A day unwrapping Social Impact Bonds

Neo Christodoulou

On Tuesday I attended the Social Investment and Public Services: the Next Five Years' conference hosted by Social Finance. It was a great conference with all the various stakeholders involved in the stages of the life of a Social Impact Bond (SIB) speaking and leading workshops. In total over 400 delegates were present which is in my opinion a really good indicator of the growth of the sector.

From my point of view I was mostly interested in what commissioners i.e. issuers of the bonds had to say. Here are my three main takeaways:

1 - It is highly beneficial to have the active participation of third parties, i.e. the private investors. It provides rigour and expertise in the process, better structuring of the intervention and helps to keep delivery on track. I was interested that, as Sarah Henry of Manchester City Council, and Roger Bullen of EBSI said, engaging with the investors was actually easier than expected. The due diligence that investors put in the proposition actually gave extra reassurance and confidence to members.

2 - The maths and the data are important, and councils need to be able to convince investors that they have a robust and quantified model so that the various stakeholders can assess and mitigate the risks. For example, Manchester City Council harnessed the power of big data in its mathematical models when they structured their Children in Care SIB. This enabled them to really focus on where the problem is / define the cohort that is in most need.

3 - From the investor’s point of view, the principal concern is around the exit strategy of SIBs. There has been a lot of focus on getting the ball rolling, but no one yet knows what you do at the end of a SIB. We are still at the pilot stage and we don’t know whether they will work and of course the first SIB in Peterborough had to end early.

More generally, interest from the investor side is picking up. Geetha Rabindrakumar, from Big Society Capital noted that they did not need to invest in the recently launched Fair Chance fund as there was already enough interest from other investors. And Social Finance closed the conference by pointing out that currently there is a combined £60 million of support available through the Cabinet Office’s Social Outcomes Fund and the Big Lottery Fund’s Commissioning Better Outcomes (CBO). So the question is whether there is sufficient interest from commissioners to absorb the supply of all this capital.

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