Investors in the world’s first social impact bond are to get a return, it has been announced today.
The social impact bond (SIB), that aimed to cut reoffending in the English town of Peterborough, has met measured outcomes and will return 17 investors their initial capital and a return of just over 3% per annum for the period of the investment.
The news comes after an initial bumpy ride for the SIB that was cut short by the Ministry of Justice; running for four years, instead of a planned six, after a change in policy.
And it missed measured outcomes that would have triggered annual return payments to investors, instead of a lump sum at the end of the SIBs period.
Overall, the SIB, which raised £5m and ran for four years, reduced reoffending of short-sentenced offenders in Peterborough Prison by 9% compared to a national control group.
Saadia Madsbjerg, Managing Director at the Rockefeller Foundation, said: “As an early support of SIBs – and an investor in this historic, first-ever SIB – the Rockefeller Foundation is very proud of the success of the Peterborough Prison pilot, an important milestone in unlocking new capital to address critical social problems.
“We are excited about the potential it demonstrates to mobilise unprecedented flows of new capital to the social sector while saving taxpayer money and driving innovation in social service delivery.”
Other investors in the Peterborough SIB, mostly charitable foundations, included the Friends Provident Foundation, Panahpur and the Barrow Cadbury Trust.David Hutchison, CEO of UK-based Social Finance, which developed and arranged the SIB, said: “The Peterborough Social Impact Bond captured people’s imagination with the simple premise that it is possible it is possible to invest in interventions to tackle difficult social issues.”
But SIBs have also been controversial. The first US social impact bond, also designed to tackle reoffending (at the Rikers Island jail complex) and backed by Goldman Sachs, was discontinued after failing to meet targets. Separately, it was also criticised for reportedly using Scientology-inspired therapy on teenage inmates.
And a London-based social impact bond seeking to tackle rough sleeping was criticised after it emerged charities were working with the UK Border Agency to deport foreign rough sleepers from the city.
Since the Peterborough SIB’s launch in 2010, the concept has been pioneered around the globe with 89 social impact bonds in 19 countries, mobilising more than £300m in investment to tackle complex social issues such as diabetes prevention and loneliness among the elderly.
SIBs an instrument where private investors fund the delivery of a social intervention, such as increasing educational attainment for teenagers, in the hope of a financial return if measured outcomes are met. The ‘outcome payer’ is typically a government department, benefiting from lower public spending if a chronic social problem is effectively tackled.