Finance
Social Impact Bonds

SIX U.S. GOVERNMENTS RECEIVE ASSISTANCE TO LAUNCH SOCIAL IMPACT BONDS

Burgess COMMENTARY
A comment made on the blog:

This ought to be good news ... but the devil is in the detail.

Exactly what is meant by the phrase 'to fund programs that deliver measurable social benefits'

I get told over and over again that it is impossible to measure the value of social impact ... so how can it be possible to have such a criteria in the case of this funding vehicle.

I happen to disagree that it is impossible to measure the value of social impact, but I have not found any organization that seems to know how to do it. I would be very interested how the Rockefeller Foundation and the Social Impact Bond Technical Assistance Lab (SIB Lab) at the Harvard Kennedy School ... prestigious institutions, intend to do the measuring.

When they do the measuring, I would like to 'audit' their work, to see if it meets a reasonable standard of legitimacy. I rather doubt it.

I wish I was not so sceptical ... but long experience suggests that it is justified.

Peter Burgess TrueValueMetrics

SIX U.S. GOVERNMENTS RECEIVE ASSISTANCE TO LAUNCH SOCIAL IMPACT BONDS

Microfinance was an idea that traveled far and wide. Social impact bonds (SIBs) look to share the same destiny. The idea, which began in 2010 in the UK, has already made its way across borders to Australia, the U.S., and beyond.

“Social impact bonds have traveled from concept to execution faster than any other social innovation in recent history,” said Kippy Joseph, associate director for innovation at The Rockefeller Foundation.

They have also caught the attention of all levels of government. Today, The Rockefeller Foundation and the Social Impact Bond Technical Assistance Lab (SIB Lab) at the Harvard Kennedy School announced six winning U.S. state and local governments in a national competition that will provide the winners with pro bono technical assistance to develop pay-for-success contracts using SIBs.

The winners are: Colorado/Denver, Connecticut, Illinois (with additional support from the Dunham Fund), New York, Ohio, and South Carolina.

SIBs are tri-party contracts between a government, service provider, and financial intermediary to fund programs that deliver measurable social benefits. If and when improved social outcomes are achieved, the financial intermediary who has provided the investment will be repaid as a result of public sector savings. Like a conventional bond it has a fixed term, but it does not offer a fixed rate of return. Rather, returns are contingent on social outcomes achieved.

The winners were chosen by a selection committee made up of former Indianapolis Mayor Stephen Goldsmith, former Massachusetts Secretary of Administration and Finance Jay Gonzalez, and Harvard Kennedy School Professor Jeffrey Liebman.

They were evaluated based on the level of commitment and readiness demonstrated by the government, the feasibility of the proposed projects, and the extent of interest in applying the SIB model to new policy areas.

Each winning government will receive support from the SIB Lab including a full-time Government Innovation Fellow who will be based in the government agency that will be spearheading the initiative, pro bono advisory services, up to six months of programmer and data analyst time, and a small amount of flexible funding for removing barriers of SIB implementation.

The governments plan to use SIBs to address issues ranging from early childhood education to helping seniors remain in their homes longer.