THE ESSEX SOCIAL IMPACT BOND 9 There are four main areas we work through when developing SIBS Social Issue Target Population What was the problem Essex identified? Which group of children would most benefit? Poor outcomes and high costs associated with children entering the care system 11-16 year olds at risk of entering care or who recently entered care; key issues are behavioural problems or family breakdown ©Social Finance 2013 Intervention What services could improve outcomes for this group? Multi-Systemic Therapy (MST) identified as the intervention with the strongest evidence base Outcomes Metrics How should success be measured and paid for? Total number care placement days saved compared against a comparison group within Essex before the SIB
  10. 10. HOW IT WORKS - SUMMARY Essex Children’s Social Impact Bond (“SIB”) Issue Essex Children’s SIB Size c.£3.1 million Objective Improve outcomes for children and young people at the edge of care Public Sector Counterparty Essex County Council, contracting with SIB delivery entity Delivery Partner National Children’s Charity: Action for Children Maturity Up to 8 years Outcome Metrics Care placement days saved Education, offending and behavioural outcomes tracked but not linked to payment Target Returns 8-11% p.a. Target Investors Trusts, foundations and funds ©Social Finance 2013
  11. 11. WHAT ATTRACTS SOCIAL INVESTORS TO SIBS 11 Social issue Local interest •Some are keen to support their local communities e.g. Community Foundations •All investors are committed to improving outcomes for vulnerable young people Essex SIB Investors Engagement •Essex SIB attracted Belgian foundation and German social investment fund Applies investment approach to delivering improved social outcomes •Some like to be involved in business case development Intervention ©Social Finance 2013 Learning and innovation •Scaling up promising approaches which have potential to transform outcomes and reshape service delivery •Rigour, focus, data analysis
  12. 12. PROGRESS TO DATE – WHAT HAVE WE LEARNED SO FAR? Performance Management: rigorous data capture and analysis informs continuing service delivery Affordable: cost benefit comparison, value of risk transfer, performance incentives Attributable: intervention, to outcome, to savings benefit Cashable: payment realised from commissioning budget where saving is made Simple: understood by all stakeholders Tactical: targeted where impact will be greatest and last longest Marketable: use development to shape and grow market from commissioner perspective Replicable: future application supported by model design ©Social Finance 2013
  13. 13. BIG LOTTERY AND CABINET OFFICE FUNDS 13 What are the funds? • Big Lottery Fund’s ‘Commissioning Better Outcomes’ fund makes £35m available in top-up funding for SIBs • The Cabinet Office’s ‘Social Outcomes Fund’ makes £20m available in top-up funding for SIBs and other PbR mechanisms as a means of contributing to financial benefits to central government which are generated locally, and testing innovation in public service redesign • There is a single application and entry point for both funds. The funds are working together to support local commissioners to use SIBs to achieve social and financial impact. Commissioners do not need to state which fund they are applying to. • The funds are available to commissioners in England What will the funds cover? • • a ‘top-up’ to commissioners’ outcomes payments – could represent: non-cashable savings or benefits to other public sector commissioners development funding - for commissioners to purchase technical support to develop their Social Impact Bond (available to commissioners regardless of which fund ultimately makes top-up outcomes payments) Outcomes payments • • • no minimum or maximum funding available average amount of funding is expected to be around £1 million expected that the average contribution to be around 20% of the total outcomes payments. Development funding • between £10,000 and £150,000 of development funding following approval of an Expression of Interest Two-stage application process – single application form and entry point for both funds: 1. 2. Expression of Interest – Outline of proposal Full application – Detailed proposal ©Social Finance 2013
  14. 14. WHAT SUPPORT IS SOCIAL FINANCE AND THE LOCAL GOVERNMENT ASSOCIATION OFFERING? • Social Finance is partnering with the Local Government Association (LGA) to support potential applicants to the outcomes funds of the Big Lottery Fund and Cabinet Office. • There is a single application process to the funds that involves two stages: an Expression of Interest and a subsequent Full Application. • The support has been designed to assist commissioners to develop an idea for submission as an Expression of Interest. • If the Expression of interest is successful, commissioners can also ask for between £10,000 and £150,000 of funding to purchase technical support to develop their proposal for submission of a Full Application. ©Social Finance 2012 WE’RE SUPPORTING COMMISSIONERS TO APPLY FOR SOCIAL OUTCOMES ‘TOP UP’ FUNDING FROM BIG LOTTERY FUND AND THE CABINET OFFICE 14
  15. 15. FURTHER SOCIAL FINANCE SUPPORT Workshops • SIBs in Health and Social Care • SIBs in Children’s services • Commissioning and Procurement • Social Impact Bonds for Legal teams • Social Impact Bonds for Finance Directors • SIB Developer Directory • Articles and blog posts on specific issues • Interactive web-based tools • Case studies • Technical guides • Podcasts • ©Social Finance 2012 SIBs in Criminal Justice • Resources 15 Webinars PLEASE LET US KNOW IF THERE IS A SPECIFIC SOCIAL IMPACT BOND SOCIAL IMPACT DEVELOPMENT BONDS BRING NEW ISSUE YOU WOULD INVESTMENT TO LIKE A RESOURCE BEARDEVELOPED FOR ON SOCIAL ISSUES, AND ALIGN ALL PARTIES AROUND A COMMON GOAL.