Publications

We are living in times of increasing social challenges. Portugal also faces many of these challenges: whether it’s the 17.4% of young people who are dropping out of school, the 34.5% of youth who are unemployed or the 46.9% of Portuguese citizens who are at risk of poverty before social transfers.

At the heart of Portugal’s response to these challenges is the work of social organisations. There are over 55,000 social organisations operating throughout the country, accounting for 2.8% of Gross Value Added and 5.5% of all paid employment. They are the backbone of social service provision and new entities are forming every day to tackle the issues the country faces. Organisations like Fruta Feia and ColorADD are leading the movement in Portugal to rethink
and reshape how to approach solving social problems.

Interest in developing a Portuguese social investment market is growing: social organisations are demanding access to adequate financing, investors increasingly have an appetite for investing in social impact and regulators and government are taking steps to promote this new source of funding.

Recognising the need to harness momentum, the Calouste Gulbenkian Foundation convened the Taskforce in July 2014, funded by the European Commission, to support the development of and provide leadership to Portugal’s emerging social investment market. In the course of its work, the Taskforce sought to understand how the different parts of a market encompassing social organisations, government commissioners, intermediaries and investors, work together to create a successful environment in which the needs of the different stakeholders are addressed and better outcomes are achieved for vulnerable people.

The publication of this report is timely: it coincides with the launch of Portugal Inovação Social, a new institution endowed over the next five years with an allocation of €150 million from the European Structural Funds. Portugal Inovação Social will undoubtedly become an accelerating force for the development of the Portuguese market as well as provide a context in which the recommendations set out in this report can be realised. Moreover, as highlighted  throughout this report, there are already concrete examples of social investment initiatives and social innovation that is taking place, most recently the announcement of Portugal’s first Social Impact Bond in Lisbon to improve childhood education and achievement.

In light of these achievements, and the recommendations of the Taskforce, Portugal is now at an inflexion point. The market is poised to grow and is ready to share its experiences with other European and international partners as part of a global social investment market, helping to address some of society’s most pressing social challenges.

The concept of commissioning by outcomes is becoming central to efforts to make radical improvements to public services in an era of enormous social and economic change.

Social Impact Bonds (SIBs) are one of a range of mechanisms to enable public commissioners to focus service delivery on achieving specific outcomes.
At its most fundamental, a SIB is an outcomes-based contract between a public sector commissioner and an investor/group of investors. Success within SIBs is measured by changes in social outcomes. A crucial stage in the development of SIBs is the selection of outcomes and the measurement and metrics used
to evaluate success. It is at this point that turning the theory into practice can present a range of technical challenges. This guide has been produced to help organisations considering outcomesbased commissioning to overcome these technical challenges.

This guide is part of a series of SIB Technical Guides produced by Social Finance. These are intended to accompany the journey an organisation may take when developing a SIB; and it is important to note that outcomes selection and measurement is not usually the first step in this process. To find out more about the Social Impact Bonds and how they work, please refer to our previous Technical Guide ‘Developing Social Impact Bonds’.

The Essex Edge of Care Social Impact Bond (SIB) was contracted by Essex County Council (ECC) to provide therapeutic support and improve outcomes for adolescents at risk of going into care.

Eight investors provided a total commitment of £3.1m to fund for five and a half years an intervention which would support 11–17 year olds who are at risk of entering care or custody. The financial return for these investors is linked to the success of the programme in helping children remain out of care and safely at home with their families.

The national children’s charity Action for Children was selected to deliver the funded intervention, Multi-Systemic Therapy (MST), an intensive evidence-based family therapy. The service aims to work with 380 young people over five and a half years. We hope to divert approximately 100 young people from entering care, with investor returns determined by the reduction in days spent in care amongst the service users compared to a historical baseline. Essex County Council repays investors if these outcomes are achieved. Investor capital is entirely at risk.

As with other Social Impact Bonds, this service places emphasis on outcomes measurement and using performance management to drive continual improvement. Rather than taking a snapshot of the outcomes for the young person immediately after the conclusion of the intervention, progress of the child is tracked for a total of 30 months from the point of engagement with MST.

Focusing on the number of care days saved as opposed to a binary measure of whether a young person has gone into care or not means that the service is incentivised to work with even the most challenging of cases. Wider outcomes such as the rate of offending, educational outcomes and emotional wellbeing are also being monitored in order to understand the broader impact of the service.

Building a business case for prevention may at first seem difficult. We believe that if the process of constructing a business case for prevention can be made easier then more commissioners will choose to invest resources in tackling problems upstream. The aim of this guide is to demystify the activities required to make a decision to invest in prevention; and to make that decision rooted in robust, reliable data.

There is an urgent need to increase the supply of housing in the UK to address the growing affordability problems faced by low to middle income families. We need to increase the supply of all types of housing in view of the scale of the challenge. But given that large numbers of low to middle income families are shut out of home ownership for the medium to long term and do not qualify for social housing, addressing supply must include a focus on market rent homes. Market rent is no substitute for an adequate supply of social and affordable housing, but it could play a greater and more positive role in addressing the UK’s acute housing needs.

In doing so, we must also offer a better deal to ‘generation rent’ based on purpose-built properties, more professional management, more affordable and transparent rents and greater security of tenure. The UK’s private rented sector remains characterised by individual landlords, older properties, short term tenancies and variable quality. Changing the offer is particularly important for families with children, who now make up a third of the 3.8 million households living in the private rented sector. A purpose-built rented sector managed by professional landlords and financed by institutional investors such as pension funds and life companies offers the potential to deliver a greater supply of market rent properties alongside a better deal for tenants. Institutional investment underpins the build to rent sector in the US and in several other European countries but despite a number of attempts in the last decade to secure investor backing to kick start the sector in the UK, it has so far failed to take off.

A central question underpinning its slow development is the extent to which a better deal for tenants is compatible with investor expectations. And, if build to rent represents a viable proposition for investors, can it meet the affordability needs of low, modest and middle income families in different parts of the country or is it only a solution for higher income tenants in London?

The analysis presented in this report attempts to take the debate over build to rent to the next stage by using real data from actual or planned developments and examining where and how build to rent might work, what the improvements for tenants could be, what the returns for investors might look like and where the key challenges lie.

This analysis demonstrates that build to rent can deliver an affordable, more secure rental product for modest and middle income tenants in different parts of the country at the same time as delivering a competitive return for institutional investors at relatively low risk. From an investor perspective, the return from build to rent set out here offers a degree of inflation hedging, with rents expected to rise in line with CPI over the long run, and the build to rent asset class also offers significant opportunities for diversification within an overall investment portfolio. Despite these clear opportunities, build to rent has been slow to take off because, while it does not require public subsidy or significant policy change, it does depend on effective partnerships between housing providers and investors to address historic concerns around scale and the risks associated with residential investment, as well as careful site selection and the efficient delivery of schemes. To date, these necessary ingredients have rarely come together.

Nick Salisbury, Director at Social Finance contributed a chapter to this report; “Is Social Investment Relevant”.

Britain’s housing crisis is well documented. Supply has failed to keep up with demand for many years, keeping prices historically high despite a prolonged downturn. This has become particularly pronounced in the private rented sector which in many parts of the country is now more expensive than owning a home with a mortgage given that interest rates remain low. However, difficulties accessing mortgage finance and raising a deposit coupled with a decline in the stock of social housing have left many low and middle income households with few options except the private rented sector.

Kick starting the development of purpose built rental accommodation in the UK to increase the supply of private rented homes for those who are shut out of home ownership must now be a priority. As well as growing supply, build to rent could bring to market a new rental offer for tenants: purpose built accommodation, greater security of tenure, more transparent rental increases and more consistent management quality, with a new breed of lettings agents and asset managers.

This briefing note looks at the challenges that build to rent poses for housing providers. It is based on a six month project conducted by the Resolution Foundation and Social Finance to develop a financing model for institutional investment in a build to rent portfolio of 778 rental units nationwide aimed at middle income households.

This report presents our hypothesis on how a Social Impact Bond (SIB) could help improve outcomes for those suffering from drug and alcohol addiction. Social Finance worked with Dr Samantha Gross and Professor John Strang from the National Addiction Centre to understand how recovery from addiction could be measured as part of a social investment contract. This report sets out ways of measuring successful recovery from substance addiction. Each measure of success needs to reflect the end goal of sustained recovery over the long term.

A Social Impact Bond is a contract in which government commits to
pay investors if there is an improvement in social outcomes (such as
a reduction in offending rates). Investors receive returns if, and only
if, these social outcomes are achieved. Investors’ money is used to pay for a range of services to help people recover from their addiction. If outcomes are improved and more people recover, investors receive
payments from government.

For success to be paid for, it must first be defined and measured. This report offers thoughts on what those measures of success should be. It aims to provide the starting point for a discussion of potential outcome metrics to structure an investment proposition.

The launch of the first Social Impact Bond (SIB) in Peterborough in September 2010 generated an overwhelming public response. The six year Peterborough project has now come to the end of its first year. The most pressing question – have we reduced reoffending sufficiently to generate a return to our investors – will only be answered in Year 4. We are measured against a very clear metric. The number of reconviction events of our cohort compared to a similar group of short sentenced male prisoners across the UK drawn from the Police National Computer. Against this objective measure, investors will either gain a return or lose their investment. What can we report after one year? We have over 500 individuals on our watch in the community. While engagement in the One* Service is purely voluntary, the proportion we are working with pre and post release is encouragingly high. There is clear evidence of an unmet need. The enthusiasm for this project from criminal justice experts and practitioners harbours well for its success. Peterborough Prison has aligned some of its services for male prisoners with our programme and has moved to adopt some of our interventions for its female prisoners. The value of a programme which is funded for over six years is tangible both for our service delivery partners and other stakeholders. It enables them to plan and build around it. We are hopeful that not only will this project succeed but that it will encourage others to be bolder in their approach to reducing reoffending in their communities.

This guide aims to set out the steps that are required to assess the feasibility of a Social Impact Bond (SIB) idea. It starts with the identification of a social issue where a SIB might be applicable and examines each factor that must be considered if a SIB is to be effective. The guide is written to assist those developing SIBs to reach a stage where it would be possible to establish a contract between a public sector commissioner and investors. This guide is one in a series of technical guides. Each document focuses on how a SIB can be developed to address the root causes of a specific social issue.

This paper explores why a new social economy is needed and the role that Social Impact Bonds could play in stimulating its creation. It draws on Social Finance’s work developing Social Impact Bond pilots to explore practical considerations around their use and application.