CSR: Success and social impact bonds

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Momentum for Sibs is growing – which banks will take the lead?

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Momentum for pay-for-success and social impact bonds (Sibs) seems to be growing. 

In September, at least four were announced, including a veterans programme that provides job development and post-traumatic stress disorder support to US veterans, two education bonds in South Africa and India, and a pilot from the state of Ontario in Canada aimed at housing stability and high-school graduation rates for at-risk youth. 

UBS, BNP Paribas, Volta Capital and Social Finance were among the institutions supporting the bonds. 

Value

The number of Sibs now issued is thought to be around 100 globally, and there have been about 20 pay-for-success projects in the US to date. 

While results-based financing as a sector has been relatively slow to take off, now that some of the earlier programmes are ending and proving their value, more local governments are expected to consider them as a financing tool – particularly in the US, thanks to new legislation.  


It was barely noticed outside Washington, but Sippra, the Social Impact Partnerships to Pay for Results Act, will push Sibs and pay-for-success programmes into the mainstream 

Democrats and Republicans may disagree on most things at present, but they do agree on greater accountability of government spending and effective programmes for communities in need. That got legislation to create a $100 million government programme to support pay-for-success projects passed earlier this year – four years after being put forward. 

It was barely noticed outside Washington, but Sippra, the Social Impact Partnerships to Pay for Results Act, will push Sibs and pay-for-success programmes into the mainstream. 

Feasibility

States will able to tap into the cash to support their results-based financing – so if a $15 million SIB is launched, the US Treasury could provide half the up-front cost, waiving a return payment if the outcomes are successful. Every state has begun feasibility studies, and the Treasury is expected to release its first request for proposals for social impact partnerships in early 2019. It will appropriate the funds to support outcome payments, feasibility studies, or project evaluations.

When the first dollars are put into action next September, it will be interesting to see if those banks that have already been engaged in outcomes-based programmes – Goldman Sachs, BNP Paribas, UBS, Bank of America – will be vying for a greater role in this emerging market.