The first examples of Social Impact Bond
The Social Impact Investing (SII) have not only been theorized and designed, but also started and tested. The first country to use them was the United Kingdom, where in 2010 the Government developed the first SIB (Social Impact Bond), followed by the United States, in particular by the city of New York (2012).
The SII for prison in Peterborough, UK
Launched by the English Ministry of Justice in collaboration with Social Finance Ltd in September 2010, the first European example of SIB was to finance a program of interventions for prisoners sentenced to a sentence of less than 12 months with £ 5 million.
The SIB was born as a response to the problem of recidivism, particularly significant for this group of prisoners: about 60% of those sentenced to sentences of less than one year commit a new crime within 12 months of their release.
The actors involved (stakeholders) are:
Beneficiaries: men of age at the time of the sentence held or released after having served the detention period.
Public Administration: Ministry of Justice, Big Lottery Fund.
Social investors: Charities Barrow Cadbury Trust, Esmée Fair-Bairn Foundation and others.
Service providers: St. Giles Trust, Ormiston Children and Families Trust and others.
Internal evaluators of the SIB: RAND Europe, Meganexus.
Specialized Intermediary: Social Finance Ltd.
Independent assessors who measure the final result: QinetiQ5 and University of Leicester.
Here, for example, the investor was Goldman Sachs with debt capital of over nine million dollars, while Bloomberg Philanthropies has made available over seven million euros in grants to be used as a guarantee fund to partially cover the loan of Goldman Sachs.
The SIB of the City of New York
In the wake of the results achieved with the first trials in the United Kingdom, the first SIB was also activated in the city of New York to reduce the recurrence rate of young prisoners.
The Department of Corrections has signed a SIB contract, in the form of a loan, which has made it possible to finance the program aimed at young prisoners: training activities during school hours and recreational activities to put into practice what was learned during the work in the classroom.
OUTCOME: this should increase the skills of young people both in the course of study and in the subsequent search for a job, removing the risk of new criminal behavior.
The subject that manages the implementation of the program is the MDRC intermediary, which deals with social policies and is responsible to the Administration and the entrepreneurs for the successful outcome of the operation, controlling the work of the two service providers for the young people: Osborne Association and Friends of Island Academy.
Not only. British Prime Minister Cameron – a representative of a conservative government – has worked to obtain a derogation from the state aid legislation for the allocation of a loan of 400 million pounds, aimed at the capitalization of Big Society Capital, a sort of bank designed to gather resources and provide financial services to social sector organizations, whose financial coverage was ensured by withdrawing dormant accounts from banks and credit institutions that had been inactive for at least 15 years.
Social Impact Bonds are not the only social impact investment tool: there are also the so-called Pay-for-Success (PfS), in which the financial return depends on the success of the project. In any case, at the base of these instruments there is the need to face a social problem with preventive actions, difficult to carry out for a PA without money, using the consequent savings for the public purse as a guarantee fund for private investments.
The British Government is so convinced of the validity of the SIIs that, in 2013, it promoted the establishment of the Social Impact Investment Task Force established by the G8 with the aim of promoting the development of social impact investments and harmonizing their growth in the G8 countries . The Task Force is composed of national Advisory Boards (ADBs) and thematic Working Groups (WGs), which have interacted with the OECD to support the drafting of a specific Report on the subject.