Social Impact Bonds - the uncomfortable truth...

SIB's or Social Impact Bonds, the new buzz word in the Third Sector/Civil Society/Big Society/whatever you want to call it....

Definition:  http://en.wikipedia.org/wiki/Social_impact_bond

How they work in practice: 

Social investor puts in £x million to pay for prevention work, delivered by a third sector organisation, that reduces hospital alcohol admissions by 5%, resulting in a saving to the local Primary Care Trust of £x million over x years.  Future savings are channeled to social investor to pay them back, provider gets funding up front to deliver outcomes, Primary Care Trust underwrites social investor risk.  I've probably over simplified that but it's the basic premise.

All sounds great doesn't it?  As long as the targets are achieved and can be evidenced, everyone's a winner.

Except I've got one big concern, if this is to be the shape of funding for social/environmental action in the future, will this be detrimental for areas of social/environmental action that have much lower benefits in £ per output.  For example, if we reduce waste to landfill, the saving to the Local Authority might be £150 per tonne and I suspect the financial return that generates for an investor will be too low to be of interest.

And what about areas where its difficult to prove the saving....carbon savings perhaps?  So will environmental projects suffer at this shift in funding approach?

The danger is that we all get whipped up in this frenzy of SIB's and focus our efforts on trying to put together innovative proposals when the investors just aren't out there or are not interested...so I think we need some focus from government and social investment organisations on providing guidelines very quickly for the sorts of projects that are likely to be of interest...or some clear direction on what investors will be looking for in terms of payback...maybe that's out there??  and there needs to be a clear debate about how the Government's strategy for financing the Big Society won't affect the smaller organisations who do not have the capacity to engage in this debate.

On a positive note, SIB's potentially lever in investment that would not have been there before and it is encouraging to see our own Local Authority starting to embrace this area.