Social Finance (consultancy)

Social Finance is a not for profit consultancy[1] international organisation founded in 2007 in the United Kingdom whose goal is to promote and implement Social Impact Bonds (SIB), a form of outcome-based sub-contracting. They partner with the government, the social sector and the financial community to help set up and raise funds for SIB projects.They typically promote SIBs in the areas of offender rehabilitation, children and family, homelessness and housing, young people at risk of becoming NEET, mental health and employment, loneliness and social isolation, and domestic violence.[2][3]

Not to be confused with the eponymous US for-profit company known as SoFi.

Social Finance
nonprofit
IndustrySocial enterprise
Consulting
Founded2007
Websitesocialfinance.org.uk
socialfinance.org

History

Social Finance's initial team supported the work of the Commission on Unclaimed Assets, which recommended the establishment of a Social Investment Bank in March 2007 and in turn developed the blueprint for what is now named Big Society Capital.[1][4] Initially financed by a group of philanthropists, later financial support included charitable trusts and foundations including: Esmée Fairbairn Foundation, Rockefeller Foundation and the Big Lottery Fund.[5]

Social Finance helped develop the first Social Impact Bond project in the world in the UK in 2010,[6] a six-year social impact bond pilot scheme run by Social Finance to see around 3,000 short-term prisoners from Peterborough prison, serving less than 12 months, receiving intensive interventions both in prison and in the community. Funding from investors outside government was initially used to pay for the services, which were delivered by Third Sector providers with a proven track record of working with offenders. If re-offending is not reduced by at least 7.5% through all tranches the investors will receive no recompense. In August 2014, the first set of results were released, showing that the Social Impact Bond reduced reoffending by 8.4 per cent. This was not high enough to trigger any repayments to investors at this point (10% reduction would have been necessary for payments to investors by August 2014) but was on track for payments to investors in the next tranche – as an 8.4% reduction is in line with the overall reduction rate needed.[7]

In January 2011, Social Finance US was launched to bring social impact bonds to the US market.[8] Today the "Social Finance Global Network" includes Social Finance UK, Social Finance US, Social Finance Israel, Social Finance India, and Social Finance Netherlands.[2]

Social impact bonds
Main article: Social impact bond

There are a range of interpretations of what the term ‘social impact bond’ means. Broadly speaking, social impact bonds are a type of bond, but not the most common type. While they operate over a fixed period of time, they do not offer a fixed rate of return. Repayment to investors is contingent upon specified social outcomes being achieved. Therefore, in terms of investment risk, social impact bonds are more similar to that of a structured product or an equity investment.[9]

Social Finance UK describes social impact bonds as "a public-private partnership which funds effective social services through a performance-based contract."[10]

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References
  1. Helen Warrell (21 April 2008). "New firm to prepare ground for Social Investment Bank". Third Sector. Retrieved 19 July 2017.
  2. "About Social Finance". socialfinance.org. Retrieved 16 May 2020.
  3. "Social financial engineering". The Economist. 23 March 2010. Retrieved 19 July 2017.
  4. Alan Travis. "Will social impact bonds solve society's most intractable problems?". The Guardian. Retrieved 19 July 2017.
  5. "Archived copy". Archived from the original on 20 July 2011. Retrieved 19 April 2011.CS1 maint: archived copy as title (link)
  6. "Private backers fund scheme to cut prisoner reoffending - BBC News". Bbc.co.uk. Retrieved 19 July 2017.
  7. "Can the Peterborough social impact bond be judged a success?". Civil Society. Archived from the original on 21 May 2015. Retrieved 18 August 2014.
  8. "For Federal Programs, a Bit of Market Discipline - David Leonhardt". The New York Times. Retrieved 19 July 2017.
  9. http://www.socialfinance.org.uk/downloads/SIB_report_web.pdf%5B%5D
  10. Social Finance (2016) Social Impact Bonds: The early years
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