22 July 2016
SIBs and the role of private capital, part 2
In my previous post on Social Impact Bonds, I described how we need to shift our focus from building investment structures to supporting the public sector to create better outcomes-focused contracts.
I want to suggest that one of the main barriers to doing this is the label ‘Social Impact Bond’.
When I raised this point at the event last week, it was clear that nobody round the table liked the name. I’ve long felt it to be deeply unhelpful and confusing for investors, given that a SIB isn’t a bond in the true financial meaning of the word (which makes it rather ironic given for the government to be pushing social impact bonds while also funding a very large regulatory body dedicated to ensuring that any communication of an investment opportunity is fair, clear and not misleading). But from listening to the researchers and commissioners in the room, it became apparent to me that the phrase has two more distinct disadvantages.
One of the problems is that it gives the false impression that there is such a thing as a single, definable SIB model. “If you want to solve your entrenched social problem, what you need is a social impact bond!” But there is no one universally applicable model to package up and sell to every public sector body. In fact there are a number of different ways that ‘SIBs’ have been structured. Sometimes they’ve followed the classic concept of creating an SPV management company, but sometimes they’ve worked fine without.
Our goal should not be to promote a social investment model but rather a set of principles and lessons in good practice around outcomes-based commissioning.
That leads us to the bigger issue: the endless talk about ‘Social Impact Bonds’ puts the focus on the finance and not on the commissioning. We are, whether consciously or not, celebrating the pioneering social investors who put up the money when we should be praising the public sector commissioners who’ve broken out of the mould to act differently. We’re implicitly telling the public sector that the solution to their problems is external finance, not a better way of commissioning. And we’re creating an artificial divide between those 32 outcomes-based models that have used external capital (and get labelled as ‘SIBs’) and all other outcomes contracts that may be just as innovative and effective but just haven’t needed to be externally funded.
It’s time we stopped talking about SIBs and simply focused on, celebrated and promoted good public sector commissioning. But whether government, having staked its reputation to them, is willing to do so remains to be seen.
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