Social Impact Bond. Information for investors and commissioners

Transcription

1 Social Impact Bond Information for investors and commissioners

2 The Public Sector Problem Diminishing resources means allocation of scarce resources has to be done more carefully and effectively. Commissioning and service design is harder and less room for innovation and creative interventions. Movement to Payment by Results and outcomes based contracts, interventions and outcomes based projects being funded by external investors = one innovative, entrepreneurial approach.

3 What is a Social Impact Bond?

4 History In 2007 the UK Prime Minister s Council on Social Action began to develop the idea of a Social Impact Bond, and the research and work behind this has been led by a number of organisations including Social Finance, an organisation committed to increasing investment in the third sector.

5 What is a Social Impact A form of outcomes-based contract in which public sector commissioners commit to pay delivery organisations for significant improvement in social outcomes (such as a reduction in offending rates, or in reducing the number of young people that are NEET) for a defined population over a defined period.

6 What is a Social Impact Social Impact bonds allow people (philanthropic, private sector, individuals, funds e.g. pension funds etc) to invest money in social projects and receive a return on their investment over a defined period. These returns are financed by commissioners, local and central government if the projects hit targets.

7 Peterborough Prison Social Impact Target Population = 3,000 short term prisoners from Peterborough prison Outcome/Target = reoffending of this population to be reduced by at least 7.5% over 5 years Intervention/delivery: By Third Sector providers with a proven track record of working with offenders across 4 key areas (volunteer mentoring, behavioural group work, family intervention and substance misuse) Scenario 1 = in 2015, reoffending is reduced by 7.5% or more. The investors could earn a return of up to 8m getting initial investment back and 3m interest (ROI only works out to 1,000 per offender!) Scenario 2 = in 2015, reoffending is NOT reduced by 7.5% or more. The investors will receive no recompense.

8 TSBC s Intervention Programmes Using enterprise and business

9 What is The core workshops are run over 10 three hour sessions. The sessions are made up of a combination of group based and individual one-to-one sessions that will culminate in each group or individual setting up their own business. Each individual who completes the programme will be supported for one year following on from the core sessions. Who delivers? The core programme will be delivered by an Enterprise Manager and trained entrepreneur facilitators. It will be supported by entrepreneur mentors who will support each participant with developing their business idea outside of the scheduled hours of delivery. This programme will see participants becoming self employed in their own businesses with their time occupied in a venture that will suppor them becoming free from poverty, abstinent from drugs, more able to spot opportunities. This programme also provides a Level 2 Award in Self Employment & Enterprise

10 What is P2S? Progress to Success, a 5 week practical work related learning and employability skills programme. The programme rewards and incentivises learners to set and take steps towards their SMART goals whilst on the programme. This will provide them with the tools to effectively look for work in the future as well as unveil each of their strengths and skills. Who The core programme will be delivered by an Enterprise Manager and trained entrepreneur facilitators. It will be supported by entrepreneur mentors who will support each participant with developing their business idea outside of the scheduled hours of delivery. The programme will see participating learners build a portfolio of evidence of steps they take towards their 3 goals whilst on the programme. This programme also provides a Level 1 Step Up Award

11 The TSBC Social Impact Bond

12 How does it work?

13 EXAMPLE Target population: Young persistent reoffenders and substance misusers in Islington PROJECT 1: Islington, London E=MC2 (GROUP) BUSINESS LOAN: TSBC Social Impact Bond TSBC 30k investment to fund delivery of Project 1 and 2 TSBC returns 40,000 to investors after 12 months 42,500 is paid to TSBC (17 outcomes x 2,500 PROJECT 2: Islington, London E=MC2 (ONE-TO- 17 young people reduce offending/substance misuse Incentives for participants to reduce offending behaviour and substance misuse to target level BUSINESS LOANS: OUTCOMES REVIEWED AFTER 12 MONTHS INVESTOR FIRST STEP: Approx 6,375 repaid by participants for business loan in Year 2 and 3 Commissioners and TSBC discuss projects and a 50,000 budget is set aside to reduce target population s offending and/substance misuse by 50% which is 2,500 per young person, paid to TSBC upon Flow of funds ( ) Reporting between TSBC and commissioners

14 Invested: 30,000 Total Return Estimated Return: 40,000 Additional returns: Invested by TSBC (from original 30,000) to incentivise participant(s): 4,500 Estimated Return: 6,375 ESTIMATED TOTAL RETURN: 46,375 (on original investment 30,000)

15 TSBC s Method of Measuring Social Impact This online tool uses the principles of Social Return on Investment (SROI) to help organisations and local government departments measure and monitor their progress in the achievement of their social outcomes. Achieving social, economic and environmental impacts are the driving force of organisations, and measuring these through identifying the key social value and impacts for a range of stakeholders involved in each programme delivery is critical in outcomes based contracts. Indicator Measure Target Social Impact Benchmar Hourly pay for equivalent job Reducing cost of residential, rehabilitation Increased earnings potential Reducing cost of crime Additional income businesses receive Savings to state of individuals being employed Employment/Self Employment Reduction in substance misuse Improved communication skills Progress in education and training Volunteering equivalent hourly pay Rehabilitation costs for drug user Increased earnings from self employment/employment Cost of crime to statutory agencies Increased income businesses receive Benefits saved and increase in tax income for government Self employment obtained Employment or work trial obtained Engagement in treatment and period of abstinence Increased confidence and self esteem levels Enrolment onto college/school and/or training providers Achievement of Level 1/2 award 45% k 63% 60% 67% 100% 54% 53% 100% 70% 40% 50%

16 TSBC s Method of Valuing Social Impact The evaluation report produced by the social e-valuator allows investors, commissioners and The Small Business Consultancy to evaluate performance against targets set, and financial value of the social impact made through our intervention as provider. In the real example above, we generated 12 times social return on investment which equated to 12 social benefit for every 1 invested by the local authority.

17 Another form of calculating different social returns? Indicator Way of valuing Value Per Person Impact Total Social Value/ person Total savings delivered by TSBC per person over 12 months: 7, RETURNS PROVIDED BY COMMISSIONERS COULD BE A SHARE OF THIS FIGURE 23. Cost of an ASBO 26. Increase in sales income of businesses of 500 each per week and 1774 per year for increase in tax income

18 Main Benefits Create an outcome-driven system whereby government expenditure is used to fund long-term preventative interventions. Transfer risk from the local government to private investors, thereby encouraging experimental pilot interventions that may not be financed otherwise. Align public sector funding with private sector incentives so that there is a mutual benefit from improved social outcomes. Mobilise and increase the amount of (private) capital available for early intervention programmes which can offer good value for money. Improve the cost-effectiveness of public service provision, a deficiency which has been widely documented in the UK. Reducing the risk of deadweight, wastage and ineffective use of resources. Dual returns for investors. Loan repayments and for TSBC meeting social outcomes. Socially responsible investment, creating positive social change and providing funding for interventions and service that are not fundable in the main by Government.

19 Supported 28 small enterprises to be formed through the E=MC 2 Programme Only 11 out of 253 offenders reoffended after 4 weeks What has our 59% of participants went from NEET to EET within 6 months of starting a programme entrepreneurial approach Ran a pilot in a school 20 out of 23 preexclusion kept in school 1/3 of substance misusers became abstinent within 4 months.

20 Set up Breaking the Cycle Initiative which creates paid employment for participants What has our Delivered an average of 7 social return for every 1 invested in communities our programmes were run entrepreneurial approach Corporate and philanthropic support of 15 organisations who directly supporting our participants Worked with our young people to develop an online entrepreneurs network that helps them to connect with each other and inspiring entrepreneurs

21 Leicester Office 367, Loughborough Road, Leicester, LE4 4BG Switchboard: +44 (0) London Head Office 45, Beech Street, London EC2Y 8AD Switchboard: +44 (0) uk The Small Business Londo TSBC