what is social investment. social impact bonds ... … · bonds & commissioning for outcomes...
TRANSCRIPT
WHAT IS SOCIAL INVESTMENT. SOCIAL IMPACT
BONDS & COMMISSIONING FOR OUTCOMES
[email protected] Director
Social Finance is authorised and regulated by the Financial Conduct Authority FCA No: 497568
DECEMBER 2017
Associate
©Social Finance 2016
WHAT IS SOCIAL INVESTMENT? 2
Core Grants Programme
Capital Social
Investments Responsible Investments
Mainstream Investments
Programme
Related
Investments
Mixed Motive
Investments
Financial
Investments Grants Charity
Commission
Definition
“ Social Investment is the provision of finance with the explicit expectation, and
measurement, of a social as well as financial return”
• Alternative investment models for charities, social enterprises and profit with purpose companies
have been developed over the last 15 years in parallel to traditional finance
• Now, globally, over 350 impact investment funds exist with c. $40 billion under management
SOCIAL INVESTMENT IS NOT FREE – IT IS A REPAYABLE FORM OF FINANCE,
WHICH REQUIRES A FUTURE REVENUE STREAM TO BE REPAID
© Social Finance 2017
WHO ARE THE SOCIAL INVESTORS 3
Description Advantages Considerations Examples
Trusts &
Foundations
• Typically ~90% of
finance as grants
• Driven by high
social return
Lower cost of
capital
• Require high impact
reporting
• Typically <£500k
• Rare to see investment in
private companies
Social Banks
• Commercial
loans from £50k
to £10M
(typically £2-3M)
Flexible
requirements on
social purpose
No dilution
• Difficult to achieve cash-flow
backed financing
SITR
• HMRC tax
advantaged
scheme
Patient and
unsecured capital
No upfront costs
No shareholder
dilution
• Must be a Charity, CIC or
CBS
• Assets<£15m; Staff<250 FTEs
• Currently cannot raise
>£300k
Social Loan
Funds
• Commercial
loans typically up
to £3m
• Higher
risk/return than
Bank
Patient and
unsecured capital
No shareholder
dilution
• Can be more expensive than
commercial loans
Social Equity
Funds
• Does not
require a running
return
Flexible repayment
timeframe
• Most expensive investment
type (as equity)
• Investors can force liquidity
event
Incre
asi
ng c
ost
of
cap
ital
Low
High
© Social Finance 2017
THE MARKET HAS GROWN SIGNIFICANTLY (2001-2016) 4
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
£1.5bn invested
3,500 deals
~20% growth
(# of deals )
* Source: Big Society Capital, The size and composition of social investment in the UK (March 2016)
2016*
© Social Finance 2016
CASE STUDY – GEN COMMUNITY (MIXED MOTIVE)
5
• Gen Community, British Gas and
Social Finance partnered to deliver
large scale community energy
projects with municipal government,
schools and housing associations
• £60m Solar Bond investment;
projects financed through ~80%
debt and ~20% community share
equity.
• £9m savings per annum re-
invested via Community Funds in
environment & education projects
and community assets.
• ~300 tCO2e per site; 0.6m
tCO2e
© Social Finance 2016
CASE STUDY: ABILITY TEC (SOCIAL INVESTMENT - DEBT) 6
Socially inclusive growth
• Community Interest
Company with global supply
chain, locally assembled
electronic circuits
• Mission to create lasting
social benefits for employees,
customers and the
community.
• 75% workforce disabled
• Profits reinvested in business,
workforce to double over
investment term.
Investment Details
Amount £260,000 (Fed 2017)
Term 5 years
Interest Rate 7%
Type Loan stock (unsecured)
Use of Funds - Refinancing creditors
- Working capital for growth
© Social Finance 2016
Improving health and wellbeing
• Personalised exercise and activity
programmes to enhance the
mental, physical and emotional
wellbeing of older adults
• 5 year equity investment £0.8m
• Funding new minibus service –
Oomph! Out & About – for out of
home activities, including in parks.
7 CASE STUDY: OOMPH (SOCIAL INVESTMENT – EQUITY)
© Social Finance 2016
CASE STUDY: NEWCASTLE PARKS TRUST (NEW ENTERPRISE) 8
Create charitable trust: a city-wide solution to maintain and maximise the environmental,
health and social impact of green spaces; a self-funding community asset that will deliver
£20m saving to local authority, and create opportunity for new enterprises.
150+ sites across the city, comprising over 480 hectares -
equivalent to over 600 football pitches
©Social Finance 2017
HOUSING GATEWAY LIMITED (PWLB BORROWING FOR GOOD) 9
Solution:
• Established a local authority controlled housing company – Housing Gateway Limited (HGL). Council borrows from Public Work Loans Board and on lends to HGL.
• HGL acquires properties within/near Council boundaries. Council has nomination rights over these properties, which are let at Local Housing Allowance levels to provide a home for people currently homeless.
• £100m invested over a 4 year period, developing a portfolio of +400 homes.
• Now saves the Council ~£1.3m p.a. through avoiding the use of expensive temporary / nightly paid accommodation from the private sector. Council also makes a margin to cover treasury costs on the borrowing on lent to HGL.
Financial Issue: A local authority experienced a 40% increase in homeless acceptances in over a three year period, 2,700 households (c. 6,000 people), and was unable to source properties at rents which can be met by housing benefit, ~ £10m cost over three years.
Social Issue: Homeless households in London increasingly stuck in poor quality, unstable, temporary accommodation, with local authorities unable to find suitable, local, good quality accommodation.
©Social Finance 2016
Support the development of a robust Business
Plan
Improved governance structures &
checks
Accessing new forms of capital
to support growth
Encourage clear and effective
impact measurement &
reporting
Increase consideration of
‘return on investment’
CAPACITY BUILDING FUNDS FOR SOCIAL BUSINESSES 10
©Social Finance 2016
BECOMING A SOCIAL INVESTOR…….? 11
1. Rates of return don’t reflect underlying risk and costs; specialist investors care about achieving social outcomes and have learnt how to manage risk.
2. Local Government pension funds are investing small amounts in social investment funds, but very limited.
3. Scope to encourage Community Development Finance Institutions and Credit Unions to invest in MSME business in Waltham Forest, though some grant funding may be required to develop robust investable business cases.
4. Some local authorities seeking to develop long term relationships with intermediaries to scope potential for direct social investment into local enterprises and charities, and set up Social Impact Bonds
©Social Finance 2016
12
COMMISSIONING
OUTCOMES BASED
CONTACTS / SIBs
© Social Finance 2016
WHY COMMISSION FOR OUTCOMES?
Risk sharing
Flexibility to learn
and adapt
Outcomes,
not outputs
Early intervention
and prevention
Co-design and
collaborate
People-
focused
13
© Social Finance 2017
HM GOVERNMENT IS SUPPORTING A GROWING MARKET 14
2010 TODAY
First SIB -
Peterborough
2011 2012 2013 2014 2015 2016
First SIB fund –
DWP
Innovation
(£28m)
First wholesale
social investment
institution - £600m
Big Society Capital
Social
Value Act
Social
Investment Tax
Relief
Spending review
- £110m for new
SIBs
Unit cost
database
Various cross-
department SIB
funds
60% of charities
positive about SI
©Social Finance 2016
WHAT IS A SOCIAL IMPACT BOND? 15
A Social Impact Bond is a type of Payment-by-Results contract where investors pay for
the up front costs of services and are repaid by a commissioner (i.e. government) if and
only if pre-defined social outcomes are achieved.
©Social Finance 2017
US$ 335m
0
50
100
150
200
250
300
350
400
2010 2011 2012 2013 2014 2015 2016 2017
US$
, mil
lio
ns
Capital Raised in Global SIB Market since Peterborough SIB, 2010-2017
Peterborough SIB
launched in Sept
2010, raising £5M
SF US
founded
First SIB in
US
Australia
Germany
Netherlands
First SIB in
Belgium
Canada
First SIB in
Portugal
India
Switzerland
Austria
Israel
Finland SF Israel
founded
First SIB in
Sweden
#
Cumulative SIBs 1
14
29
54
94
GLOBAL CONTEXT
©Social Finance 2016
Social Issue Target
Population Intervention
Outcomes Metrics
DEVELOPING A SOCIAL IMPACT BOND OR OUTCOME BASED
COMMISSIONING STRATEGY
17
What is the
problem we want
to tackle?
Which group of
individuals would
most benefit?
How could
services be
improved for
this group?
How should
success be
measured and
paid for?
1 2 3 4
©Social Finance 2016
NEET RESEARCH: NEWCASTLE 18
POOR GCSC ATTAINMENT NOT MOST SIGNIFICANT RISK FACTOR; NEETS ARE FAR MORE LIKELY
TO EXPERIENCE A RANGE OF NEGATIVE OUTCOMES IN EARLY ADULTHOOD
OFFENDING, CARE PLAN, CARE LEAVER/LAC, SEN, PRU, TRUANT AND CONTACTS WITH
CHILDREN’S SERVICES ALL MORE STRONGLY CORRELATED WITH BECOMING NEET
©Social Finance 2017
15.1
11.0
8.1
5.6
3.2 1.5
0
2
4
6
8
10
12
14
16
Previously LAC Previously CIN/CP Previously OtherCSC Involvement
ChallengingBehaviour / SEN
Free School Meals No Risk Factors
AVERAGE MONTHS SPENT NEET AGED 17-19 IN NEWCASTLE 19 19
THOSE WHO HAVE BEEN LAC SPEND 10X AS LONG NEET AS THOSE WITH NO RISK
FACTORS; OUTCOMES NEARLY AS POOR FOR THOSE WITH CIN/CP PLAN OR
OTHER CSC CONTACT
©Social Finance 2016
CASE STUDY: TEENS AND TODDLERS (MANCHESTER) 20
SOCIAL ISSUE & INTERVENTION
Social Purpose:
Better the lives of disadvantaged children and
adolescents vulnerable to becoming Not in
Education, Employment or Training (NEET).
Intervention:
At-risk young person mentors a disadvantaged
child in nursery - develops emotional intelligence
- and improves education and employment
outcomes
Target Group:
~3,000 vulnerable teenagers and disadvantaged
children in nursery in Greater Manchester
Success thus far:
First project delivered 17% over-performance on
outcomes compared to original base case
~97% of T&T grads in employment or training
OUR WORK
Project:
Advised T&T on programme design, CBA, bid
development; raised investment; performance
management systems for service delivery
Outcome:
Successfully won two successive Social Impact
Bond programmes run by DWP and raised
£1.7m investment to fund two projects delivered
over 3.5 years each
©Social Finance 2015
SOCIAL ISSUE & INTERVENTION
Social Purpose:
The Energise programme targets young
people at risk of becoming Not in
Education, Employment or Training (NEET).
Intervention Programme:
Mentoring services, structured activity days
and residential courses are designed to
foster re-engagement with school, build
self-esteem and improve interpersonal
skills. Energise is delivered by Adviza (a
charity).
Target Group:
1,500 young people aged 14-24 at risk of
becoming NEET
Start of Investment / Intervention:
March / April 2012 - £902k over c3.5 yrs
CASE STUDY – ENGERGISE (THAMES VALLEY)
OUR WORK
Project
Brokered partnership with social investors and
Adviza, CBA & business case, set up Energise
Innovation Ltd. (new company), raised finance
and managed performance to ensure outcomes
were achieved.
Outcomes
1750 clients worked with; overachieved on
outcomes including improved attitude,
behaviour, qualifications (NVF 1 & 2)
sustainment of employment ~15%
21
©Social Finance 2015
ENERGISE SIB STRUCTURE
Investor Group
DWP
Main contract
Social Finance Performance Management
Subcontract:
Advisory Agreement Subcontract
Delivery Body
Adviza Partnership
Investor Agreement
Energise Innovation Limited:
Investors fund the £2.3m delivery cost such that Adviza is not at financial risk of outcomes. Adviza shares in any surplus
22
©Social Finance 2016
OTHER EXAMPLES: THINK FORWARD – TOWER HAMLETS
TOMMORROWS PEOPLE – BARKING AND DAGENHAM
23
Most disadvantaged NEET in London
• 77% eligible for Free School Meals
(15.2% nationally)
• 50% registered special education needs
or Education, Health & Care Plans.
(14.4% is the number nationally)
• 53% have below expected English and
90% below expected Maths attainment
• 75% have attendance under average
©Social Finance 2016
‘HIDDEN NEET’ IN EAST LONDON 24
Social Finance worked with London Youth’s Talent Match programme to explore hidden NEETs in London. These are young people who are NEET but not claiming JSA, and who are completely disengaged from the system.
National Characteristics
• Become NEET at 18 but tend to stay in education for two more years, usually FE
• Most don’t come from low-income families or have special educational needs, and very few face more serious challenges such as being looked after or getting in trouble with the police at an early age.
• Defining characteristic tends to be lack of skills and qualifications – especially in English and mathematics
East London’s Hidden NEET population
• There are high rates of Hidden NEET are in East and North-East London – Waltham Forest, Tower Hamlets, Barking and Dagenham, Newham, Enfield, Hackney, Haringey, and Islington
• Twice as likely to self identify as Black African or Caribbean than any other ethnicity, and twice as likely to be male
• Extremely likely to live in areas of deprivation - 80% living in households within the third decile of the most income deprived in England.
• Many do not know where to get the support to help them transition to employment, lack confidence, and work experience or perceive employer prejudice
©Social Finance 2016
SUPPORTED EMPLOYMENT OR ‘JOB FIRST’ MODELS EFFECTIVE AT
TARGETING THOSE FURTHEST FROM LABOUR MARKET 25
Intervention
• 5 core principles linked to better
performance
• ‘Place then train’ approach
• Job coaching for jobseeker;
ongoing support to employer
Costs Outcome Success Evidence base
c. £3,000-
£8,000 pa
(depending on
target cohort
needs)
Sustained, paid
work in
mainstream
jobs
30+%
(depending on
target cohort
needs)
Medium -
strong
Other key elements:
Rapid job search – intense initial support to ensure results in months not years
Choice and control – job search is built around the individual jobseeker
Partnership – between jobseeker, family, carers and employers, and local VCS
Fidelity – established intervention principles that underpin good delivery
Supported Employment – key features
©Social Finance 2016
WALTHAM FOREST: GOING FOR GROWTH 26
2020 vision for economic growth – ‘To maximise the opportunity of Waltham Forest’s unique place in London to help our economy grow and thrive, enabling residents to enjoy sustainable prosperity and a high quality of life.’
Strategy includes employment, skills and pay progression objectives, indicators to measure progress and a number of opportunities:
• Fastest employment growth in London
• National Construction College Leyton & Adult Learning Centre
• Apprentices & devolution of skills budget to London
• Big Creative and ESCALATOR project to support local skills for creative and service sectors
• Prince’ s Trust Team Programme at Waltham Forest College
Falling unemployment among young people
©Social Finance 2016
WALTHAM FOREST 16-18 NEET SCORECARD (2016) 27
Bottom 20% of all England authorities for:
• 16-17 whose activity is not know
• Guaranteed September place
• NEETs reengaging in EET
• At mean, but for previous 6 years performed
better than average
• Average GSCE results compared to rest of
England
• No accurate borough data on 16-24 NEET but
London 9% in 2017
©Social Finance 2016
SKILLS (2016) 28
Below national average overall, in particular at NVQ 2, 3 and 4
©Social Finance 2016
QUESTIONS & DISCUSSION 29
1. Is your priority to prevent at risk children becoming NEET or target
entrenched NEET population?
2. Are you concerned about hidden NEET?
3. Within the 16-24 population are there particular high risk cohorts
that you are most interested in targeting to improve outcomes
(SEND, edge of care/CIN, ASB and offending)?
4. Will skills programmes put local 18-24 year olds in the best position
to benefit from growth opportunities?
©Social Finance 2016
THANK YOU 30
ANNEX - WHO WE ARE
©Social Finance 2016
WE HAVE EXPERTISE ON A RANGE OF SOCIAL ISSUES 31
Social Finance is a not for
profit that partners with
government, the social sector
and the financial community to
find better ways of tackling
social problems in the UK and
beyond.
© Social Finance 2017
WE HAVE EXPERTISE ON A RANGE OF SOCIAL ISSUES 32
Domestic Abuse
Education & skills Criminal Justice
Health and Social Care
Employment Housing &
Homelessness
Strengthening
Communities
International
Development
Children’s Services and
youth engagement
© Social Finance 2017
OUR APPROACH TO DESIGN AND SCALE SUSTAINABLE CHANGE TO
IMPROVE OUTCOMES FOR VULNERABLE PEOPLE AND COMMUNITIES 33
UNDERSTAND
DESIGN
FINANCE
SCALE
DELIVER
Use a data-driven lens to understand the issues people
face and how to tackle them
Design responses focused on peoples’ needs and their
communities
Mobilise capital to support sustainable social change
Deliver, and continuously evaluate and adapt our
responses to maximise impact
Share lessons widely, and support our partners to scale
their impact
© Social Finance 2017
WE DRIVE SOCIAL CHANGE THROUGH A RANGE OF
ORGANISATIONAL INITIATIVES
34
Enterprise Advisory
• Completed advisory projects with 35 social enterprises
• Provider for several capacity building and social investment programmes
Social Impact Bonds
• Designed and launched 15 in UK alone
Commissioner Advisory
• Advised 50+ local authorities
• Long term strategic partnership with Newcastle
Funds
• Care and Wellbeing Fund (£12M)
• Bright Futures SITR Fund (£1.5M)
International Development
• Initiated Development Impact Bond
• International market building
Impact Incubator
• Developed bottom-up solutions for 3 social issues in partnership with Foundations
• 2 new social issues in development stage
Digital Labs
• Developing software to enable data-drive decision making within local authorities
MOBILISED OVER £250M OF INVESTMENT TO SUPPORT SOCIAL IMPACT