27 februari 2018

SOCIAL IMPACT BONDS in The Netherlands

Social Impact Bonds (SIBs) are impact investment*instruments originating from the UK. It launched the 1st SIB in 2009 for Peterborough Prison Recidivism Prevention an innovative approach of the support chain. The SIB project is completed and already halfway it's term the government decided to pay the investors and implemented the model all over the UK.

SIBs are private capital investments and usually a government body, often local or national, repays the investment. Returns are not fixed, they depend on success i.e. societal savings. Note that structuring SIBs takes time.

Worldwide there are 108+ Social & Health Impact Bonds with almost 400million US$ capital raised and almost 750.000 lives touched*. 102 SIBs are in developed countries, 6 in middle income countries. Still interest in Development Impact Bonds for developing countries especially within the UN Sustainable Development Goals framework is high. (see reports)

The global SIB champions are the UK (42), the US (20) and The Netherlands (10). Japan has announced it's ambition to invest 200million US$ in SIBs in 2016 and already launched three Health Impact Bonds in 2017.

Government versus Entrepreneurship
Looking at the Dutch experience the popularity of Social Impact Bonds can be seen as a follow-up of privatization as in selling government entities or contracting out state responsibilities (popular in e.g. It's development cooperation policy). In this tradition SIBs can be seen as a impact investment instruments piloting for societal challenges & opportunities with the risk for the private investors and contractors. Most Dutch SIBS are thematic, for work, a few are innovative offering a chain or a one stop shop support system.

Great Britain
The UK has 42 SIBs, of which half are completed and it even has a SIB Fund with SIBs and other social investments: http://www.columbiathreadneedle.co.uk/investment-capabilities/fixed-income/uk-social-bond/.

The UK's first SIBs aimed at Work & Youths (Not in Education, Employment or Training, NEETs). Early, now completed UK SIBs, on average ranged from 0.3 to 1million UK£ (most) and one exception with 5 million UK£.
Maximum outcome payment, returns range from 50 to 500%.
The operational SIBs on average have 1 million UK£ investment with maximum outcome payment, returns ranging from 150 to 200%.
12 SIBS maximum outcome payment are undisclosed. (Instiglio)

According to Social Finance UK database
The UK: has 40 ImpactBonds, £43.4M Capital raised & 49,060 lives touched. (£ 884 p.p.).

United States of America
The USA has 20 SIBs, of which one failed and 18 are operational. Six were launched in 2016 and another six in 2017 for Recidivism (7); Children, Youths and their Education (5); and Homelessness. (4). American SIBs, named ''Pay for Success'' bonds are BIG, often amount to millions of US$. The smallest is 2 million US$, the mean 10 million US$ and the largest 30 million US$.
Maximum outcome payment, returns range from 10% to 200%. (Instiglio)

According to Social Finance UK database
The US: has 20 ImpactBonds, US$211M Capital raised & 24,316 lives touched. (US$ 7650 p.p.) 650.000 residents in the DC Environmental Impact Bond area US$ 25M EIB.

The Netherlands
The Dutch with 10 SIBs take third place globally. It has one of the largest SIBs with 13million Euro for Work in Rotterdam South and in total Dutch SIBs have raised almost 27 million Euro in 5 years. Unfortunately one SIB was halted and 10million Euro less is invested in employment on & in Rotterdam Zuid (South). The first SIB is successfully repaid, the contractor is now also co-investor working on 2 more SIBs.

Most Dutch SIB investments range from (below) one to two million Euro with one (Health Impact Bond for Families) 4.75million which is also a pilot i.e. potential scaling catalyst.

Maximum outcome payment, returns range from 10 to 25%, most are undisclosed. (Instiglio) Quite modest compared to the UK & USA maximum payout ie return.
The Dutch SIB investors are still cautious about communicating potential returns compared to other countries (Instiglio leaves undisclosed). In early factsheets and press presentations on average 5% is suggested up to to 8 & 10%.
Maybe reflective of a different culture in venture capital & risk rewards. And probably influenced by a critical attitude towards profiting of market failures dealing with societal challenges. A Dutch Parliamentarian even questioned the Minister for Social Affairs on his views of ''commercial gains'' of employment seeking support for refugees SIB. The Minister voiced his support.

7/9 Dutch SIBs have Employment as the primary goal and most work for (uneducated) youths, one for former inmates, one for cancer patients i.e. keeping their job and one for (admitted) refugees.
One of the SIBs is crossing borders, helping Dutch people find employment in Germany.

The Ministry of Justice has a national recidivism prevention SIB (which includes finding employment) it resembles the first UK SIB with it's innovative chain-support approach.

Two Health Impact Bonds (HIB) were launched in 2017: Healthier without Debt for Families in Hague (one stop shop support, an innovative SIB) and Cancer & Work for cancer patients support during their treatment and return to work.

Late 2017 saw the launch of the first (with two more intended) SIB for Refugees. Admitted refugees, Statushouders, are supported with very high quality Dutch language classes and 40 hours per week support in seeking employment.

A government sponsored intermediary, Society Impact, has raised awareness, trained (local) civil servants and now focuses on Health Impact Bonds in an alliance with Health Insurers & Pensionfunds. A ''Falling Prevention'' Health Impact Bond has been researched, but has not yet materialized.
Social Impact Finance, a private company is the intermediary for the largest and most recent SIB, with two more intended.

The Netherlands: 10 SIBs, capital raised: almost 27million Euro, Lives touched: 3400 (7900E) SFUK + Instiglio + Alcanne.

DATA sources:
SocialFinance UK Database: http://sibdatabase.socialfinance.org.uk/
108 Impact bonds,
392 Milion US$ capital raised &
738.671 Lives touched.
*The DC Water Environmental Impact Bond touching 650.000 lives is not included.

Themes: Workforce Development (36), Housing / Homelessness (19), Health (18), Child & Family Welfare (13), Criminal Justice (11), Education & Early Years (9), Environment & Sustainability (1) Adults with Complex Needs (1).

INSTIGLIO.org a Harvard SIBLab spin off focuses on Development Bonds. It has an almost complete online global database with spreadsheets showing countries, capital raised, maximum payout, year & duration & social issue. Global outlook: Instiglio also collects data on 36 SIBs in design stage (4 exploration).

The global map shows the activity in US & Western Europe, noticeable is the Middle East with Israel (4 operational, 2 design) & Palestine (2 design stage). Probably inspired by ''the father of social investment & SIB inventor'' Sir Ronald Cohen.
Jordan, Lebanon & Turkey are home to the International Red Cross'' Humanitarian Impact Bond for rehabilitation of & by Syrian refugees (10-30million US$).

The Brookings Institute & Convergence, a WEFDavos impact investing platform published ''Impact Bonds in Developing Countries: Early Learnings from the Field''. Data source, the SocialFinance UK database.

Social Finance UK SFUK also looked at the potential of SIBs for Development in it's latest report. It points out there are 24 Impact Bonds in low-and middle-income countries in design stage and that (Development) Impact Bonds can learn from dat 10 years and 42 SIBs experiences in Britain.
Note that in developing countries the repayment party is not the national government but a supranational body and / or a philanthropic foundation.

Social Finance UK differentiates between Thematic SIBs (best intervention for competition) and Innovative SIBs such as the Peterborough Prison recidivism prevention which introduced an support chain model and is now implemented nationally.

SFUK stresses ''the UN SDGs & scaling impact require a rigorous focus on outcomes, not inputs. A shift to financing outcomes will create space for front-line innovation, learning, and adaptation.''

In 2017 SFUK published SIBs-the Early-Years (pdf, 87 p.)

And the Stanford Social Innovation Review on Pay for Success financing 

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