1. INTRODUCTION TO SOCIAL IMPACT BONDS –
BRISTOL LIF EVENT
14TH JANUARY 2014
Tom Symons, Associate
Tom.Symons@socialfinance.org.uk
Social Finance is authorised and regulated by the Financial Conduct Authority FCA No: 497568

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
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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.
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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. 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. 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. 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. 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. DEVELOPING THE ESSEX SOCIAL IMPACT BOND
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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. 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. WHAT ATTRACTS SOCIAL INVESTORS TO SIBS
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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. 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. BIG LOTTERY AND CABINET OFFICE FUNDS
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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
http://www.biglotteryfund.org.uk/sioutcomesfunds
©Social Finance 2013

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
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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.