what is social investment. social impact bonds ... … · bonds & commissioning for outcomes...

WHAT IS SOCIAL INVESTMENT. SOCIAL IMPACT

BONDS & COMMISSIONING FOR OUTCOMES

[email protected] Director

Social Finance is authorised and regulated by the Financial Conduct Authority FCA No: 497568

DECEMBER 2017

[email protected]

Associate

©Social Finance 2016

WHAT IS SOCIAL INVESTMENT? 2

Core Grants Programme

Capital Social

Investments Responsible Investments

Mainstream Investments

Programme

Related

Investments

Mixed Motive

Investments

Financial

Investments Grants Charity

Commission

Definition

“ Social Investment is the provision of finance with the explicit expectation, and

measurement, of a social as well as financial return”

• Alternative investment models for charities, social enterprises and profit with purpose companies

have been developed over the last 15 years in parallel to traditional finance

• Now, globally, over 350 impact investment funds exist with c. $40 billion under management

SOCIAL INVESTMENT IS NOT FREE – IT IS A REPAYABLE FORM OF FINANCE,

WHICH REQUIRES A FUTURE REVENUE STREAM TO BE REPAID

© Social Finance 2017

WHO ARE THE SOCIAL INVESTORS 3

Description Advantages Considerations Examples

Trusts &

Foundations

• Typically ~90% of

finance as grants

• Driven by high

social return

Lower cost of

capital

• Require high impact

reporting

• Typically <£500k

• Rare to see investment in

private companies

Social Banks

• Commercial

loans from £50k

to £10M

(typically £2-3M)

Flexible

requirements on

social purpose

No dilution

• Difficult to achieve cash-flow

backed financing

SITR

• HMRC tax

advantaged

scheme

Patient and

unsecured capital

No upfront costs

No shareholder

dilution

• Must be a Charity, CIC or

CBS

• Assets<£15m; Staff<250 FTEs

• Currently cannot raise

>£300k

Social Loan

Funds

• Commercial

loans typically up

to £3m

• Higher

risk/return than

Bank

Patient and

unsecured capital

No shareholder

dilution

• Can be more expensive than

commercial loans

Social Equity

Funds

• Does not

require a running

return

Flexible repayment

timeframe

• Most expensive investment

type (as equity)

• Investors can force liquidity

event

Incre

asi

ng c

ost

of

cap

ital

Low

High


THE MARKET HAS GROWN SIGNIFICANTLY (2001-2016) 4

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

£1.5bn invested

3,500 deals

~20% growth

(# of deals )

* Source: Big Society Capital, The size and composition of social investment in the UK (March 2016)

2016*

http://www.thegiin.org/cgi-bin/iowa/home/index.html

http://www.bigissueinvest.com/


CASE STUDY – GEN COMMUNITY (MIXED MOTIVE)

5

• Gen Community, British Gas and

Social Finance partnered to deliver

large scale community energy

projects with municipal government,

schools and housing associations

• £60m Solar Bond investment;

projects financed through ~80%

debt and ~20% community share

equity.

• £9m savings per annum re-

invested via Community Funds in

environment & education projects

and community assets.

• ~300 tCO2e per site; 0.6m

tCO2e


CASE STUDY: ABILITY TEC (SOCIAL INVESTMENT - DEBT) 6

Socially inclusive growth

• Community Interest

Company with global supply

chain, locally assembled

electronic circuits

• Mission to create lasting

social benefits for employees,

customers and the

community.

• 75% workforce disabled

• Profits reinvested in business,

workforce to double over

investment term.

Investment Details

Amount £260,000 (Fed 2017)

Term 5 years

Interest Rate 7%

Type Loan stock (unsecured)

Use of Funds - Refinancing creditors

- Working capital for growth


Improving health and wellbeing

• Personalised exercise and activity

programmes to enhance the

mental, physical and emotional

wellbeing of older adults

• 5 year equity investment £0.8m

• Funding new minibus service –

Oomph! Out & About – for out of

home activities, including in parks.

7 CASE STUDY: OOMPH (SOCIAL INVESTMENT – EQUITY)


CASE STUDY: NEWCASTLE PARKS TRUST (NEW ENTERPRISE) 8

Create charitable trust: a city-wide solution to maintain and maximise the environmental,

health and social impact of green spaces; a self-funding community asset that will deliver

£20m saving to local authority, and create opportunity for new enterprises.

150+ sites across the city, comprising over 480 hectares -

equivalent to over 600 football pitches


HOUSING GATEWAY LIMITED (PWLB BORROWING FOR GOOD) 9

Solution:

• Established a local authority controlled housing company – Housing Gateway Limited (HGL). Council borrows from Public Work Loans Board and on lends to HGL.

• HGL acquires properties within/near Council boundaries. Council has nomination rights over these properties, which are let at Local Housing Allowance levels to provide a home for people currently homeless.

• £100m invested over a 4 year period, developing a portfolio of +400 homes.

• Now saves the Council ~£1.3m p.a. through avoiding the use of expensive temporary / nightly paid accommodation from the private sector. Council also makes a margin to cover treasury costs on the borrowing on lent to HGL.

Financial Issue: A local authority experienced a 40% increase in homeless acceptances in over a three year period, 2,700 households (c. 6,000 people), and was unable to source properties at rents which can be met by housing benefit, ~ £10m cost over three years.

Social Issue: Homeless households in London increasingly stuck in poor quality, unstable, temporary accommodation, with local authorities unable to find suitable, local, good quality accommodation.


Support the development of a robust Business

Plan

Improved governance structures &

checks

Accessing new forms of capital

to support growth

Encourage clear and effective

impact measurement &

reporting

Increase consideration of

‘return on investment’

CAPACITY BUILDING FUNDS FOR SOCIAL BUSINESSES 10


BECOMING A SOCIAL INVESTOR…….? 11

1. Rates of return don’t reflect underlying risk and costs; specialist investors care about achieving social outcomes and have learnt how to manage risk.

2. Local Government pension funds are investing small amounts in social investment funds, but very limited.

3. Scope to encourage Community Development Finance Institutions and Credit Unions to invest in MSME business in Waltham Forest, though some grant funding may be required to develop robust investable business cases.

4. Some local authorities seeking to develop long term relationships with intermediaries to scope potential for direct social investment into local enterprises and charities, and set up Social Impact Bonds


12

COMMISSIONING

OUTCOMES BASED

CONTACTS / SIBs


WHY COMMISSION FOR OUTCOMES?

Risk sharing

Flexibility to learn

and adapt

Outcomes,

not outputs

Early intervention

and prevention

Co-design and

collaborate

People-

focused

13


HM GOVERNMENT IS SUPPORTING A GROWING MARKET 14

2010 TODAY

First SIB -

Peterborough

2011 2012 2013 2014 2015 2016

First SIB fund –

DWP

Innovation

(£28m)

First wholesale

social investment

institution - £600m

Big Society Capital

Social

Value Act

Social

Investment Tax

Relief

Spending review

- £110m for new

SIBs

Unit cost

database

Various cross-

department SIB

funds

60% of charities

positive about SI


WHAT IS A SOCIAL IMPACT BOND? 15

A Social Impact Bond is a type of Payment-by-Results contract where investors pay for

the up front costs of services and are repaid by a commissioner (i.e. government) if and

only if pre-defined social outcomes are achieved.


US$ 335m

0

50

100

150

200

250

300

350

400

2010 2011 2012 2013 2014 2015 2016 2017

US$

, mil

lio

ns

Capital Raised in Global SIB Market since Peterborough SIB, 2010-2017

Peterborough SIB

launched in Sept

2010, raising £5M

SF US

founded

First SIB in

US

Australia

Germany

Netherlands

First SIB in

Belgium

Canada

First SIB in

Portugal

India

Switzerland

Austria

Israel

Finland SF Israel

founded

First SIB in

Sweden

#

Cumulative SIBs 1

14

29

54

94

GLOBAL CONTEXT


Social Issue Target

Population Intervention

Outcomes Metrics

DEVELOPING A SOCIAL IMPACT BOND OR OUTCOME BASED

COMMISSIONING STRATEGY

17

What is the

problem we want

to tackle?

Which group of

individuals would

most benefit?

How could

services be

improved for

this group?

How should

success be

measured and

paid for?

1 2 3 4


NEET RESEARCH: NEWCASTLE 18

POOR GCSC ATTAINMENT NOT MOST SIGNIFICANT RISK FACTOR; NEETS ARE FAR MORE LIKELY

TO EXPERIENCE A RANGE OF NEGATIVE OUTCOMES IN EARLY ADULTHOOD

OFFENDING, CARE PLAN, CARE LEAVER/LAC, SEN, PRU, TRUANT AND CONTACTS WITH

CHILDREN’S SERVICES ALL MORE STRONGLY CORRELATED WITH BECOMING NEET


15.1

11.0

8.1

5.6

3.2 1.5

0

2

4

6

8

10

12

14

16

Previously LAC Previously CIN/CP Previously OtherCSC Involvement

ChallengingBehaviour / SEN

Free School Meals No Risk Factors

AVERAGE MONTHS SPENT NEET AGED 17-19 IN NEWCASTLE 19 19

THOSE WHO HAVE BEEN LAC SPEND 10X AS LONG NEET AS THOSE WITH NO RISK

FACTORS; OUTCOMES NEARLY AS POOR FOR THOSE WITH CIN/CP PLAN OR

OTHER CSC CONTACT


CASE STUDY: TEENS AND TODDLERS (MANCHESTER) 20

SOCIAL ISSUE & INTERVENTION

Social Purpose:

Better the lives of disadvantaged children and

adolescents vulnerable to becoming Not in

Education, Employment or Training (NEET).

Intervention:

At-risk young person mentors a disadvantaged

child in nursery - develops emotional intelligence

- and improves education and employment

outcomes

Target Group:

~3,000 vulnerable teenagers and disadvantaged

children in nursery in Greater Manchester

Success thus far:

First project delivered 17% over-performance on

outcomes compared to original base case

~97% of T&T grads in employment or training

OUR WORK

Project:

Advised T&T on programme design, CBA, bid

development; raised investment; performance

management systems for service delivery

Outcome:

Successfully won two successive Social Impact

Bond programmes run by DWP and raised

£1.7m investment to fund two projects delivered

over 3.5 years each


SOCIAL ISSUE & INTERVENTION

Social Purpose:

The Energise programme targets young

people at risk of becoming Not in

Education, Employment or Training (NEET).

Intervention Programme:

Mentoring services, structured activity days

and residential courses are designed to

foster re-engagement with school, build

self-esteem and improve interpersonal

skills. Energise is delivered by Adviza (a

charity).

Target Group:

1,500 young people aged 14-24 at risk of

becoming NEET

Start of Investment / Intervention:

March / April 2012 - £902k over c3.5 yrs

CASE STUDY – ENGERGISE (THAMES VALLEY)

OUR WORK

Project

Brokered partnership with social investors and

Adviza, CBA & business case, set up Energise

Innovation Ltd. (new company), raised finance

and managed performance to ensure outcomes

were achieved.

Outcomes

1750 clients worked with; overachieved on

outcomes including improved attitude,

behaviour, qualifications (NVF 1 & 2)

sustainment of employment ~15%

21


ENERGISE SIB STRUCTURE

Investor Group

DWP

Main contract

Social Finance Performance Management

Subcontract:

Advisory Agreement Subcontract

Delivery Body

Adviza Partnership

Investor Agreement

Energise Innovation Limited:

Investors fund the £2.3m delivery cost such that Adviza is not at financial risk of outcomes. Adviza shares in any surplus

22


OTHER EXAMPLES: THINK FORWARD – TOWER HAMLETS

TOMMORROWS PEOPLE – BARKING AND DAGENHAM

23

Most disadvantaged NEET in London

• 77% eligible for Free School Meals

(15.2% nationally)

• 50% registered special education needs

or Education, Health & Care Plans.

(14.4% is the number nationally)

• 53% have below expected English and

90% below expected Maths attainment

• 75% have attendance under average


‘HIDDEN NEET’ IN EAST LONDON 24

Social Finance worked with London Youth’s Talent Match programme to explore hidden NEETs in London. These are young people who are NEET but not claiming JSA, and who are completely disengaged from the system.

National Characteristics

• Become NEET at 18 but tend to stay in education for two more years, usually FE

• Most don’t come from low-income families or have special educational needs, and very few face more serious challenges such as being looked after or getting in trouble with the police at an early age.

• Defining characteristic tends to be lack of skills and qualifications – especially in English and mathematics

East London’s Hidden NEET population

• There are high rates of Hidden NEET are in East and North-East London – Waltham Forest, Tower Hamlets, Barking and Dagenham, Newham, Enfield, Hackney, Haringey, and Islington

• Twice as likely to self identify as Black African or Caribbean than any other ethnicity, and twice as likely to be male

• Extremely likely to live in areas of deprivation - 80% living in households within the third decile of the most income deprived in England.

• Many do not know where to get the support to help them transition to employment, lack confidence, and work experience or perceive employer prejudice


SUPPORTED EMPLOYMENT OR ‘JOB FIRST’ MODELS EFFECTIVE AT

TARGETING THOSE FURTHEST FROM LABOUR MARKET 25

Intervention

• 5 core principles linked to better

performance

• ‘Place then train’ approach

• Job coaching for jobseeker;

ongoing support to employer

Costs Outcome Success Evidence base

c. £3,000-

£8,000 pa

(depending on

target cohort

needs)

Sustained, paid

work in

mainstream

jobs

30+%

(depending on

target cohort

needs)

Medium -

strong

Other key elements:

Rapid job search – intense initial support to ensure results in months not years

Choice and control – job search is built around the individual jobseeker

Partnership – between jobseeker, family, carers and employers, and local VCS

Fidelity – established intervention principles that underpin good delivery

Supported Employment – key features


WALTHAM FOREST: GOING FOR GROWTH 26

2020 vision for economic growth – ‘To maximise the opportunity of Waltham Forest’s unique place in London to help our economy grow and thrive, enabling residents to enjoy sustainable prosperity and a high quality of life.’

Strategy includes employment, skills and pay progression objectives, indicators to measure progress and a number of opportunities:

• Fastest employment growth in London

• National Construction College Leyton & Adult Learning Centre

• Apprentices & devolution of skills budget to London

• Big Creative and ESCALATOR project to support local skills for creative and service sectors

• Prince’ s Trust Team Programme at Waltham Forest College

Falling unemployment among young people


WALTHAM FOREST 16-18 NEET SCORECARD (2016) 27

Bottom 20% of all England authorities for:

• 16-17 whose activity is not know

• Guaranteed September place

• NEETs reengaging in EET

• At mean, but for previous 6 years performed

better than average

• Average GSCE results compared to rest of

England

• No accurate borough data on 16-24 NEET but

London 9% in 2017


SKILLS (2016) 28

Below national average overall, in particular at NVQ 2, 3 and 4


QUESTIONS & DISCUSSION 29

1. Is your priority to prevent at risk children becoming NEET or target

entrenched NEET population?

2. Are you concerned about hidden NEET?

3. Within the 16-24 population are there particular high risk cohorts

that you are most interested in targeting to improve outcomes

(SEND, edge of care/CIN, ASB and offending)?

4. Will skills programmes put local 18-24 year olds in the best position

to benefit from growth opportunities?


THANK YOU 30

ANNEX - WHO WE ARE


WE HAVE EXPERTISE ON A RANGE OF SOCIAL ISSUES 31

Social Finance is a not for

profit that partners with

government, the social sector

and the financial community to

find better ways of tackling

social problems in the UK and

beyond.


WE HAVE EXPERTISE ON A RANGE OF SOCIAL ISSUES 32

Domestic Abuse

Education & skills Criminal Justice

Health and Social Care

Employment Housing &

Homelessness

Strengthening

Communities

International

Development

Children’s Services and

youth engagement


OUR APPROACH TO DESIGN AND SCALE SUSTAINABLE CHANGE TO

IMPROVE OUTCOMES FOR VULNERABLE PEOPLE AND COMMUNITIES 33

UNDERSTAND

DESIGN

FINANCE

SCALE

DELIVER

Use a data-driven lens to understand the issues people

face and how to tackle them

Design responses focused on peoples’ needs and their

communities

Mobilise capital to support sustainable social change

Deliver, and continuously evaluate and adapt our

responses to maximise impact

Share lessons widely, and support our partners to scale

their impact


WE DRIVE SOCIAL CHANGE THROUGH A RANGE OF

ORGANISATIONAL INITIATIVES

34

Enterprise Advisory

• Completed advisory projects with 35 social enterprises

• Provider for several capacity building and social investment programmes

Social Impact Bonds

• Designed and launched 15 in UK alone

Commissioner Advisory

• Advised 50+ local authorities

• Long term strategic partnership with Newcastle

Funds

• Care and Wellbeing Fund (£12M)

• Bright Futures SITR Fund (£1.5M)

International Development

• Initiated Development Impact Bond

• International market building

Impact Incubator

• Developed bottom-up solutions for 3 social issues in partnership with Foundations

• 2 new social issues in development stage

Digital Labs

• Developing software to enable data-drive decision making within local authorities

MOBILISED OVER £250M OF INVESTMENT TO SUPPORT SOCIAL IMPACT

what is social investment. social impact bonds ... … · bonds & commissioning for outcomes...

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