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Social Impact Bond<br />10:00am – 11:15am<br />Facilitators: Brian Parker, McGuire Woods / Sam Reiman, McCune Foundation<b...
Share your thoughts!<br />Text “Summit” to 57682 with your <br />feedback and thoughts on today’s <br />event!<br />Share ...
Nonprofit Finance Fund®<br />An Introduction to the Social Impact Bond<br />Presented by:<br />Bill Pinakiewicz<br />Direc...
The Social Impact Bond - What is it all about?<br />Multi-year <br /> Capital for<br />Qualified Service<br /> Provider(s)...
Social Impact Bonds – The Appeal and the Potential <br />Social Impact Bonds<br />2<br />Innovative <br />structure <br />...
Social Impact Bonds – Underpinnings of Feasibility in the United States <br />Social Impact Bonds<br />Social Impact Bonds...
Social Impact Bonds – Barriers to  Feasibility in the United States <br />Proof of <br />concept not <br />yet achieved<br...
Social Impact Bonds – Readiness and Delivery Issues for Service Providers<br />Service Provider Readiness<br />2<br />Hist...
Social Impact Bonds<br />“The long and winding road”<br />9<br />
Investors<br />LPs<br />General<br />Partner<br />$<br />SIB<br />Outcomes <br />Based <br />Contract<br />Social Impact <...
Investors<br />SIB   $<br />Outcomes <br />Based <br />Contract<br />Federal<br />State<br />Local<br />Government<br />No...
Peterborough SIB<br />First SIB transaction completed in the UK.  The Ministry of Justice signed agreement in March 2010. ...
Major Hurdles<br />Program<br />Program must achieve cost savings that are clear, measurable and consistent<br />What is t...
Does the Program generate cost savings that are greater than the costs of intervention?<br />Over what period of time?<br ...
Besides cost savings for the government, what other social benefits does the Program generate?<br />How large, compelling ...
What governmental entity will achieve cost savings?<br />Are they currently funding similar interventions? <br />Would the...
Will investors be willing to take the risk?<br />Financial investors?<br />Social impact investors?<br />What is the appro...
Where to Look for More Information on Social Impact Bonds<br />www.socialfinance.org.uk<br />www.socialfinanceus.org<br />...
Thank you from the Greater Pittsburgh Nonprofit Partnership!<br />
Workshop Evaluation<br />Text “SIB” to 57682 with your answers to the following questions:<br />Please rate the overall va...
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Pittsburgh Nonprofit Summit - Social Impact Bond

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Pittsburgh Nonprofit Summit - Social Impact Bond

  1. 1. Social Impact Bond<br />10:00am – 11:15am<br />Facilitators: Brian Parker, McGuire Woods / Sam Reiman, McCune Foundation<br />Speakers: Simon Jawitz, Growth Philanthropy Network / Bill Pinakiewicz, Nonprofit Finance Fund<br />
  2. 2. Share your thoughts!<br />Text “Summit” to 57682 with your <br />feedback and thoughts on today’s <br />event!<br />Share your thoughts on Twitter <br />by adding #GPNPSummit to your <br />tweets!<br />
  3. 3. Nonprofit Finance Fund®<br />An Introduction to the Social Impact Bond<br />Presented by:<br />Bill Pinakiewicz<br />Director, New England Program<br />May 12, 2011<br />
  4. 4. The Social Impact Bond - What is it all about?<br />Multi-year <br /> Capital for<br />Qualified Service<br /> Provider(s) from <br />Private<br /> Investors<br />Capital is Invested<br /> in Prevention or Early <br />Intervention Services <br />Producing “Cashable” <br />Savings to <br />Government Payer<br />Government Payer <br />Retains a Portion of <br />“Cashable” Savings from<br />Successful Investments<br />Voluntary<br />Government Payer <br />Obligated to Pay<br />Investors From Portion <br />of “Cashable” Savings<br />IF Contracted Social <br />Outcome Target Is Hit <br />Investment Success =<br />Achieving Contractually<br /> Agreed Social Outcome<br />Targets <br />(Metric and Timing)<br />Social Impact Bond Structure<br />Measurement <br />of Outcomes <br />Against Targets <br /> is Performed by an<br />Independent Expert<br />100% of Success Risk <br />Shifted From <br />Government Payer to <br />Private Investors<br />
  5. 5. Social Impact Bonds – The Appeal and the Potential <br />Social Impact Bonds<br />2<br />Innovative <br />structure <br />for new, <br />supplemental <br />source of <br />multi-year<br /> funding<br />for service <br />providers <br />Cost savings <br />to <br />government <br />payers <br />compared to <br />current<br />practices<br />Aligns <br />interest<br /> of investors,<br /> nonprofits & <br />government<br /> on positive <br />outcomes<br />Integrates <br />social & <br />financial ROI<br /> for the<br />impact <br />investor pool<br />More<br /> productive <br />reallocation <br />of risk <br />among <br />investors, <br />government <br />& service <br />providers<br />Monetizes <br />the positive<br />social impact <br />of prevention<br /> & early<br /> intervention<br />
  6. 6. Social Impact Bonds – Underpinnings of Feasibility in the United States <br />Social Impact Bonds<br />Social Impact Bonds<br />2<br />Pockets of <br />active<br />support<br /> “in concept”<br />at the <br />federal,<br /> state & <br />local levels<br />Pool of <br />potential<br /> investor <br />demand for <br />structures <br />that combine <br />social & <br />financial<br />returns<br />Growing <br />community <br />of service<br /> providers <br />guided by <br />outcome <br />impact data<br />Institutions &<br />infrastructure<br />to support <br />large-scale<br /> private<br /> investment <br />in the <br />social sector<br />Collaborative <br />network of<br />US & global <br />stakeholders<br />sharing <br />information<br />on “lessons <br />learned”<br />Highly<br />motivated <br />& capable<br /> intermediary <br /> pool actively <br />vetting SIB<br />opportunities<br />
  7. 7. Social Impact Bonds – Barriers to Feasibility in the United States <br />Proof of <br />concept not <br />yet achieved<br /> in the <br />original <br />& only <br />completed <br />transaction<br /> Readiness of <br />service<br />providers to <br />adapt to SIB<br />execution<br /> requirements<br /> Uncertainties <br />over <br />scalability, <br />breadth of <br /> access to SIB <br />capital, cost<br /> of metrics,<br /> transparency, <br />etc.<br />Potential for <br />failed or <br />substandard <br /> “first mover” <br />transactions<br /> to sour <br />the market <br /> Multi-layer & <br />overlapping<br />government<br /> funding<br /> creates <br />complexity &<br />difficulty<br />Highly <br />complex & <br />customized<br /> multi-party<br /> transactions <br />- hard to do!<br />2<br />Social Impact Bonds<br />Social Impact Bonds<br />
  8. 8. Social Impact Bonds – Readiness and Delivery Issues for Service Providers<br />Service Provider Readiness<br />2<br />History & <br />culture<br />of using <br />outcome<br />metrics to<br /> evaluate<br />program <br />performance <br />Business <br />models &<br />executives<br /> with<br />collaborative <br />service<br />delivery <br />capacity<br /> & experience<br />Institutional <br />capacity<br />to support <br />scaling<br />up & time <br />horizon<br /> requirements <br />of SIBs<br />Multi-year <br />planning, <br />budgeting &<br />execution<br />expertise to<br />manage <br />upfront SIB <br />capital <br />Board<br /> support <br />for SIB <br />business <br />model <br />capacity <br />demands &<br />reputational <br />risk<br />Track record<br /> of success <br />in setting & <br />achieving <br />challenging <br />outcome<br />metric <br />targets<br />
  9. 9. Social Impact Bonds<br />“The long and winding road”<br />9<br />
  10. 10. Investors<br />LPs<br />General<br />Partner<br />$<br />SIB<br />Outcomes <br />Based <br />Contract<br />Social Impact <br />Partnership <br />(LLP)<br />Federal<br />State<br />Local<br />Government<br />Contract<br />Contract<br />$<br />$<br />$<br />Contract<br />Service <br />Provider<br />Service <br />Provider<br />Service <br />Provider<br />
  11. 11. Investors<br />SIB $<br />Outcomes <br />Based <br />Contract<br />Federal<br />State<br />Local<br />Government<br />Nonprofit<br />Organization<br />
  12. 12. Peterborough SIB<br />First SIB transaction completed in the UK. The Ministry of Justice signed agreement in March 2010. Social Finance Ltd. raised £5 million to fund services to 3,000 male, short-sentenced offenders at Peterborough Prison.<br />Social sector organizations will provide intensive support to prisoners and their families.<br />If the re-offending rate is reduced by 7.5% or more, investors will receive cash payments giving them a return of 2.5% - 13.3%<br />Maximum capped at 13% over eight years.<br />
  13. 13. Major Hurdles<br />Program<br />Program must achieve cost savings that are clear, measurable and consistent<br />What is the Program’s “outcome” metric?<br />Can the outcome metric be linked to a government cost savings?<br />How compelling is the data?<br />
  14. 14. Does the Program generate cost savings that are greater than the costs of intervention?<br />Over what period of time?<br />What is the Program’s return on investment (“ROI”)<br />
  15. 15. Besides cost savings for the government, what other social benefits does the Program generate?<br />How large, compelling and quantifiable are the social benefits?<br />
  16. 16. What governmental entity will achieve cost savings?<br />Are they currently funding similar interventions? <br />Would they be attracted to pay for outcomes contract?<br />How does the relevant budgetary process work? Who pays? Who saves?<br />Will the governmental entity be willing to pay a “premium” over cost for the services? Should they? What does the government achieve?<br />What legislative, regulatory and other approvals are required?<br />What is the credit profile of the government?<br />
  17. 17. Will investors be willing to take the risk?<br />Financial investors?<br />Social impact investors?<br />What is the appropriate expected rate of return?<br />It depends on the risk of the Program and the return available on other assets.<br />Treasury Bills<br />Treasury Bonds<br />Corporate Bonds<br />Equities<br />Real Estate<br />Venture Capital<br />Private Equity<br />Commodities<br />Other Social Impact Investments<br />
  18. 18. Where to Look for More Information on Social Impact Bonds<br />www.socialfinance.org.uk<br />www.socialfinanceus.org<br />www.nonprofitfinance.org<br />www.socialimpactexchange.org<br />www.thirdsectorcap.org<br />www.twincitiesrise.org<br />…or GOOGLE "Social Impact Bonds"  for 634,000 results<br />
  19. 19. Thank you from the Greater Pittsburgh Nonprofit Partnership!<br />
  20. 20. Workshop Evaluation<br />Text “SIB” to 57682 with your answers to the following questions:<br />Please rate the overall value of this workshop<br /> E – Excellent G – Good P – Poor F – Fair <br />Did you learn anything that you will apply at your own organization?<br /> Y – Yes N - No<br />Please text other comments and feedback.<br />Submit by hitting “send!” You will receive an auto-reply from the GPNP.<br />Sample text: “SIB E Y This is an interesting alternative funding strategy that I’d like to learn more about.”<br />

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