Social Finance’s first Social Impact Bond inspired a global movement, and while our original social investment model has been adapted, developed and renamed; our guiding principal — that the return on investment is linked to improved social outcomes — remains fundamental to its success.
Last week, a small social experiment conceived 10 years ago to help 2,000 offenders in Peterborough, in eastern England, paid off – literally. More important, the Peterborough experiment has become the guiding light for hundreds of millions of dollars in investment in social reform.
Gordon Brown, former Prime Minister of the United Kingdom, Taken from an article in Financial News, August 2017
In July 2017, seven years after launch, the Ministry of Justice – the commissioner and outcomes payer – announced that the support service funded by the Peterborough Social Impact Bond (SIB) had reduced reoffending of short-sentenced offenders by 9% overall compared to a national control group. This exceeded the target of 7.5% set by the Ministry of Justice.
That meant that the 17 investors into the SIB received payment representing their initial capital plus an amount equivalent to just over 3% per annum for the period of investment.
Since then, Social Impact Bonds, now known as Social Outcomes Contracts (SOCs) have been set up in 35 countries, raising 100s of millions of dollars of investment capital.
Social Impact Bonds — or Social Outcomes Contracts as they are known today – are a way to finance projects where funding is not tied to specific activities and outputs, but to the outcomes it is aiming to deliver. A SIB can support long-term projects and needs three partners:
An impact investor who can provide at risk, upfront funding with no guarantee they’ll get it back – often a private philanthropic organisation or individual
An implementing organisation to deliver the programme – often service providers or charities
An outcomes funder who will pay back the investor if and when the project achieves the desired outcomes – for example a government or commissioner
Return on investment depends on whether or not the social outcome improves. If it does, the outcome payer repays the investors for their initial investment plus a return for the financial risks they took.
Criminal justice was an obvious choice for the first Social Impact Bond. Experts across the country highlighted the paradox of short sentenced prisoners (those who are imprisoned for less than twelve months). Reoffending rates amongst this group were high; around 60% were convicted of at least one offence in the year after release.
Each short sentenced prisoner who reoffended after release in 2007 was convicted, on average, of five further offences within the year. But nobody had statutory responsibility for this group of offenders once they were released from prison. They typically left with £46 in their pocket, often with nowhere to live, no job to go to and no family waiting for them. An extremely high proportion left prison only to return a few weeks / months later.
The Social Impact Bond raised £5 million from trusts and foundations to fund the One* Service – an umbrella organisation designed to respond to the complex needs of offenders.
The One* Service was delivered by St Giles Trust, Ormiston Families, Sova, MIND, TTG Training, YMCA and John Laing Training, and was managed by Social Finance. Over the course of the programme, it became an integral part of the Safer Peterborough Partnership. Staff worked closely with the police, the probation service, the Integrated Offender Management Teams, the prison, the local authority, local statutory providers and the voluntary sector.
Over five years of operation, support from the One* Service was offered to two cohorts of 1,000 short-sentenced male prisoners for a period of up to 12 months post-release. Engagement was voluntary, but the whole cohort was included in the measurement of the results
Most of the clients on the One* Service had reoffended before, and for many, a spell in custody did not act as a deterrent. They had acute needs. A high proportion suffered from mental health and substance abuse challenges. Many had housing needs, didn’t have access to money and were in debt, and didn’t have the right skills to find employment.
The video below was produced in 2010 to mark the launch of the One* Service
It also provided us with strong evidence that a similar outcomes-based whole system-change approach should be used for the government’s Better Futures Fund*.
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