News and Comment

Whither Social Impact Bonds?

Wednesday 21 October 2015


When the Peterborough Social Impact Bond (SIB) was launched in 2010, SIBs were heralded as the future of funding social change. This £5million SIB was designed to reduce reoffending among short-sentence male prisoners through an innovative model of levering private investment in social outcomes. In April 2014, however, the third and final cohort of the SIB was cancelled; leading to much hand-wringing by concerned onlookers. This ‘shut down risk’ has caused a number of interested parties to express concern that the development of SIBs may be stunted by Government ‘meddling’. Others were more despondent and claimed that the SIB “dream” may be over.

However, at around the same time as the cancellation of the final Peterborough SIB cohort, the Cabinet Office launched a £30million package to back SIBs to help disadvantaged young people into education, work or training. The number of SIBs in the UK continues to grow, and currently totals 31; more than the rest of the world combined. My trip to Japan earlier this year and a second visit from the Japanese delegation in September to learn from the UK SIB experience and to explore the future of SIBs indicates continued international interest. A variant of the Impact Bond model: the Development Impact Bond, has just been launched in Rajasthan, India; aimed at improving the retention and attainment of girls in schools.

A recent expert roundtable convened by the UK Cabinet Office and HM Treasury focusing on the future of SIBs again signals the current Conservative Government’s intention to ‘scale up’ SIBs, signaled in their Manifesto published before the Election. SIBs can therefore be thought of as still being in a nascent stage of development. It is a concept that is still being pushed in ways that may not have been envisaged when the Peterborough SIB was first designed.

I realised, from my involvement in the Commissioning Academy over the past 15 months or so, that while awareness of SIBs has risen over time; most are still woefully unaware of how SIBs have been evolving and the implications that may arise. Indeed, most people’s understanding of SIBs is based on quite outdated information.

Proliferation and transformation

Although they got off to a slow start, SIBs have now entered a phase marked by proliferation. This is not merely a numbers game. Moving beyond criminal justice (as in the case of Peterborough), SIBs have now spread across an ever-growing number of social issues including children and family support, employment, homelessness, health, and more. There are brave and creative ones emerging, tackling issues such as social isolation, using social prescribing to support holistic wellbeing, and more.

While many SIBs are used to back proven evidence-based interventions, there are others motivated by a commitment to try new ways of doing things by backing relatively ‘untested’ interventions. There are also examples of SIBs being used to back proven interventions in ways that varied from the evidence base behind those interventions; for example by applying an intervention on a different target group, in a different setting, etc. The appetite for innovation seems alive and well.

Different SIB structures have also emerged. The Bank of America Merrill Lynch and Bridges Ventures have typologised them as ‘direct’, ‘intermediated’, and ‘managed’ SIBs. These different and ever-evolving structures are important in supporting different commissioner, provider, and investor motivations; for example through accommodating different appetites for risk. This could bring a wider variety of actors into the market, in turn opening up further possibilities.

A further development that has attracted significant attention has been a response to the high development costs of the “first wave” of UK SIBs which has been perceived by many to be a major stumbling block. For example, the Essex SIB took 23 months to develop and cost Essex County Council around £300,000. Innovative responses from the market have led to new variants of SIBs that are provider-led, or have been packaged by intermediaries, in ways that reduced transaction costs for commissioners by creating models for easy ‘spot purchasing’.


It is endlessly fascinating to observe how different groups, different sectors and different countries have taken the idea of a SIB and have run with it; molding this malleable idea into seemingly limitless incarnations. There is no single model of SIB that is appropriate in every instance. Indeed, SIBs themselves may not be suitable in some situations. Instead, it encourages us to continue innovating and pushing the idea to its limits. I would simply like to end with a reminder never to forget the ‘social impact’ part of Social Impact Bonds. At their best, SIBs contain a wealth of possibilities for generating meaningful social impact for some of the most vulnerable people in our societies. Let us rise to that challenge.

Dr Chih Hoong Sin, OPM Director for Business Development