Investors in the pioneering Peterborough social impact bond will not get a return this year as hoped as the project has not met targets set by the UK government, it has been announced today (August 7).
A coalition of 17 charitable foundations had backed the Peterborough SIB, the world’s first social impact bond and which is seeking to reduce reoffending in the English city, with nearly £5m (€6.3m). The government had agreed to pay investors a return this year if the SIB reduced reoffending by 10% among 1,000 prisoners in the area compared to a national baseline.
It has been announced by the Ministry of Justice that the Peterborough SIB has reduced reoffending by 8.4% compared to the control group, meaning that investors will not get a return this year.
The reduction in the first cohort was “insufficient with regard to the terms set out in the contract between the Ministry of Justice and the Social Impact Bond partnership to be considered an Outcome, [and] thus did not trigger payment” according to an independent assessment. However, the Ministry of Justice and funder the Big Lottery Fund will make a return to investors in 2016 if there is a reduction in reoffending of more than 7.5% for this cohort and a second cohort of 1,000 prisoners, as seems likely.A spokeswoman for Social Finance, which structured the SIB, said based on the trend in performance for the first cohort, investors can look forward to a positive return.
Sara Llewellin, CEO of the Barrow Cadbury Trust and SIB investor, said: “We are delighted with the progress made in the first cohort of the Peterborough SIB. As investors, we wanted to prove that by doing something differently, and by being more flexible, we could indeed create a different outcome. An outcome which is a ‘WIN, WIN’; a win for the taxpayer as the volume of repeat crime falls and a win for prisoners and their families when they take charge of restabilising their lives.”
Following the Peterborough launch in 2010, there are now 16 Social Impact Bonds in the UK, four in the US, two in Australia, one in Canada, one in the Netherlands, one in Belgium, one in Germany and more than 100 proposals world-wide.
Social Finance says that over $100m has been raised in social investment to fund SIBs globally and that three of the SIBs under Social Finance management have already paid outcome payments to investors. Link