Posted on 3rd September 2009
Social investment organisation Social Finance Ltd has published an introduction to its work in developing the Social Impact Bond (SIB), which aims to tackle the causes of Britain’s social ills.
This new financial mechanism aims to drive greater investment into addressing the causes rather than the symptoms of deep-rooted social problems by offering investors a financial return based on successful social impact.
The report from Social Finance, which is involved with setting up a pilot SIB scheme, says the bonds could deliver a ‘paradigm shift’ in government spending on social issues.
The basis of the SIBs is that the government uses a proportion of the savings made from improved social outcomes to reward non-government investors who fund early intervention activities.
The level of reward is based on a contract negotiated by Social Finance with government that identifies specific success criteria and target population, and agrees a payment schedule.
Once the contract is agreed, investment is raised from non-government investors. This investment is used to finance a range of interventions.
In addition to catalysing positive cycles of government spending, SIBs align the interests of investor, investee and the government around specific social outcomes, says the report. By doing this, Social Finance hopes that SIBs will have the potential to address some of society’s most intractable problems.
The report is available on the Social Finance website.
