Presentation from Ben Jupp, Director, Social Finance, at the Services for Later Life conference, 2012

1. AN INTRODUCTION TO SOCIAL IMPACT
BONDS
Ben Jupp, Director
ben.jupp@socialfinance.org.uk

2. OUR MISSION 2
WE BELIEVE THAT IF SOCIAL PROBLEMS ARE
TO BE TACKLED EFFECTIVELY, SUCCESSFUL ORGANISATIONS
SEEKING TO SOLVE THEM NEED SUSTAINABLE REVENUES AND
INVESTMENT TO ENABLE INNOVATION AND GROWTH
OUR ROLE IS TO DEVISE THE FINANCIAL STRUCTURES AND RAISE
THE CAPITAL TO ENABLE THIS TO HAPPEN
©Social Finance 2012

3. SOCIAL INVESTMENT AIMS TO DELIVER A COMBINATION OF A 3
SOCIAL IMPACT AND A FINANCIAL RETURN
Charitable Trusts and Foundations have been behind much social investment to date
.. but affluent retail investors and some institutions are also becoming interested
Sample of investors with over £100k investment assets
©Social Finance 2012 Source: NESTA/Fair Banking, Investing for the Good of Society

4. COULD INVESTMENT IN EARLIER ACTION DELIVER A SOCIAL 4
IMPACT AND FINANCIAL RETURN – REVERSING THE CYCLE
A cycle of underinvestment
Higher level • Only 4% of UK health spending is on
of spending long-term preventative services1
on crisis
interventions • Budget cuts restricting services to core
‘crisis intervention’ offer
• Political pressure not to divert funding
from core services
• Public sector has an historic lack of
Poorer social Fewer success in rolling-out promising
outcomes, resources interventions
more require available for
crisis early • Little evidence about what actually
interventions interventions
works
• Innovative programmes seen as ‘just
too risky’
CAN THE LONG TERM SAVINGS BE USED TO INVEST IN PRESENT SERVICES?
1 - Young Foundation Health Launchpad, 2002
©Social Finance 2012

5. SOCIAL IMPACT BOND: PETERBOROUGH PRISON 5
Social Finance launched the first Social Impact Bond in Peterborough in 2010
Payment on basis
MINISTRY OF
INVESTORS of reductions in
JUSTICE & BIG
re-offending
LOTTERY FUND
£5 million
Reduction in
re-offending
SOCIAL IMPACT PARTNERSHIP
St. Giles Trust Ormiston Trust YMCA & SOVA Other Interventions
Support in prison, at Support to Support needed by the
the prison gates and prisoners’ families Providing a prisoner, in prison and the
in the community while they are in community base community. Funded as the
prison and post need is identified
release
3,000 male prisoners sentenced to less than 12 months
©Social Finance 2012

6. A NUMBER OF OTHER SOCIAL IMPACT BONDS ARE NOW 6
LAUNCHED OR IN DEVELOPMENT
Department for Work and Pensions’ Innovation Fund is creating around 10 projects to
prevent young people from becoming Not in Education, Employment or Training (NEET)
Social
Investors DWP as Commissioner
Organisations
Young People
Other policy areas are also developing Social Impact Bonds:
• Improving support for adolescents on the edge of care – procurement underway in Essex
• Reducing rough sleeping – procurement underway in London
• Supporting families facing multiple problems – four central government funded feasibility studies
• Supporting drugs recovery – feasibility study in Essex
• Health and social care – two feasibility studies
©Social Finance 2012

7. WHEN COULD SOCIAL INVESTMENT SUPPORT IMPROVEMENTS 7
IN SERVICES?
What is attractive to commissioners
• More flexible resources, deployed outside of traditional budget headings and
cycles
• Enables public sector organisations to share implementation risks
• Can stimulate a focus on better performance management and implementation,
including learning and organisational development
• May be more willing than traditional commercial investment to fund innovative
projects where social impact high
SOCIAL INVESTMENT CAN ALLOW A TRANSFER OF RISK FROM THE PUBLIC SECTOR
AND SUPPORT THE CAPITALISATION OF SOCIAL SECTOR ORGANISATIONS TO
ENHANCE THE PROVIDER MARKET
©Social Finance 2012

8. INTEREST IN HEALTH AND SOCIAL CARE IS GROWING 8
There is considerable interest in applying the Social Impact Bond model to support health care
• Funding for new interventions for patients
with long-term conditions
• Improving the management of specific
pathways
• Reducing emergency admissions in a local
area
• Step down care from hospital or residential
social care
Social Impact Bonds - A new way to invest in better healthcare
Paul Corrigan, 2011
©Social Finance 2012

9. HOWEVER, SOCIAL IMPACT BONDS NEED TO BE DESIGNED 9
CAREFULLY
A number of criteria must be met for a Social Impact Bond to be suitable:
1 A compelling social need
2 The existence of promising interventions to meet this need
3 Investors better able to manage risk than commissioners and can add wider value
4 The ability to structure social investment to address the problem
5 The ability to structure an outcomes-based contract
• Robust outcome metrics with clear attribution
• Identifiable target population
• Sufficient saving for investors and commissioners
6 The opportunity to achieve significant social impact, and develop a proposition that is attractive to
social investors
A POORLY DESIGNED PAYMENT-BY-RESULTS CONTRACT CAN BE WORSE THAN CURRENT
FORMS OF FUNDING
©Social Finance 2012