Realizing Value Through Social Impact Bonds

5 hurdles to overcome when assigning value to outcomes

SOURCE: SiMPACT Strategy Group


By Stephanie Robertson & Anne Miller
SiMPACT Strategy Group
December 06,2012

While the concept of Social Impact Bonds (SIBs) jumped the Atlantic from Britain in 2011, it is taking its time to develop in Canada. Unlike American and Australian counterparts that are already testing the concept, SIBs seem to be increasingly discussed in Canada, but are not yet in the testing phase. Several links to recent conversations are provided at the end of this article.

The benefits of SIBs have been discussed primarily in three ways. First, SIBs are a tool to raise finances to invest in social programming from non-government sources. The role of government is then to pay the investor if the investment in a social agency’s ability to provide a service (i.e. to achieve agreed outcomes) is fulfilled. This relationship creates the second benefit, i.e. SIBs enable governments to invest current dollars elsewhere as money raised from alternative sources is funding the daily activities of the social agencies/investees. Finally, SIBs allow government to benefit from prevention, which is typically less expensive than investing to manage or to resolve a problem. Government pays a premium to the investor if agreed outcomes are achieved. If outcomes are not achieved, the investor has lost money.

Many questions linger about the application and structure of SIBs. Significant questions include how government will value agreed outcomes in order to pay investors a fair price for the risk taken in the course of enabling social outcomes to be achieved, and for creating opportunity for government to direct scarce resources elsewhere in the short term. But how to value outcomes?

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KEYWORDS: People, Social Action & Community Engagement, Reporting, Ratings & Rankings, Social Impact Bonds, Social Impact, SIBs, assigning value outcomes, measurement, sroi, SROI Analysis, value; value creation

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