SocialFinance.Org provides a report on Social Impact Bonds since 2010. The report aims to take stock of the “Early years” of social impact bonds. The report looks at qualitative data associated with specific bonds and at the future of social impact bonds as an asset class. As of the date of publication in 2016, social impact bonds were launched in 15 countries. Of those 60 projects, four projects had successfully repaid investor capital.
Social impact bonds are financing tools associated with the performance of social impact projects. Typically, Governments or private sector investors finance social impact projects to receive both a financial and social return on investment. An independent assessor evaluates whether project goals are being meant before further capital is disbursed for the project.
Page 19 of Social Finance’s report looks at four social impact bonds. One highlighted program raised 13.5 million USD over five years to reduce recidivism. Each cohort’s results were measured and if those results were adequate further funding was distributed.
Another example of a project is the Fair Chance Fund launched in the UK to assist homeless youth with sustained accommodation, employment, and training services. Disbursements were structured as a monthly payment to the project. The project raised between 5-6 Million GBP. Of the 60 social impact bonds launched at the time of writing, the bonds collectively raised more than 200 Million.
A second report issued by the Center for Public Impact quantifies the average maximum contract value and average investment across the social impact bonds launched in the UK, US, and other countries. The average investment in the UK was 1.5 million, 9.6 million in the US, and 2.5million across other countries. The are five major categories that social impact bonds launched in including four projects in criminal justice twenty-two projects in employment, twenty-four projects in social welfare, four projects in education and seven projects related to health. Pages 19-20 list a spreadsheet of social impact bonds including the country, the start year, the name, and other indicators.
However, there are criticisms related to social impact bonds despite the increased transparency related to these investments. Criticisms include that they are more restrictive, which can lead to less project innovation. Bonds require quantifying outcomes in ways that might lead to disinvestment in projects where outcomes are hard to achieve. Lastly, critics argue that social impact bonds generate an ideological shift in welfare service provision whereas the financier has the power in projects as opposed to public servants.
In 2017, an alternative to the social impact bond, the community bond was launched in Scotland. A community bond’s major difference is the sourcing of funds. Community bonds can receive small-scale investments from community members to finance loans to social impact enterprises and community small businesses.