Some governments around the world are experimenting with new financial instruments, notably ones that are most often in Canada called ‘social impact bonds’ (SiB).
Simply, a ‘social impact bond’ is a financial instrument that raises private capital, and links financial returns to the achievement of a social outcome. In a successful SiB model, these outcomes will create improvements in the system that create cost savings as well as social benefits, and so fund financial returns to the private capital.
While potentially creating new sources of investment for social interventions, Social Impact Bonds also represent new relationships, and shifting responsibilities, between non-profits, governments, and private investors.
Here are some resources for community groups to better understand opportunities, limits and risks offered by Social Impact Bonds
- Watch this 3-minute Introductory video on Social Impact Bonds by McKinsey and Company, based on their 2012 report “From Potential to Action,” which assesses the opportunity for social impact bonds in the U.S.
- The MaRS Centre for Impact Investing in Toronto published “Pioneering Pay for Success in Canada” which describes the approach. Their site offers a number of documents outlining potential Canadian applications and issues, as well as international experiences. Read more >>
- In November 2013, the MaRS Centre for Impact Investing published a Social Impact Bond Technical Guide for Service Providers along with this commentary sharing a development perspective on Social Impact Bonds for non-profit service providers. In 2014, MaRS and Deloitte also published Social Impact Bonds in Canada: Investor Insights
Some CCEDNet members and leading CED thinkers have expressed concerns about the social impact bond model
- Margie Mendell and Émilien Gruet have prepared a brief synthesis on the topic, summarizing how SiBs are being promoted, where they are already in place, and what some of the critiques are.
- Social Impact Bonds – John Loxley, Canadian Centre for Policy Alternatives
- CCEDNet’s webinar on social impact bonds with Margie Mendell and Christian Novak
Other coverage and debate
- On November 20, 2012, the CBC Radio program The Current examined social impact bonds, discussing them with Human Resources and Skills Development Canada Minister Diane Finley, Toby Eccles, the man responsible for developing the Social Impact Bond in the UK, and David MacDonald, an economist with the Canadian Centre for Policy Alternatives Listen to the program >>
- Social Impact Bonds: Benefits and Promises – Imran Sulemankhil and Christian Novak
- Social Impact Bonds: Can a Market Prescription Cure Social Ills? – Knowledge @ Wharton
- Feds Introduce controversial ‘social impact bonds’ to fund social services – Toronto Star
- Top 10 Reasons to be Worried about Social Impact Bonds – National Union of Public and General Employees, and their background research paper Social Impact Bonds: A new way to privatize public services
- Worried About Change – Steve Goldberg’s response to each of NUPGE’s 10 Reasons to be Worried (above)
- Social Impact Bonds Can’t Replace Fairer Taxes – Rob Howarth
- Social Impact Bonds — Approach with Caution Part I and Part II – Steffen Kramer
- Realizing Value Through Social Impact Bonds: Five Hurdles to Overcome When Assigning Value to Outcomes – Stephanie Robertson and Anne Miller
Note: Social impact bonds are not the same thing as community bonds. The Centre for Social Innovation in Toronto offers an excellent explanation of how they used community bonds to raise $2 million for the purchase of a building, and how others can learn from their experience. Read more >>