1. INTRODUCTION TO OUR SOCIAL IMPACT BOND WORK Jane Newman, International Director Jane.newman@socialfinance.org.uk NOVEMBER 2012 Emily Bolton, Director Emily.bolton@socialfinance.org.uk 1

2. ©Social Finance 2012 2 SOCIAL FINANCE IS PASSIONATE ABOUT IDENTIFYING NEW WAYS OF TACKLING ENTRENCHED SOCIAL ISSUES – IN SUSTAINABLE AND SCALABLE WAYS

3. ©Social Finance 2012 Develop deep understanding of key social issues Identify effective interventions; analyse where the costs of failure rest Develop new revenue models which reward effective social action Build investor confidence in the financial and social value of these models Work hard to make the models deliver in practice Build and share evidence of what works Change the way government seeks to tackle problems Help build and support growth of strong, effective social enterprises Expand the range of investors able to participate in social investment WHAT DO WE DO? IN ORDER TO AND THEREBY DELIVER SOCIAL CHANGE 3

4. ©Social Finance 2012 OUR ROLE IN THE MARKET 4 SOCIAL FINANCE DESIGNS FINANCIAL STRUCTURES THAT ENABLE MORE CAPITAL TO REACH THE SOCIAL SECTOR Research & Development Financial Structuring Capital Raising Social Finance GovernmentSocial Service Providers Investors Key social issues Social Investor Market Growth Supporting Effective Organisations Long-term Social Change

5. ©Social Finance 2012 THE STARTING POINT: CONSISTENT UNDER-INVESTMENT IN PREVENTION 5 Higher level of spending on crisis interventions Poorer social outcomes, more require crisis interventions Fewer resources available for early interventions CAN THE LONG TERM SAVINGS FROM AVERTING POOR OUTCOMES BE USED TO INVEST IN PREVENTATIVE SERVICES?

6. ©Social Finance 2012 SOCIAL IMPACT BONDS CATALYSE POSITIVE CYCLES OF GOVERNMENT SPENDING, IMPROVING SOCIAL OUTCOMES AND REDUCING COSTS 6 SOCIAL IMPACT BONDS CAN UNLOCK THIS SOCIAL IMPACT BONDS Money to invest in earlier interventions More early interventions Better outcomes; fewer individuals requiring crisis interventions Lower spending on crisis interventions

7. ©Social Finance 2012 FUNDING REHABILITATION AT PETERBOROUGH PRISON 7 Providing volunteer support post intensive phase or with lower risk/need clients pre and post release INVESTORS £5 million SOCIAL IMPACT PARTNERSHIP St Giles Trust Support in prison, at the prison gates and in the community Support to prisoners’ families while they are in prison and post release Other Interventions Support needed by the prisoner, in prison and the community. Funded as the need is identified eg. Lower level mental health support 3,000 male prisoners sentenced to less than 12 months Reduction in re-offending MINISTRY OF JUSTICE/ BIG LOTTERY FUND Payment based on reduced convictions St. Giles TrustOrmiston TrustSOVA Other Interventions Return depends on success

8. ©Social Finance 2012 RECENT PROGRESS Young people in or on the edge of care Announced 23 November 2012: Awarded contract by Essex County Council to deliver and finance multi-systemic-therapy to over 380 adolescents on edge of care system in Essex over next 8 years – outcomes financed by savings from reduction in care placements Advising Manchester City Council on options to raise social investment to fund multi-dimensional foster care working with vulnerable adolescents Improving education and employment prospects for young people Announced 31 October 2012: Awarded two contracts by Department of Work and Pensions to work with specific groups of 14-16 year olds with outcome payments made at agreed milestones Prisoner rehabilitation Advising two consortia on bids to participate in £20 million of outcomes payments pledged by the Ministry of Justice Homelessness Announced 23 November 2012: Advising Greater London Authority on procuring interventions to address rough sleeping financed by £5 million outcomes budget 8 A RECENT NCVO REPORT IDENTIFIED 28 ACTIVE PAYMENT BY RESULTS INITIATIVES ACROSS UK PUBLIC SECTOR

9. ©Social Finance 2012 INTERNATIONAL CONTEXT 9 US Separate sister organisation launched Massachusetts started procuring two SIBs in youth justice and homelessness Connecticut, New York State and Minnesota developing SIB projects NYC and Goldman Sachs announced a Social Impact Bond in August 2012 for rehabilitation of offenders from Rikers Island Canada Manifesto commitment from new government Exploring applications in criminal justice and worklessness Ireland Manifesto commitment from new government Presently exploring five areas Scotland Manifesto commitment from new government Spending review outlined plans for at least two areas Israel Government interest Plan emerging around employment for ultra orthodox communities Australia New South Wales has announced three co-development partners for applications around reoffending and out of home care Federal government interest Emerging intermediaries/large NGOs International interest has surged in the past two years Germany Bertelsmann Stiftung Social Venture Fund

10. ©Social Finance 2012 10 SOCIAL IMPACT BONDS ARE NOT A UNIVERSAL SOLUTION – THERE ARE KEY INGREDIENTS

11. ©Social Finance 2012 WHAT IS REQUIRED FOR A SIB? 11 Robust outcome metric Clearly defined target group Issue area a priority for public sector Evidence-based interventions Issue area a priority for investors Cost of intervention is small relative to potential public sector value Measurable attribution

12. ©Social Finance 2012 12 BUILDING THE INVESTOR BASE

13. ©Social Finance 2012 ENGAGING WITH KEY POOLS OF INVESTOR CAPITAL 13 INSTITUTIONSCORPORATES HIGH NET WORTH INDIVIDUALS MASS AFFLUENT TRUSTS AND FOUNDATIONS £70bn assets in UK Fund Managers Family Offices Private BanksIFA Investor Advisory Services Global Social Impact Fund of Funds Venture Capital Trust NEAR TERM FOCUS MEDIUM TERM FOCUS Investors Intermediaries Could philanthropy be an asset, not an expense in their balance sheets? Enterprise Investment Scheme as a wrapper for SIBs STRUCTURED FUNDS ISAs £92bn £488 bn Early signs of Local Authority Pension Funds interest. The Results Fund BIG SOCIETY CAPITAL SEEDED FUNDS Impact Ventures UK Fund Nesta Impact Investment Fund

14. ©Social Finance 2012 14 APPENDIX

15. ©Social Finance 2012 NEW PRODUCTS Global Social Impact Fund $250m institutional quality fund of funds focusing on 15-20 private equity and debt funds across Africa, LatAm and SE Asia. Five key sectors: financial inclusion, agriculture, healthcare, micro-cap SME and community based energy. Working with fund management team with over fifty years combined experience. Targeted at family offices and private banks across the globe. Social Impact Venture Capital Trust London listed regulated product supported by a strong independent board which IFAs comfortable to promote. Offers mass affluent investors a tax enhanced return on a portfolio of investments in social enterprises working with disadvantaged groups, improving community cohesion, providing better health and social care and ethical consumerism. Targeted for completion in 2012/13 tax year. 15

16. ©Social Finance 2012 16 THANK YOU!