social impact bonds
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INTRODUCTION TO SOCIAL IMPACT BONDS –
BRISTOL LIF EVENT
Tom Symons, Associate
Tom.Symons@socialfinance.org.uk
14TH JANUARY 2014
Social Finance is authorised and regulated by the Financial Conduct Authority FCA No: 497568
©Social Finance 2012
INTRODUCTION TO SOCIAL IMPACT BONDS 2
• 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
INTRODUCTION TO SOCIAL IMPACT BONDS CONT. 3
• 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 IMPACT
BONDS BRING NEW
INVESTMENT TO
BEAR ON SOCIAL
ISSUES, AND ALIGN
ALL PARTIES
AROUND A
COMMON GOAL.
©Social Finance 2013
WHAT IS A SOCIAL IMPACT BOND? 4
• Social Impact Bonds invest in preventative services to improve social outcomes
• (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
• (3) Social outcomes are measured over time
• Investors are repaid only if desired outcomes are achieved
• 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
©Social Finance 2013
WHY WOULD A LOCAL COMMISSIONER EMBARK ON A SIB? 5
• 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
Initial SIB model
2nd stage implementation
Scaling
EXAMPLE OF IMPACT DELIVERED SO FAR 6
Peterborough
SIB
Essex,
Manchester
and Liverpool
feasibility
studies
Further PbR pilots
-Doncaster
-Local Government Incentive models
Essex children at the edge of care
MST SIB launched
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
Criminal
Justice
Adolescents
in or on
edge of care
Social Impact Bonds are demonstrating an ability to create systemic change.
©Social Finance 2013
SIBS: UK AND INTERNATIONAL ACTIVITY 7
Reducing reoffending
Children in care
Early childhood
Employability skills
Older people
Self management of chronic health conditions
Homelessness
Adoption
Addiction
Other
x2
x2
x9
*
* Demonstration project
Launched In development (illustrative)
*
©Social Finance 2013
CASE STUDY: ESSEX EDGE OF CARE SIB 8
Action for
Children
Evolution Fund
Services
Service Users
Outcomes
Contract
CSSL (an SPV)
£3.1 million
Investors
ECC
Ongoing operating
funds
Social
Finance
Service
Contracts
1
2
3
4
• Board of Directors
1
2
3
4
CSSL and ECC enter
Outcomes Contract
Investors fund CSSL
Funds released to pay for
service delivery. CSSL
contracts with service
provider in Services
Agreement
ECC makes payments
based on reduced care
placement days
Essex SIB Investors
David Burnett through
• 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 2013
DEVELOPING THE ESSEX SOCIAL IMPACT BOND 9
There are four main areas we work through when developing SIBS
Social Issue Target
Population Intervention
Outcomes Metrics
What was the problem
Essex identified?
Which group of
children would most
benefit?
What services could
improve outcomes
for this group?
How should success
be measured and paid
for?
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
Multi-Systemic Therapy
(MST) identified as the
intervention with the
strongest evidence base
Total number care
placement days saved
compared against a
comparison group
within Essex before the
SIB
©Social Finance 2013
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
WHAT ATTRACTS SOCIAL INVESTORS TO SIBS 11
Essex SIB Investors
Learning and innovation •Essex SIB attracted Belgian foundation and German social investment fund
Applies investment approach to delivering improved social outcomes
•Rigour, focus, data analysis
Social issue •All investors are committed to improving outcomes for vulnerable young people
Engagement •Some like to be involved in business case development
Local interest •Some are keen to support their local communities e.g. Community Foundations
Intervention •Scaling up promising approaches which have potential to transform outcomes and reshape service delivery
©Social Finance 2013
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
BIG LOTTERY AND CABINET OFFICE FUNDS 13
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. Expression of Interest – Outline of proposal
2. Full application – Detailed proposal
http://www.biglotteryfund.org.uk/sioutcomesfunds
©Social Finance 2012
WHAT SUPPORT IS SOCIAL FINANCE AND THE LOCAL
GOVERNMENT ASSOCIATION OFFERING?
14
• 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.
WE’RE SUPPORTING
COMMISSIONERS TO
APPLY FOR SOCIAL
OUTCOMES ‘TOP UP’
FUNDING FROM BIG
LOTTERY FUND AND
THE CABINET OFFICE
©Social Finance 2012
FURTHER SOCIAL FINANCE SUPPORT 15
SOCIAL IMPACT
BONDS BRING NEW
INVESTMENT TO
BEAR ON SOCIAL
ISSUES, AND ALIGN
ALL PARTIES
AROUND A
COMMON GOAL.
Workshops • SIBs in Health and Social Care
• SIBs in Criminal Justice
• SIBs in Children’s services
• Commissioning and Procurement
• Social Impact Bonds for Legal teams
• Social Impact Bonds for Finance
Directors
Resources • SIB Developer Directory
• Articles and blog posts on specific issues
• Interactive web-based tools
• Case studies
• Technical guides
• Podcasts
• Webinars
PLEASE LET US
KNOW IF THERE IS
A SPECIFIC SOCIAL
IMPACT BOND
DEVELOPMENT
ISSUE YOU WOULD
LIKE A RESOURCE
DEVELOPED FOR
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