Social Finance Ltd.

Social Finance Ltd. is a not for profit organisation that partners with the government, the social sector and the financial community to find better ways of tackling social problems in the UK and beyond. It works with government, investors and delivery partners to develop new models of social change.

Since its formation in 2007, Social Finance has mobilised over £100 million of investment and helped to design a series of programmes, including the Social Impact Bond model, to improve outcomes for individuals with complex needs. It has sister organisations in the US and Israel and a network of partners across the world.

History

Social Finance's initial team supported the work of the Commission on Unclaimed Assets, which recommended the establishment of a Social Investment Bank in March 2007 and in turn developed the blueprint for what is now named Big Society Capital, a social investment institution with £600m to invest. ^[1][2][3][4]

Initially financed by a group of philanthropists, later financial support included charitable trusts and foundations including: Esmée Fairbairn Foundation, Rockefeller Foundation and the Big Lottery Fund.^[5]

Core activities

Social Finance's core mission is to find better ways of tackling social problems in the UK and beyond. It partners with the government, the social sector and the financial community, to tackle entrenched social problems and bring rigour and capital to the delivery of social change. Social Finance designs financial and advisory services and products for organisations looking to deliver social impact. It looks for structures that offer flexibility and long-term funding, and encourage innovation to deliver maximum social impact.

Social Finance’s core services are described below.

Commissioner Advisory: Social Finance works with public service commissioners to reshape their services so that they focus on outcomes and increase social impact, while reducing costs.

Enterprise Advisory: Social Finance works with charities, social enterprises and Community Interest Companies to scale their existing activities and expand their impact.

Social Investment: Social Finance develops Social Impact Bond/ Development Impact Bond projects that improve social outcomes and generate financial returns.

Field Building: Through research, advocacy, and publications, Social Finance supports the development of the Social Impact Bonds and the broader impact investment movement.

International: Social Finance is working in collaboration with a range of impact investment intermediaries in different countries to support the development of locally based programmes.

Social Impact Bonds

Social Finance UK has been central to the development of Social Impact Bonds.^[6][7][8] A Social Impact Bond, also known as a Pay for Success Bond, is a contract with the public sector in which a commitment is made to pay for improved social outcomes that result in public sector savings.^[9] The expected public sector savings are used as a basis for raising investment for prevention and early intervention services that improve social outcomes.^[10][11]

Social Impact Bonds are not bonds in the conventional sense. While they operate over a fixed period of time, they do not offer a fixed rate of return. Repayment to investors is contingent upon specified social outcomes being achieved and therefore in terms of investment risk Social Impact Bonds are more similar to that of a structured product or an equity investment.^[12]

The Social Finance Global Network in 2016 published Social Impact Bonds: The Early Years, its first white paper on the state of the Social Impact Bond market.The paper looks back to the launch of the first Social Impact Bond in Peterborough in 2010 and charts the development and take up of the model across different countries and different social issues. The paper reflects the shared lessons from the three Social Finance organizations in the UK, US and Israel – which, together, represent the largest pool of Social Impact Bond expertise globally, across multiple jurisdictions.

The network also published a comprehensive online database of all impact bonds worldwide.

Development Impact Bonds

A Development Impact Bond (DIB) is a variation of the SIB model that would provide new sources of financing to achieve improved social outcomes in developing country contexts. As with SIBs, investors would provide external financing and only receive a return if pre-agreed outcomes are achieved. Funds to remunerate investors would come from donors, the budget of the host country, or a combination of the two. Financial returns to investors are intended to be commensurate with the level of success. DIBs have the potential to improve aid efficiency and cost-effectiveness by shifting the focus onto implementation quality and the delivery of successful results.

In October 2013, Social Finance and the Center for Global Development released a report outlining the findings of a high level working group set up to explore the potential of this new mechanism.

Project Examples

Offender Rehabilitation

On 18 March 2010, then Secretary of State for Justice Jack Straw announced a six-year social impact bond (SIB) pilot scheme run by Social Finance to see around 3,000 short-term prisoners from Peterborough prison, serving less than 12 months, receiving intensive interventions both in prison and in the community. Funding from investors outside government was initially used to pay for the services, which were delivered by Third Sector providers with a proven track record of working with offenders. If re-offending is not reduced by at least 7.5% through all tranches the investors will receive no recompense. In August 2014, the first set of results were released, showing that the SIB reduced reoffending by 8.4 per cent. This was not high enough to trigger any repayments to investors at this point (10% reduction would have been necessary for payments to investors by August 2014) but was on track for payments to investors in the next tranche - as an 8.4% reduction is in line with the overall reduction rate needed.^[13]

The Social Impact Bond in Peterborough was launched by Secretary of State for Justice Kenneth Clarke MP and Prisons Minister Crispin Blunt on 10 September 2010.^[14][15]

Children and Families

Social Finance worked with UK local authorities to assess the potential for social impact bonds to improve family support services. These studies assessed the potential of social impact bonds to fund preventive and early intervention services which improve outcomes for children and generate cost savings for Local Authorities.^[16][17]

In March 2012 Manchester City Council announced a social impact bond to fund Multi-dimensional treatment foster care.^[18]

Social Finance worked with the GLA to co-ordinate the efforts of six boroughs to provide therapeutic support to families where there is significant risk that adolescents will enter care. This not only offers smaller boroughs the opportunity to benefit from a service they would struggle to commission on their own on an outcomes basis – or at all – but offers the prospect of a pan London SIB platform to address this area of acute need.

Homelessness and Housing

Social Finance advised Enfield Borough council on setting up and managing an in-house £100m portfolio to provide better housing for local homeless families at significantly lower cost than existing solutions. The model has been replicated in Blackpool, Bracknell Forest and Lewisham.

Social Finance launched and are managing three Social Impact Bonds with the support of the Department for Communities and Local Government to support homeless youth into secure accommodation. £2.2m raised to support work with 600 18-24 year olds in in London, Birmingham and Liverpool who do not qualify for statutory support.

Young people at risk of becoming NEET

Social Finance has developed Social Impact Bonds in Manchester and the Thames Valley to support 2,500 youth at risk of becoming NEET, which have outperformed on outcomes such as improved school attendance, behaviour and educational achievement and all have returned initial capital to investors. Social Finance supported one of the delivery bodies, Teens and Toddlers, to win another contract with DWP to deliver support to 1500 teenagers at risk in Bury, Rochdale, Stockport, Trafford and Wigan.

Social Finance has analysed extensive longitudinal data for 8000 young people, provided by Newcastle City Council, to explore the factors that are most closely associated with eventual long term NEET status. The findings highlight a significant – but nevertheless defined and identifiable – minority, that the evidence suggest account for 67% of the NEET population. The findings support the business case for intensive support of this group.

Mental Health and Employment

Social Finance established Health and Employment Partnerships which secured £1.3m of funding from the Cabinet Office to launch a social impact bond for supporting people with severe mental health issues into work. The partnership has signed three contracts to provide an evidenced based intervention – Individual Placement Support – to 2,500 people over three years referred to the program by GPs in Haringey, Tower Hamlets and Staffordshire.

Loneliness and Social Isolation

Social Finance designed, launched and now manage Social Impact Bond to support 3,000 older people across Worcestershire overcome loneliness. We designed a service model in partnership with Age UK Hereford and Worcestershire bringing together community and voluntary organisations. The SIB was commissioned jointly by the Local Authority and local Clinical Commissioning Groups.

Domestic Violence

As part of Social Finance's Impact Incubator, it led a joint initiative with three charities to develop the first national attempt to reduce the number of victims of domestic violence by disrupting the behaviour and abuse patterns of the most high risk and serial perpetrators. Three police forces are supporting the roll out of the programme in West Sussex, South Wales and Essex. The program has attracted £3m of funding including significant contributions from the police forces for whom this problem is a major drain on their scarce resources.

Sister Organizations

US

In January 2011, Social Finance, Inc. was launched to bring social impact bonds to the U.S. market.^[19]

In May 2011, Massachusetts became the first state in the nation to formally explore social impact bonds when Governor Deval Patrick's administration issued a Request for Information (RFI) to seek public input into how best to implement SIBs in the Commonwealth.^[20]

In December 2013, New York State and Social Finance US announced a $13.5M social impact partnership to reemploy formerly incarcerated individuals, making it the first state-led Social Impact Bond to launch in the nation.^[21] The team received a grant from the US Department of Labor to support the pay for success project .^[22]

Israel

Social Finance Israel was established in 2013 to help build a social investment market in the Israel.

Publications

• A New Approach to Banking: Extending the use of Jam Jar Accounts in the UK (2011),
• Towards a New Social Economy: Blended value creation through Social Impacts Bonds (2010),
• Social Impact Bonds: Rethinking finance for social outcomes(2009),
• Charity mergers: Tackling the issues in practice(2009),
• Bringing Social Impact Bonds to Massachusetts (2011),
• A New Way to Invest in Better Healthcare(2011),
• Technical Guide to Commissioning Social Impact Bonds(2011),
• Social Impact Bonds: The One Service. One Year On(2011),
• Financial Inclusion: Families with Disabled Children. Understanding their financial needs(2011),
• A New Tool for Scaling Impact: How Social Impact Bonds Can Mobilize Private Capital to Advance Social Good(2012),
• Investing to tackle loneliness: a discussion paper (2015)
• Breaking the deadlock: A social impact investment lens on reducing costs of road trauma and unlocking capital for road safety (2015)
• Social Impact Bonds: The Early Years (2016)
• New Insights Into Improving Outcomes for At Risk Youth: The Newcastle Experience (2016)
• Using Results-based Funding to Drive Health Equity (2016)

References

External links

• Social Finance