1. LESSONS FROM THE ESSEX SOCIAL IMPACT BOND SO FAR… Yvonne Campbell, Essex SIB Director, CSSL Yvonne.campbell@socialfinance.org.uk Roger Bullen, Head of Partnerships, Essex County Council Roger.bullen@essex.gov.uk Social Finance is authorised and regulated by the Financial Service Authority FSA No: 497568 1 ST JULY 2013

2. ©Social Finance 2012 EVOLVING UK SOCIAL INVESTMENT MARKET 2001-2013 Social investment is the provision of capital for social as well as financial returns The UK social investment market is comprised of a number of financial intermediaries and funds Trusts and foundations are core to the social investor landscape but recently we have seen local authorities, community foundations and housing associations also investing in SIBs 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Bridges Social Entrepreneurs Fund launched

3. ©Social Finance 2012 WHAT IS SOCIAL INVESTMENT? 3 Controlled innovation Due diligence rigour Immediate capital requirements Investment in management, skills & info. Service integration & partnerships Active investment Impact New service delivery landscape Social investment is repayable funding which yields both social and financial returns. Social investors can bring expertise, rigour and capacity to the services they support Active social investment has the potential to transform services, not just provide funding.

4. ©Social Finance 2012 INTRODUCTION TO SOCIAL IMPACT BONDS 4 The Social Impact Bond is a means of investing in intensive prevention services where improved social outcomes are likely but not certain. Social Impact Bonds are contracts with public sector commissioners under which government commits to pay for improved social outcomes. On the back of this contract, investment is raised from non-governmental investors. This investment is used to pay upfront for a range of interventions to improve social outcomes. Investors are repaid only if successful outcomes are achieved. Investors stand to lose some or all of their capital if positive outcomes are not achieved. The investor takes the risk that the interventions do not deliver the desired outcomes. The greater the improvement, the greater the financial return to investors. SOCIAL IMPACT BONDS BRING NEW INVESTMENT TO BEAR ON SOCIAL ISSUES, AND ALIGN ALL PARTIES AROUND A COMMON GOAL.

5. ©Social Finance 2012 RATIONALE FOR A SIB 5 A SIB is…A SIB is not… A way of tackling social problems that require a range of interventions Up front funding for service delivery Only going to achieve returns for investors if social impact is achieved An attempt to make more non- governmental money available to the social sector Payments for failure – if no social impact is achieved investors lose their money Debt or grant funding for service providers A new form of PFI – investor returns are contingent on achieving socially beneficial outcomes Social Impact Bonds provide up front funding to pay for additional services to help improve outcomes for service users, with investors risking their money based on the outcomes that will be achieved

6. ©Social Finance 2012 WHAT ATTRACTS SOCIAL INVESTORS TO SIBS 6 Essex SIB Investors Learning and innovation Essex SIB attracted Belgian foundation and German social investment fund Applies investment approach to delivering improved social outcomes Rigour, focus, data analysis Social issue All investors are committed to improving outcomes for vulnerable young people Engagement Some like to be involved in business case development Local interest Some are keen to support their local communities e.g. Community Foundations Intervention Scaling up promising approaches which have potential to transform outcomes and reshape service delivery

7. ©Social Finance 2012 CASE STUDY: ESSEX EDGE OF CARE SIB 7 Action for Children Evolution Fund Services Service Users Outcomes Contract CSSL £3.1 million Investors ECC Ongoing operating funds Social Finance Service Contracts 1 2 3 4 Board of Directors 1 2 3 4 CSSL and ECC enter Outcomes Contract Investors fund CSSL Funds released to pay for service delivery. CSSL contracts with service provider in Services Agreement ECC returns a % of savings from reduced cost of care placements Essex SIB Investors 1 2 3 4 1 2 3 4

8. ©Social Finance 2012 SUCCESSFUL COLLABORATION WITH SERVICE PROVIDERS 8 Governance CSSL (new company set up for Essex SIB) commissioned Action for Children to deliver MST, funded by SIB CSSL Board oversees performance of SIB –3 investors, MST expert, Social Finance –Action for Children attend each quarter MST Project Board –Strategic collaboration between ECC, Action for Children and CSSL MST Operational Steering Group -Brings together operational leads for services relevant for MST MST Oversight Committee –Set up and facilitated by MST Service

9. ©Social Finance 2012 ROLE OF SIB DIRECTOR 9 Drive forward Implementation Performance Management Supporting operations Contract management Reporting to CSSL Board and MST Project Board Data Management Direct and wider outcomes tracking framework Negotiating access to data CSSL Online - aggregates and analyses performance data to inform service delivery Communication Building and maintaining relationships Regular communication necessary to bridge cultures Wider Picture Referral pathway Finding the fit amongst existing services Step-down provision

10. ©Social Finance 2012 ESSEX SOCIAL IMPACT BOND – CORE INTERVENTION 10 Multisystemic Therapy (MST) Objective Reduce anti-social behaviour and prevent out-of-home placement – care or custody How it works Combines parenting support with practical assistance and a therapeutic approach to rebuilding relationships between the young person, the family and the networks around them. Delivered by a team of family therapists, each of whom work with around 10 families per year in the home or community, providing 24/7 support. Eligibility Criteria Adolescents aged 11-16, displaying anti-social or offending behaviour or other conduct disorders At risk of an out-of-home placement Evidence Base Good evidence from the US for MST on crucial factors relevant to the edge of care population, e.g. improved parental supervision and management, reduction in child conduct problems. 10 years running in the UK, with initial indications of positive impact on care outcomes. 1 Multisystemic Therapy (MST) forms the core intervention in the SIB. It is one of the most promising interventions for the adolescent edge of care and custody population. Source: www.mstservices.com/outcomestudies.pdf

11. ©Social Finance 2012 ADDITIONAL LESSONS SO FAR 11 Evidence based programmes Defined models build confidence with investors but are a starting point Benefits of quality assurance and fidelity Referrals Stakeholder buy-in and continual communication at all levels required An effective referral pathway is essential -Right cases at the right time -Parts of the process and responsibilities at which stage, -Ensuring no delays in families getting the help they need due to process Relationships Point person within the LA as SIB Director’s main contact vital to ensure co-ordination Increasing awareness of SIB service(s) to improve engagement and flow of referrals

12. ©Social Finance 2012 ADDITIONAL LESSONS SO FAR 12 Data Why are you collecting data and how are you going to use it Data sharing agreements Resources required for data collection Quality of data dependant on data entry Recruitment If specialist skills required, may need multiple rounds of recruitment which takes time Consider retention strategy and building pool of future recruits to avoid disruption to service Realistic Expectations Risk of running before you can walk Investor’s Journey Engaging them in the challenges Providing opportunities for them to develop their own understanding of the issues relating to the service users

13. ©Social Finance 2012 13  Need: high numbers, high cost, poor outcomes  Services: shift towards prevention  Resilience: building family strengths, reducing dependence and demand  Savings: unlocking acute spend, efficiencies and re-investment  Investment: upfront, off the balance sheet  Risk: risk of failure deferred to investor  Performance: Enhanced by PbR approach  System change: sustainable and outcomes driven  Transformation: outcomes-led commissioning organisation WHY DID ESSEX CHOOSE THE SIB APPROACH?

14. ©Social Finance 2012 14  Affordability: cost benefit comparison, value of risk transfer  Simplicity: attribution, cashability, timeliness  Tactical: targeted where impact will be greatest and last longest  Procurement: innovation to enable co-design, ensuring competitive process  Market development: shaping of new market opportunities  Harness enthusiasm and develop expertise: political and senior leadership support, develop and retain expertise, reduce future replication costs LESSONS LEARNT: COMMISSIONERS PERSPECTIVE

15. ©Social Finance 2012 THANK YOU FOR YOUR TIME ANY QUESTIONS? QUESTIONS, COMMENTS, DISCUSSION