Impact Fund

Social Impact bonds (SIBs) have attracted much attention in the aftermath of the financial crisis. They have been
implemented in a number of countries as they seem to be an attractive proposition for financing the delivery of social
services.
However, SIBs remain a fairly new financial instrument aiming at social impact with limited evidence regarding
their results. Therefore, further analysis is needed in order to develop a robust evidence base.
SIBs are complex instruments. They involve multiple stakeholders coming from different sectors. Time, technical
expertise and commitment to collaborate are indispensable in order to establish a SIB.
SIBs have been costly instruments so far. They have entailed significant transaction costs that stakeholders
should consider before embarking on them. Policy makers should evaluate carefully what is the value added for
implementing a SIB for a policy intervention compared to a more traditional approach. However, transaction costs are
expected to drop as more SIBs develop and there is a streamlined process for establishing them.
Rigorous methodological design for identifying measurable social outcomes and appropriate target groups is of
utmost importance in order to avoid perverse effects, such as “creaming”, “parking” or “cherry picking”.
SIBs may be an opportunity to nurture a culture of monitoring and evaluation in social service delivery.
Independent and robust evaluation could benefit all stakeholders as it may identify what works well in SIBs and what
does not as well as unintended consequences- positive or negative.
SIBs intend to roll over the risk from the government and the service providers to investors. Yet, capital protection
and guarantee mechanisms as well as early termination clauses of the SIB contract may be in place mitigating the risk
assumed by investors.
Ensuring continuity of social service delivery by the public sector is indispensable for vulnerable groups and
citizens. Therefore, SIBs could be more appropriate as a complementary and not core mechanism for social services
delivery.

Source: OECD.org/cfe/leed/UnderstandingSIBsLux-WorkingPaper.pdf

Social impact bonds are a results-based form of social impact investment. Private investors provide capital to launch or expand innovative social services that provide a public good. If the expected social benefits are achieved at the end of a given period,
investors receive back their capital plus a rate of return (negotiated with public authorities and varying with the level of results achieved). Social impact bonds are increasingly common in the United Kingdom, as well as in the United States and Australia, and have begun to be used in a number of other EU Member States.
Social impact bonds have the potential to tap large capital markets so as to launch new social services. Private investors can earn attractive investment returns for assuming the risks associated with the service. Social enterprises can benefit from the business experience of investors, and the interests of all partners may be better aligned from a strict results-oriented approach. Public authorities do not need to stump up capital to launch a new service and do not need to shoulder the risk if the intervention is not
successful. On the other hand, designing services where results can be accurately measured is not easy and more experience is needed before investors have a clear idea of risks and returns in this new asset class. The European Commission has promised to facilitate the exchange of experiences between Member States with social impact bonds. The European Parliament has called for greater use of innovative financing for social benefit and for more specific
proposals from the European Commission.

Source: europarl.Europa.eu/EPRS/538223-Social-impact-bonds-FINAL.pdf

Large amounts of private sector financing is needed to bridge the development gap.

The basic structure of a SIB is like any other bond.

Many investors today are committed to socially responsible investing, and SIBs offer them the opportunity to make an impact.

SIBs can be successful if they are structured like bonds, and not just customized contracts negotiated on a bilateral basis.

SIBs for the future

The last decade has seen a surge in investor interest for impact investing.

Investors still don’t want to compromise on their financial returns, but they are focused on impact. SIBs push that a step further with investors fully vested in the outcome of the project, and that is a good thing.

By promoting greater oversight and collective ownership, and with the necessary changes in structure, SIBs can lead to better outcomes and a better society for us all.

Source: blogs.Worldbank.org/voices/five-ways-social-impact-bonds-live-their-potential

ESG investing — or strategies that take a company’s environmental, social and governance factors into consideration — grew to more than $30 trillion in 2018, and some estimates say it could reach $50 trillion over the next two decades.
These strategies, which include impact investing, are not new, but momentum is growing as shareholders demand action, and as the consequences grow for companies that fail to adapt.
One of the most popular ways to evaluate these metrics is through ESG integration.This is a strategy whereby a stock is evaluated through an ESG lens alongside traditional metrics like capital allocation and cash flow.
There are a number of ways to take an ESG-style investing approach, including ETFs that track indices, as well as specialty funds that do not include stocks related to polarizing areas of the market such as tobacco and fossil fuels.
Once thought to come at the expense of returns, ESG strategies have proven that they can be market-beating.

Source: CNBC.com/2019/12/14/your-complete-guide-to-socially-responsible-investing.html

• A growing number of investors want to see their money go toward stocks or funds that are both profitable and reflective of their social values.
• Three styles of investing fulfill this: Environmental, social and governance (ESG), socially responsible investing (SRI) and impact investing.
• ESG looks at the company’s environmental, social and governance practices, alongside more traditional financial measures.
• Socially responsible investing involves actively removing or choosing investments based on specific ethical guidelines.
• Impact investing looks to help a business or organization complete a project or develop a program or do something positive to benefit society.

Source: Investopedia.com/financial-advisor/esg-sri-impact-investing-explaining-difference-clients/

A number of standards exist to aid investors in evaluating and differentiating between financial products described as sustainable:

Eurosif Transparency Code
Febelfin Quality Standard and Label
FNG-Label for Sustainable Mutual Funds
FNG Sustainability Profiles and Transparency Matrix
Luxflag ESG label
Novethic SRI & Green Fund Labels

In 2010 wurde in Grossbritannien der weltweit erste Social Impact Bond (SIB) und damit ein neuartiges, innovatives Finanzierungsinstrument lanciert.
Dieser pay for success-Kontrakt hat sogleich für hohe mediale Aufmerksamkeit gesorgt. Bislang wurden SIBs vor allem im angelsächsischen Raum aufgelegt. Ende 2014 hat das Sozialamt des Kantons Bern den ersten SIB in der Schweiz ausgeschrieben. In dieser Publikation werden zentrale Fragen zum SIB beantwortet: Was ist ein Social Impact Bond.

Was ist ein Social Impact Bond?
Social Impact Bonds binden private Investoren in soziale Präventionsprogramme ein und schütten dabei nur eine Rendite aus, wenn die vordefinierten Ziele erreicht werden. Der Staat als Auftraggeber zahlt den Investoren ihr Kapital nur bei Zielerreichung zurück.
Social Impact Bonds monetisieren die Vorteile sozialer Interventionen und binden die Auszahlung an Performance. Gleichzeitig wird die Kontrolle
des Staates über die Programme limitiert. Die gewonnene Flexibilität erlaubt mehr Spielraum unter anderem für die Umsetzung neuer und innovativer Massnahmen.

Wo und wie wird ein Social Impact Bond eingesetzt?
Grundvoraussetzung für einen SIB ist die Annahme, dass ein Dienstleistungsanbieter mittels einer Intervention mehr Staatsausgaben sparen kann als
die Intervention Kosten verursacht. Gegeben dieser Grundvoraussetzung ist der Anwendungsbereich sehr offen. Bisher wurden vor allem Projekte in
den Bereichen Jugendarbeitslosigkeit, frühkindliche Schulförderung, Resozialisierungsprogramme und Betreuung und Integration von Obdachlosen und
Bedürftigen realisiert.

Ein SIB wird als vertragliche Partnerschaft zwischen einem Auftragsgeber (zumeist Staat), einem koordinierenden Intermediär, einem oder mehreren Investoren (privat und institutionell) sowie einem ausführenden Dienstleister (meist in Form einer Nonprofit Organisation) eingesetzt.

Wie wird der Erfolg eines Social Impact Bonds beurteilt?
Die Festlegung robuster und transparenter Wirkungsindikatoren ist anspruchsvoll. Beispielsweise kann anhand von Kontrollgruppen festgestellt werden, ob die intendierte Veränderung bei der Zielgruppe tatsächlich mit Hilfe des SIB realisiert werden konnte.
Um eine unabhängige Einschätzung des Projekterfolgs zu garantieren werden externe Gutachter eingesetzt.

Was sind die aktuellen Herausforderungen und Entwicklungen rundum Social Impact Bonds?
Die bisher realisierten SIB-Projekte haben noch nicht das Ende ihrer Laufzeit erreicht. Erste Resultate werden wegweisend für die Zukunft dieser Anlageform sein.
Grundsätzliche Herausforderungen sind derzeit der stärkere Einbezug des privaten Sektors als Auftraggeber und Investor, der besseren Verteilung der involvierten finanziellen Risiken, die Realisierung von grösseren Skalen sowie die Schärfung des Bewusstseins über die Funktionsweise dieses Instrumentes.
Kritiker beklagen die Privatisierung von staatlichen Aufgaben und die Renditeerwirtschaftung von privaten und institutionellen Investoren auf Kosten von Freiwilligen.

Quelle: CEPS Forschung und Praxis – Band 13

Das Center for Philanthropy Studies (CEPS) ist ein Institut der Universität Basel, das auf Initiative von SwissFoundations gegründet worden ist. Folgende Organisationen tragen zur Grundfinanzierung bei:
Age Stiftung, AVINA STIFTUNG, Christoph Merian Stiftung, Ernst Göhner Stiftung, Gebert Rüf Stiftung, Ria und Arthur Dietschweiler Stiftung, Sophie und Karl Binding Stiftung, Stiftung Mercator Schweiz, UBS Stiftung für Ausbildung und Soziales.

A social impact bond is not a bond, per se, since repayment and return on investment are contingent upon the achievement of desired social outcomes; if the objectives are not achieved, investors receive neither a return nor repayment of principal. SIBs derive their name from the fact that their investors are typically those who are interested in not just the financial return on their investment, but also in its social impact.

The trend of investing in the social environment and society has risen in recent years and has become a way for investors to give back to the community, as well as a way for companies to expand their social responsibility. It’s a way to increase community involvement and awareness of social issues.

Social Finance UK (2009) Social Impact Bonds: Rethinking finance for social outcomes[29]
Social Finance UK (2010) Towards a New Social Economy: Blended value creation through Social Impacts Bonds[84]
Young Foundation (2010) Social Impact Investment: the challenge and opportunity of Social Impact Bonds[85]
Social Finance UK (2011) A Technical Guide to Developing Social Impact Bonds[86]
Centre for American Progress (2011) Social Impact Bonds[87]
Impact Economy (2011) Four Revolutions in Global Philanthropy[88]
Social Finance (2011) Technical Guide to Commissioning Social Impact Bonds[89]
Social Finance (2011) Social Impact Bonds: The One Service, One Year On[90]
Rand Corporation (2011) Lessons learned from the planning and early implementation of the Social Impact Bond at HMP Peterborough, RAND Europe, 2011[91]
Social Finance US (2012) A New Tool for Scaling Impact: How Social Impact Bonds Can Mobilize Private Capital to Advance Social Good[92]
Benjamin R. Cox (2012) Financing Homelessness Prevention Programs with Social Impact Bonds[93]
Maryland Department of Legislative Services (2013) Evaluating Social Impact Bonds as a New Reentry Financing Mechanism: A Case Study on Reentry Programming in Maryland. [94]
Third Sector Capital Partners (2013) Case Study: Preparing for a Pay for Success Opportunity[95]
Social Market Foundation (2013) Risky Business: Social Impact Bonds and public services[45]
The New Zealand Initiative (2015) Investing for Success: Social Impact Bonds and the future of public services[96]
Government Outcomes Lab (2018) Building the tools for public services to secure better outcomes: Collaboration, Prevention, Innovation.[43]
Government Outcomes Lab (2018) Are we rallying together? Collaboration and public sector reform.[97]

Source: en.Wikipedia.org/wiki/Social_impact_bond#Publications