2013 will be the year that social impact investing gains critical mass, according to KPMG’s public sector practice, which has produced a guide to Social Impact Bonds. This outlines the tools for assessing their feasibility, from both the investor and commissioner perspective.
The professional services firm is challenging those leading the country’s public bodies to consider Social Impact Bonds for funding innovation in public services that aims to deliver better outcomes than ‘traditional’ government support. Through a payment by results formula a return is provided to the investor, while the ‘interventions’ may be adopted as status quo policy measures.
Such investments are being explored by a number of the country’s more progressive public service providers. Indeed, their profile is rising rapidly now: A new £14m Social Impact Bond Fund launched at the end of April backed by the government’s social investment bank, Big Society Capital, and is its largest signed investment commitment to date. Also, the Prime Minister has indicated that he plans to use the UK’s G8 Presidency to draw attention to impact investing.
Caroline Haynes, director in KPMG’s public sector practice, says:“It can be difficult to secure public funds to try out innovative ways of delivering public services. Governments typically spend money on programmes that have been rigorously tested, evaluated and measured, resulting in public services and social programmes that can remain unchanged for decades.
“Social Impact Bonds have a role to play in local government, the Prison Service and beyond. Preventative action is at their heart, for instance stopping young ex-prisoners from going down a lifetime path causing harm to themselves, their families and communities, thereby saving the state significant sums and improving collective well-being.
“Most have so far focused on social services but the principle could be extended to health. For example a Health Impact Bond for helping people with diabetes to manage their condition, or to support people who drink too much or are overweight to change their lifestyles and so improve their health prognoses.”
KPMG’s guide to Social Impact Bonds discusses a series of factors that the firm advises the increasing numbers of organisations considering impact investment to assess.
They are grouped into four key feasibility criteria:
A defined target population, measurable outcomes as well as counterfactuals and innovative interventions all need to be available.
There must be a competitive marketplace of providers capable of both delivering in different ways and making the investment required for a payment by results approach.
A workable commercial case, encompassing satisfactory cost savings, returns and outcome payments from the perspective of the commissioner, investor and delivery partners respectively, needs to be developed.
The backing of those who look after the project client base; the carers, teachers, probation officers etc, and the target population themselves will maximise the chance of success.
Caroline Haynes concludes: "I foresee Social Impact Bonds having their day in the sun during the coming months for projects that can meet these criteria and are innovative and demonstrably different.”
For further information please contact:
Alison Anderson, KPMG Corporate Communications
T: 0113 254 2980 E: email@example.com
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