| Notes |
Social Impact
Bonds:
An Update
By John Loxley and Marina Puzyreva
Department of Economics, University of Manitoba
CANADIAN CENTRE FOR POLICY ALTERNATIVES
CCPA
MANITOBA
JANUARY
2015
Social Impact Bonds: An Update
isbn 978-1-77125-135-8
january 2015
This report is available free of charge from the CCPA
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About the Authors:
John Loxley is Professor of Economics at the
University of Manitoba and the Principal
Investigator for the Manitoba Research Alliance.
John has published extensively on a variety of
economic issues including international finance
and development, P3s, and community economic
development.
Marina Puzyreva is a graduate student in economics
at the University of Manitoba. She holds an MA
in Economics with a specialization in financial
management and a BA in Economics from the
National Research University Higher School of
Economics in Moscow. Her current research focuses
on the payment for successful models of financing,
with a particular interest in Social Impact Bonds.
Acknowledgements
We are pleased to acknowledge the generous
financial support of the Social Sciences and
Humanities Research Council of Canada through
the Manitoba Research Alliance grant: Partnering
for Change — Community-based solutions for
Aboriginal and inner-city poverty.
social impact bonds: an update iii
Table of Contents
1 Growth and Sector of SIBs, 2010–2014
3 The Development of ‘Enabling Fields’ for SIBs
4 Government Support for SIBs in the UK, USA, and Canada
8 Performance to Date
9 Growing Skepticism about SIBs?
10 Bibliography
iv canadian centre for policy alternatives — manitoba
social impact bonds: an update 1
In an earlier paper (Loxley, ) it was argued
that Social Impact Bonds (s) are a recent innovation in the financing of social services and
are becoming more popular with governments,
service agencies and private and charitable financing bodies. It is difficult to gather precise
information on s but a scan of the literature
and web sites suggests that there are now some
Growth and Sector of SIBs, 2010–20141
s either being implemented or very close
to implementation around the world.
Two thirds of them are located in the UK,
the rest in the , Australia, the Netherlands
and Canada. +e average size of s in the ,
however, is much larger than that in the UK so
that the amount of money involved in total is
greater than that of the UK.
table 1 2 Social Impact Bonds 2010–2014
Number
Total Canada UK USA Australia Netherlands
2010 1 1
2011 0 0 0 0 0
2012 13 12 1
2013 6 1 2 2 1
2014 3 1 1 1
23 1 15 4 2 1
1 +is paper has benefitted greatly from comments by Shauna Mackinnon and Jesse Hajer. Financial support was provided by
and by the Global Political Economy Research Fund of the Faculty of Arts, University of Manitoba. We also acknowledge
the generous financial support of the Social Sciences and Humanities Research Council of Canada through the Manitoba
Research Alliance grant: Partnering for Change – Community-based solutions for Aboriginal and inner-city poverty.
2 +e dates when s actually commence should be treated cautiously as sometimes it refers to services actually commencing (e.g. projects in Peterborough, London, New South Wales), sometimes the contract being signed (e.g. Essex),
sometimes the transaction being completed (e.g. ) and sometimes merely the project being announced (e.g. New
York Rikers Island, Massachusetts etc). +e apparent lack of activity in , therefore, should also be treated with caution.
2 canadian centre for policy alternatives — manitoba
rates and improve early childhood education are
the main area of focus in the UK, though similar
initiatives exist in the and Australia. Half
of the existing projects focus on increasing
employment, especially for youth, but these account for only of total funding, suggesting
these types of initiatives are relatively less expensive or at a smaller scale than programs aimed
at offenders or children.
In terms of the sector distribution of s,
the bulk measured by financing are to be found
in the criminal justice field, aimed at reducing
recidivism among ex-inmates. Four anti-recidivism projects account for of total financing, with most of this expenditure in the .
Programs targeting children account for of
total financing. Projects seeking to reduce the
number of children in care, increase adoption
table 2 Social Impact Bonds 2010–2014
Amount in Million US Dollars
Canada UK USA Australia Netherlands Total
2010 7.7 7.7
2011 0.0 0.0
2012 28.5 9.6 38.1
2013 3.3 20.5 15.9 0.9 40.7
2014 0.92 15.0 27.0 43.0
0.92 54.5 57.1 15.9 0.9 129.4
table 3 Social Impact Bonds 2010–2014
Sector No. Canada UK USA Australia Netherlands Total % Total
Offenders 4 7.7 50.1 57.8 44.7%
Homelessness 1 7.6 7.6 5.9%
Children 6 0.92 23.3 7.0 6.5 37.8 29.2%
Employment 11 15.9 0.9 16.8 13.0%
Home Care 1 9.4 9.4 7.2%
23 0.9 54.5 57.1 15.9 0.9 129.4 100.0%
social impact bonds: an update 3
ly days. Whiteside argues the penetration of the
public sector by Ps can be understood as a specific form of commodification of public services by the private sector, a form of dispossession
which benefits private capital at public expense.
s can also be characterized as having
these properties and such an enabling field is
likely required prior to any large expansion of
activity globally. +ere is, indeed, evidence
of widespread activity in the development of necessary background supports for s, including
significant government subsidization directly
through the guarantee of returns to private investors or indirectly through project grants, as
outlined below.
+ere are at least proposals in the works
(Burpee, ) and, despite the increase in activity by value since , the rate of implementation seems quite modest. Also, so far, only one
has started in Canada. How do we explain this?
+e answer, we believe, lies in the need for prior
development of background supports for these
activities in terms of legislation, government
policy, budgetary practices and institutions and
lobbyists promoting and enabling s. Heather
Whiteside () has analyzed the evolution of an
‘enabling field’ to explain the eventual rapid takeoff of public-private partnerships (Ps) in Canada,
and especially in the health field, despite strong
evidence of poor performance of Ps in their earThe Development of
‘Enabling Fields’ for SIBs
4 canadian centre for policy alternatives — manitoba
measured (New Economy, ). If experience
with Ps is any guide, this toolkit is likely to be
widely adopted in other countries.
USA
+ere has recently been a great flurry of activity
with regard to facilitating and encouraging s
in the . Legislation to permit pilot projects has been passed recently in Hawaii, New
Jersey and Minnesota,
while legislation is being
considered in Maryland and Utah (Eames and
Terranova, ). Pilot projects or feasibility studies are under way in California, Ohio, Oregon,
Rhode Island and Washington DC. Formal Requests for Information for s have been issued
by the City of Denver, , with interest in ‘early
childhood education, at risk youth, supportive
housing and homelessness prevention’ (ibid, p.
); by Illinois in youth justice and employment;
by Michigan for criminal justice and human services and by South Carolina for ‘controlling costs
UK
s were pioneered in the UK, where their development has been supported significantly by
government. +e U.K. government has established two separate funds totalling Million
to support s (U.K. Cabinet Office, a) and
Prime Minister Cameron used his presidency
of G meetings in to profile s and the
broader concept of social impact investing (U.K.
Cabinet Office, b). A Centre for Social Impact Bonds has been established in the Cabinet
Office and this has developed a tool-kit for those
wishing to consider s (Cabinet Office, ).
+is consists of a Template Service Agreement Contract which would simplify and cheapen
establishing contracts for s and a cost-benefit guide and model to help proponents assess
their proposals. In addition, there has recently
been added a centralized database of unit costs
covering crime, education and skills, employment and economy, fire, health, housing and social services against which proposals can be
Government Support for SIBs in the UK,
USA, and Canada
3 +e Minnesota proposals are somewhat different from other s in that the State would guarantee private funding but
pay social service agencies only if predetermined outcome targets were met. Unlike other s, the risk here lies entirely
with the delivery agency and not with the private funders. It remains to be seen how delivery agencies are likely to respond to being exposed to such risks. See Perry, .
social impact bonds: an update 5
+is follows the creation of Finance for Good
in Alberta, a lobby group designed specifically
to ‘develop the necessary tools, networks, and
processes to bring s to Canada’. According
to them, ‘We are on the verge of a revolution in
social service delivery’ with s allowing ‘private sector champions to make profitable investments to enhance our community and save our
government money’ (Finance for Good, ).
In March, , the Government of Ontario’s Ministry of Economic Development, Trade
and Employment made a call for ideas that
would provide ’innovative, prevention-oriented
solutions in housing, youth-at-risk or ‘improving employment opportunities for persons facing barriers’ (Ontario, March , ). s had
earlier been promoted by the Drummond Report
() and by the Social Enterprise Strategy for
Ontario (). +e Ministry will support promising ideas through workshops and the provision of expert advice.
New Brunswick also announced its interest in pursuing s in its
+rone Speech (Finance for Good, ). Interest in s has been expressed in BC with regard to Aboriginal out-of-home care; in Alberta
regarding Homelessness and in Nova Scotia in
the areas of literacy and early childhood education (Gill, ).
Recently, Saskatchewan announced its first
, a million project to provide assisted living to young single mothers at risk in Saskatoon,
designed to reduce the number of children taken
into care (Hill, ). Half the money will be advanced by the Conexus Credit Union in Regina,
matched by a contribution from two private individuals in Saskatoon. +is is a five year project
which will return the original investment and a
return to the funders if children remain
and improving the health of mothers and babies
enrolled in South Carolina’s Medicaid Program’
(Eames and Terranova, , p. ). Formal Requests for Proposals have been issued by Connecticut (substance abusers affiliated with the
state’s child welfare program); Massachusetts
(chronic homelessness and juvenile justice.) and
the State of New York (health care, child welfare,
early childhood development and public service)
(Eames and Terranova, , pp. –).
In terms of institutional encouragement and
facilitation of s in the US, the Harvard Kennedy School has established a Social Impact
Bond Technical Assistance Lab, which assisted
the Connecticut initiative.
An important factor in launching two of
the earlier US s was the presence of guarantees for the funders, with the Riker’s Island
in New York obtaining a funding guarantee by Bloomberg Philanthropies and the New
York State (youth justice) a guarantee
from Rockefeller Foundation (Finance for Good,
March, ). Similar guarantees were important in the two Australian s, though in these
cases it was the government which provided a
and a guarantee (ibid). Guarantees have
not been used in the UK where, it is argued, the
social financing landscape is more developed
(Finance for Good, ).
Canada
In Canada, Alberta has recently introduced
legislation which provides billion from the
Alberta Heritage Trust Fund to create the Social Innovation Endowment Account, designed
partly to fund the promotion and development
of social impact bonds in Alberta (Acuña, ).
4 carried this news on its web site without any critical comment, raising the question of whether or not
itself is becoming part of the ‘enabling field’ for s in Canada. In response, Mike Toye, the Executive Director stresses
that does not have a formal policy position on s and that its ‘ limited capacity is directed towards making sure our members and audience are at least aware of what’s going on and have the information available to make up
their own minds’ (personal communication, May, ).
6 canadian centre for policy alternatives — manitoba
and philanthropic support...to grow the Innovation Fund and to examine the potential to
achieve improved outcomes, including cost
savings, through new financial structures such as
social-impact bonds’ (Bonneville, ). His most
recent presentation, however, is less categorical
and avoids explicitly mentioning s referring,
instead, to social finance and to ‘investors’ without mentioning the specific form of such finance
and investment (Gill, ). +e local head of the
project, a highly respected member of the Winnipeg Aboriginal and social service community,
has also made it clear in personal communication that there is no prior assumption that the
Boldness Project will be pursuing s.
+is apparent backing off from s may perhaps reflect the lack of enthusiasm for them by
the Provincial government.
+e McConnell Foundation appears to be
taking a lead in enabling s, both by direct finance of projects and by funding an Impact Finance Lab run by the MaRS Centre for Impact
Investing which will work with ‘governments,
nonprofit organizations and investors to build
ecosystem’s capacity to undertake outcomes finance in Canada’ (MaRS Centre, ).
At the federal level, as noted in the earlier
report, Human Resources and Skills Development Canada () had expressed an interest
with their mothers for six months after leaving
the Sweet Dreams assisted living home. +e return will be pro-rated if to children stay with
their mothers and nothing, neither the original
investment nor the return, will be paid if fewer than children remain with their mothers.
While there has been no official expression
of interest in s in Manitoba, some interest in
examining their adoption has been expressed by
the Boldness Project on early childhood development in Winnipeg. +e Province has provided
of the funding for the million Boldness
Project, the balance of the funding coming from
the McConnell Foundation. +e Province has
also created an Early Childhood Development
Innovation Fund, administered by the United
Way and the Boldness Project is its first initiative. One of experts funded by McConnell, Ian
Gill from Vancouver, is an active proponent of
s claiming that, among other attractions,
they ‘Free(s) service providers from government
meddling’ (Gill, ). Gill initially stated quite
categorically that s would be a component
of the Boldness Project (ibid). He sees s as ‘a
tool for communities themselves to co-design
and co-deliver interventions (and) eventually, a
way for communities to invest in their own outcomes’ (ibid). More recently he has stressed that
the Boldness Project is seeking ‘ Further business
table 4 Concept Area Frequency
Multiple domains 45
Youth 21
Health 15
Aboriginal people 13
Housing/Homelessness 13
People with disabilities 11
Public safety 6
Unemployed 5
Seniors 4
New Canadians 4
Other 17
Total 154
social impact bonds: an update 7
income families for post-secondary education,
group homes for seniors, and mentorship programs for immigrant professionals (,
May , pp –)
+e government promises follow-up action
to connect ‘great ideas with social finance partners’, building ‘on the Call’s momentum by taking several steps to bring players together, incentivize leveraging, encourage new partnerships
and stimulate innovative ideas for addressing
social and economic challenges’ (ibid, p. ). It
is apparent, therefore, that the federal government intends to be very active in promoting
s, playing a key role in their development.
+e criteria it lays down for supporting
projects are that ‘they must be proven, more
beneficial than the existing program and both
scalable and replicable’ (Ibid, p.)
in s. In November, , it put out a call for
innovative ideas in Social Financing, including
s. It received over concept papers, an unspecified number of which, but ‘many’, contained
proposals for s. Proposals came from all over
the country, with just over a half from BC and a
further from Ontario. +e vast majority of
proposals, or were submitted by non-profit
or charitable organizations and by the private sector. Proposals were received for many
sectors of the economy, but mainly for youth,
health, Aboriginal People, housing and homelessness and people with disabilities.
On reporting on these proposals, the Minister specifically described proposals for s
in the fields of supportive housing for people with mental disabilities, employment and
training for Aboriginal youth, savings by low
8 canadian centre for policy alternatives — manitoba
the number of reconvictions in Cohort when
compared to the Comparison Group, the reduction 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, thus did not trigger
payment (Jolliffe and Hedderman, August, ,
p. ). In short, targets were not met.
It should be noted, however, that if the average reconviction rate falls by at least . per cent
across the first and second cohorts, then investors
will get their money back in . Initially, there
were supposed to be three cohorts, but the third
one will not proceed as the experiment was cancelled by the Ministry of Justice with effect from
June . +e is replaced by a national program for short-term offenders called Transforming Rehabilitation. +e pilot will, therefore, last
only three years and not the seven years originally
planned (Pay For Success Learning Hub, ). As
Ainsworth has argued, ‘the pricing structure for
the first was inevitably pretty finger-in-the-air,
because no one quite knew what could be achieved.
In order to tempt government into putting up the
money, the first made some stretching promises. And even then the Big Lottery Fund had to
promise to put up much of the cash to pay for it.
As far as I can see, future s have been priced
in a way that’s more generous to the investor, and
indeed, several of them have already paid out’.
Only six s have been completed and there is
information on outcomes for only two of them,
but this does not deter proponents from waxing
eloquent about the success of the approach. +us,
Matthew Burpee, of Finance for Good Ltd,
concludes that the results from UK s targeting youth education and prisoner recidivism ‘are
incredibly promising and appear to suggest that
the model is an effective way to drive positive
social outcomes’ (Burpee, ). At the same time
he acknowledges that ‘Obviously it is dangerous
to imply correlation between a program targeting youth education and another targeting adult
recidivism; similarly, one must be cautious not
to conclude too much from such a small sample size’. No mention here of possible selection
bias in these two projects, or of whether or not
these results could have been achieved using improved conventional delivery methods. +is rah
rah approach of Finance for Good is reminiscent
of the uncritical approval of Ps by the Canadian
Council on Public-Private Partnerships, but it is
likely to become an important part of creating
an enabling environment.
What makes this positive evaluation of the
approach doubly suspect is that it appears to be
premature, at least in the case of Peterborough.
A recent independent assessment of the Peterborough trial, widely considered to be the model
, concluded that `despite a . reduction in
Performance to Date
social impact bonds: an update 9
quotes its president, Lori Sigurdson: “We don’t
want people to profit from the misery of others.
+e motive becomes profit, not service. +e primary responsibility of government is to support
vulnerable and marginalized people.”
Awareness of s is not as high elsewhere in
Canada. Reactionary governments are likely to
promote s to undermine the public sector and
promote the privatization of public services (Joy
and Shields, ), while social service agencies
are still likely to be attracted to s because of
the guaranteed funding they offer.
+e movement to promote s has generated
some negative reactions, especially in Alberta.
David MacDonald () has argued that ‘+ere is
no free lunch with the social impact bond model.
Make no mistake: +e government always pays.
Even if the project misses its targets, investors will
be paid off so that they’ll pony up for next year’s
bond. Otherwise, the house of cards collapses’.
He points out that the Alberta College of Social Workers is opposed to s, because they
“allow financial institutions to turn human suffering and conditions into commodities” and
Growing Skepticism about SIBs?
10 canadian centre for policy alternatives — manitoba
Acuña Ricardo, , Opinion: Social impact
bonds: An investment in the wrong direction
Edmonton Journal, March .
Ainsworth, David, , Can the Peterborough social impact bond be judged a success? Civil Society, UK. http://www.civilsociety.co.uk/finance/
blogs/content//can_the_peterborough_
social_impact_bond_be_judged_a_success
Bonneville, Ruth , , ‘Early investment, longterm payoff’, Winnipeg Free Press, March .
Burpee, Mathew, , Initial Results are Extremely Positive for Social Impact Bonds,
Finance for Good.http://financeforgood.ca/
initial-results-are-extremely-positive-for-social-impact-bonds/, September .
Drummond, Donald, , Commission on the
Reform of Ontario’s Public Services, Public
Services for Ontarians: A Path to Sustainability and Excellence; Department of Finance,
Ontario, http://www.fin.gov.on.ca/en/reformcommission/
Eames, Sandra and Victoria Terranova, et al. ,
A Review of Social Impact Bonds: Financing
Social Service Programs through Public-Private Partnerships, February.
Bibliography
Finance for Good, .Social Impact Bonds and
their Role in Canada. http://financeforgood.ca/
social-impact-bonds-and-their-role-in-canada/
Finance for Good, , Compensating for Risk
in Innovation: +e Myths and Realities of
Funding Guarantees (Part ) http://financeforgood.ca/compensating-risk-innovationmyths-realities-sib-funding-guarantees-part-/
March .
Gill, Ian, , Social Impact Bonds: Measure
for measure, Cause and Effect, +e Social
Projects Studio.
Gill, Ian, , A Pathway to a Canadian Indigenous Impact Partnership in Early Childhood
Development: Lessons (so far) from Winnipeg. Cause and Effect, March.
Hill, Andrea, , ‘New funding model supports single moms’, +e StarPhoenix, Saskatoon, May . http://www.thestarphoenix.
com/life/funding+model+supports+single+
moms//story.html
Human Resources and Skills Development Canada (), , Harnessing the Power of
Social Finance, http://www.esdc.gc.ca/eng/consultations/social_finance/report/index.shtml
social impact bonds: an update 11
forsuccess.org/resources/peterborough-sibphase-out-
Perry, S. (). Minnesota explores ‘Pay for Performance’ bonds. !e Chronicle of Philanthropy. Retrieved from http://philanthropy.com/
blogs/state-watch/minnesota-explores-payfor-performance-bonds/
UK Cabinet Office. (). Social impact bonds:
Introduction to social impact bonds, information on commissioning a social impact bond,
sources of funding and available support. Retrieved /, , from https://www.gov.uk/
social-impact-bondssources-of-funding-forsib-projects
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gov.uk/sib_knowledge_box/toolkit
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attachment_data/file//peterboroughsocial-impact-bond-report.pdf
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Loxley, John, ‘Social Impact Bonds’, Review:
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+ey aren’t charity. +ey aren’t social justice.
+ey’re a new way for business to profit from
social services. Albertaviews, https://albertaviews.ab.ca////social-impact-bonds
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Pay For Success Learning Hub, , Peterborough to Phase Out in , http://pay-
Unit 205 – 765 Main St., Winnipeg, MB R2W 3N5
tel 204-927-3200 fax 204-927-3201
email ccpamb@policyalternatives.ca
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