Social Finance is Authorised and Regulated by the Financial Services Authority. FSA No: Funders’ Social Impact Bond Forum 16 February 2011 Emily Bolton – Jill Wiltshire – Harry Hoare – © Social Finance, 2011

What is BIG’s Current Investment In Social Impact Bonds? Invested £11.2 million in SIBs until 2018 £6.2m as joint commissioner of the Peterborough SIB pilot £5m three year grant to Social Finance to develop, in partnership with other organisations, three additional SIBs

What next for BIG? UK Board to consider longer term strategy in this area for BIG in March What should our role be in supporting payment by result models As an investor Commissioner Supporting long term learning in the emerging market

Social Finance is Authorised and Regulated by the Financial Services Authority. FSA No: How does the Social Impact Bond work in Peterborough Prison? Alignment of all parties behind a single definition of success Sustainable revenue streams for successful organizations – for 6 years! A collaborative environment An investable proposition A replicable model Flexibility to innovate and reward innovation Flexibility to reflect regional variations Social Impact Partnership 1 Investors £ 5 million drawn evenly over six years Support in prison, at the prison gates and in the community Support to prisoners’ families while they are in prison and post release Providing a community base Support needed by the prisoner, in prison and the community. Funded as the need is identified St Giles TrustOrmiston TrustYMCA Other Interventions Ministry of Justice Ongoing operating funding for the One Service program 3,000 male prisoners sentenced to less than 12 months Reduction in re-offending Payments representing a % of cost savings from reduced reoffending The SIB is designed to provide... (advised by Social Finance) Big Lottery Fund 1) The legal structure is an LP hence the label “Social Impact Partnership” and the abbreviation SIP © Social Finance, 2011

Social Finance is Authorised and Regulated by the Financial Services Authority. FSA No: What do SIBs mean for the voluntary sector? Uncertainty of income SIBs provide successful charities with a reliable revenue stream for a relatively long time. Lack of funding at scale for preventative work Competition on the basis of costs rather than outcomes Lack of evidence about what type of interventions are most successful Commissioning based on outcomes rather than costs allows charities to compete on an equal footing with private sector firms. SIBs have the potential to open up a seem of new capital to fund preventative work Robust measurement of outcomes builds an evidence base as to work works. Charities can share successful techniques and demonstrate their track record to government and investors. Challenges Charities Face TodaySocial Impact Bond Solutions © Social Finance, 2011

Social Finance is Authorised and Regulated by the Financial Services Authority. FSA No: How could SIBs change the way we solve social problems? At risk of offending Receive police caution Serve community sentence Serve prison sentence Social Impact Bond Cycle of re-offending Transfer of resources catalysed by Social Impact Bonds SIBs can catalyse a transfer in resources from crisis provision to preventative spend. © Social Finance, 2011

Social Finance is Authorised and Regulated by the Financial Services Authority. FSA No: Where else will the SIB apply? Target IssueSocial Impact Bond A SIB could be designed to improve recovery from drug addiction, thereby improving life chances for the children of addicts and reducing crime. Note: a) Problem drug users (PDUs) are defined by the UK government as those with dependency or chaotic use of heroine and crack cocaine, the two drugs deemed to cause the most problems to the individual and to society. This is the main group of drug users measured by government to assess effectiveness of treatment. Sources: (1) UK Focal Point 2010, EMCDDA; (2) Children Looked After by Local Authorities in England (including adoption and care leavers) (2010) DfE (3) Trends in emergency admissions in England 2004–2009: is greater efficiency breeding inefficiency? (2010) Nuffield Trust (4)Avoiding hospital admissions: What does the research evidence say? (2010) The King’s Fund Health Unnecessary admissions to emergency result in the NHS budget being tied up in in acute hospital spend Unplanned admissions cost the NHS £11bn a year (3) and account for around 65% of hospital bed days in England (4 ) Women in the Criminal Justice System Women offenders have a broad range of complex problems, and have needs which are distinct from male offenders In 2008, £108 million was spent on the female custodial estate Children and Young People at Risk There are currently 64,400 looked after children in England (2) Direct costs of placement for a child looked after is on average £40,000 p.a. Drugs There are 320,000 people in England who are considered problematic drug users Just over 50% received treatment in 2009 Only 4% left treatment clean (a)(1) We are investigating a SIB model to reduce the number of emergency hospital admissions. We are developing a SIB model to reduce women’s reoffending and divert low risk female offenders away from custody to effective rehabilitation alternatives. A SIB would aim to reduce the time that children spend in care and improve their general wellbeing (such as education outcomes). © Social Finance, 2011

Social Finance is Authorised and Regulated by the Financial Services Authority. FSA No: How do we build a SIB Market Place? Our aim is to develop an asset class which will raise investment at scale to fund solutions to social problems. Development of Asset Class Pilot models operating at small scale Diverse issue areas being explored Emphasis on knowledge sharing (e.g. Outcome metrics and measurement) between service providers and commissioners Investors likely to be trusts and foundations or other socially motivated capital Few market players Early Development To achieve this, it is critical that the next SIBs are well structured and deliver strong social and financial returns. Demonstrated track record in achieving social outcomes and investor return Robust body of evidence on intervention effectiveness Models operating at scale Service providers increasingly independent in model development SIB models pay out on multiple outcomes with multiple commissioning partners Emergence of new investors with traditional financial focus (e.g. Private banks) Growth Multiple providers competing on the basis of outcomes values Service providers from all sectors skilled in model development Commissioning and procurement structures well established and transparent Broad investor interest (e.g. pension funds, mass affluent) Tax incentives introduced for social investment Maturity © Social Finance, 2011

Social Finance is Authorised and Regulated by the Financial Services Authority. FSA No: Which social issues do you think this model could be applied to? How can we engage a broader group of social investors? What assistance/support would you need if you were considering investing? Discussion 9 © Social Finance, 2011