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Social Impact Investing (SII) is a mechanism by which governments seek to access and mobilise the resources of private for-profit and philanthropic capital to finance a range of social policies. SII is used increasingly but remains relatively under-examined conceptually, empirically and particularly geographically. This chapter explores the ways in which SII represents a distinctive process of extensive financialisation that creates new financialised market space within social welfare programmes. In doing so, the chapter examines how SII forges new financial chains of value that transform geographically rooted ‘problem’ populations and welfare delivery into investable products linked to distant mobile national and global financial market actors. Through this spatially transformative financial shift, it is argued that the SII starting point of finance capital for welfare provision instead results in appropriating additional public resources for finance capital

This is a detailed case analysis of the world’s first SIB, based at Her Majesty’s Prison in Peterborough, UK. This chapter starts by defining the SIB model and its key constituent parts. Next, the chapter sketches in the historical context that provides the background to the emergence of the SIB. The third section examines the Peterborough Pilot SIB in some detail. After this, the evolution of SIBs globally is discussed. Conclusions consider some of the issues that have emerged as the first SIB has been implemented. The chapter closes with a postscript reflecting on key issues that developed in 2014.

This chapter examines the development of social impact bonds as arguably the quintessential example of neoliberalization and marketization of the welfare state. Social impact bonds are discussed as an idea that has in recent years spread from country to country as welfare states confront fiscal challenges and the need for alternative forms of financing in the face of the prevailing antitax climate. Social impact bonds involve private investors providing financing for preventive social welfare programs on the possibility that they will get returns should the program effectively reduce future government costs. While a potentially lucrative new source of funding, social impact bonds open the door to social welfare programs being treated as commodities according to neoliberal logic. They threaten to increase the influence of private financiers in deciding which social welfare programs will be funded in the newly marketized welfare state.

This chapter explores in detail the evolution of social impact bonds (SIBs) in the United Kingdom as an example of social policy as social innovation. Specifically, it presents new analysis of three empirical cases in the United Kingdom. The chapter examines some key claims made by policy actors concerning SIBs as social innovation and welfare reform, specifically that they offer improved outcomes by means of innovating hybrid collaboration. The relevance of such claims in the context of addressing sites of marginalization is also discussed with reference to theoretical approaches from the Social Grid model.

Chapter Seven focuses on efficiency of administration and the mixing of morals and mathematics in the context of the financialisation of everyday life. They examine the development and scope of Social Impact Bonds (SIBs), a policy instrument designed to extend the role of private finance in welfare provision and delivery, following in the wake of previous efforts to outsource public services and expand the mechanisms for ‘payments by results’. As the authors demonstrate in the UK SIBs represent more than just an expansion of existing privatisation measures; they are part of the financialisation of service provision and delivery, bringing venture capital and the risk calculations and hedging of welfare outcomes to the financial market in an effort to shake up the assumed public sector inertia. As the authors discuss, the assumptions of risk, cost-saving attributes and the measurability of outcomes are all problematic in the financialised framework.

Over time, the availability of investable bond products has expanded considerably to include bonds focused on social improvements (social impact bonds), life settlement securitization (death bonds), natural disaster risk transfer (catastrophe bonds), environmental improvements (green bonds), and collateralized bonds (covered bonds). Social impact bonds are geared toward positive social change to provide financing to programs that are otherwise ignored or underfunded. Death bonds are bonds backed by the cash flows from life insurance policies. Catastrophe bonds enable spreading the risk of natural disasters or human catastrophes to a broader investor base. Green bonds are issued to raise funds to revitalize brownfield sites or underdeveloped areas and geared toward energy efficiency and pollution control, sustainable agriculture, and clean transportation. Covered bonds are issued against a pool of assets but remain on the issuer’s balance sheet providing safety in the event of bankruptcy. This chapter briefly discusses each of these products.

examine whether some of the place-based investment strategies, like the Community Reinvestment Act and the Low Income Housing Tax Credit—which have unlocked billions of dollars in private capital for real estate, affordable housing and enterprise development—lend themselves to more people-centric services. We look at innovations in financial inclusion and asset building, approaches intended to create wealth for the poor, often by simply connecting them to resources they are already eligible for, like the Earned Income Tax Credit. We also investigate the U.S. experience with social impact bonds (SIBs), pay-for-success contracts between local government, nonprofit service providers, and private investors whose capital underwrites preventive services. The idea is that if the interventions succeed, the investors will be repaid out of the social savings. The SIB industry is still new in the US and the track record is mixed. However, the larger lessons about good governance, evidence-based policy-making, and blended capital are relevant for innovative finance in U.S. communities for a growing set of capital investments that fuse the place and people lenses. Like development projects that link affordable housing with community health centers. In this paradigm, mobility is critical to economic opportunity, and investments in physical and social infrastructure are mutually reinforcing.

This chapter focuses on an emerging new tool for financing social services known variously as pay-for-success financing (PFS), or the social-impact bond (SIB). This tool provides an alternative, cost-effective means of funding social programs by tapping private-sector risk capital to finance the operating needs of preventative programs, with governments obligated to repay the investors only in the event that the targeted social outcomes are achieved. The chapter walks through how a PFS financing is operationalized, describing the roles of the various participants. In addition, the chapter discusses the importance of credible evaluations and the importance of tapping government administrative data to monitor and manage pay-for-success programs. It addresses the limitations and challenges of such a novel tool, including the start-up hurdles and the key implementation challenges.

Social innovation (SI) has been widely embraced as a pragmatic problem-solving approach to social policy challenges. While framed as apolitical, this chapter demonstrates that the dominant SI agenda, which became prominent in the wake of the 2008 recession, is anything but. Instead, SI is illustrative of the ways in which the neoliberal project has adapted to its own crises, embracing policy ideas and processes needed to drive forward its agenda. This chapter explores the lineage of SI, including its amorphous definition, seemingly conflicting idea-sets, and associated tools and techniques to understand how it has been used to extend the neoliberal project through austerity and to identify conflicts that might be exploited to challenge austerity politics. We warn against the dominant version of SI as a solution to social policy challenges in a post-pandemic era and encourage academics, activists, and practitioners to explore and harness more radical orientations of SI. 

This chapter discusses the development of outcomes-based commissioning in the UK, focusing on Payment by Results (PbR) and Social Impact Bonds (SIBs). It first considers key policies that have underpinned outcomes-based commissioning in the UK since 2010 before analysing PbR programmes and SIBs in more detail, highlighting results and some of the important issues related to these areas of policy. It shows that the themes of New Public Management (NPM) and risk management are evident in the development of PbR and SIBs, whereas the theme of social innovation is present but less prominent. The chapter also provides an overview of the social investment market and two PbR programmes, namely, the Work Programme and the Troubled Families programme. Finally, it describes two SIBs: HMP Peterborough SIB and Nottingham Futures SIB.

This book examines outcomes-based commissioning as an important element of the public service reform agenda, focusing on Payment by Results (PbR) and Social Impact Bonds (SIBs) in the UK (also known as Pay for Success (PFS) or outcomes-based funding and Pay for Success financing in the US, respectively). It considers whether PbR/PFS and SIBs/Pay for Success financing drive efficiency and innovation in the delivery of social outcomes, and whether attempts to reconcile corporate profits and social goods may lead to perverse incentives and inefficiency. It also analyses the impact of PbR and SIBs on not-for-profit and smaller players in the market for social outcomes. This introduction provides an overview of outcomes-based commissioning, the distinction between PbR/PFS and SIBs/Pay for Success financing, some key questions raised by outcomes-based commissioning, and the chapters that follow.

This chapter discusses the development of Pay for Success (PFS) and Social Impact Bonds (SIBs) in the US. PFS ties payment for service delivery to the achievement of measurable outcomes. PFS projects to date have clustered primarily in three issue areas: criminal justice and recidivism, early childhood education and wellbeing, and homelessness. The chapter first provides an overview of the extent and trends relating to PFS and SIBs before discussing lessons learned from PFS programmes. It also considers the infrastructure support, evaluation approaches, and financial models for such programmes and concludes by analysing how the development of PFS in the US compares to that of programmes in other countries, and how PFS has been connected to the broader performance management practices in the US.

This chapter reviews the current state of evidence on what works in outcomes-based commissioning using published evaluations of Payment by Results (PbR) and Social Impact Bonds (SIBs) in the UK and SIBs in the US. Findings from these evaluations are arranged under the following broad headings: designing and commissioning, development of markets, performance management, innovation, the role of incentives, and overall outcomes. The evaluations address issues such as the complexity of PbR commissioning models compared to other commissioning exercises, the impact of PbR on the market for social goods, and the development of new or enhanced performance management systems as a result of outcomes-based commissioning. Two areas of innovation are also highlighted: innovation in service design and delivery, and innovation in financing.

This chapter discusses some key theoretical issues that are raised by outcomes-based commissioning. It begins by outlining three potential theoretical drivers of outcomes-based commissioning. First, Payment by Results (PbR)/Pay for Success (PFS) and Social Impact Bonds (SIBs) can be viewed as the logical next step in the New Public Management (NPM) reforms aimed at improving public sector efficiency. Second, they can be explained as an attempt by policy makers to deal with complexity in the social world. Third, they can be interpreted as a means by which policy makers seek to facilitate and develop new and existing philanthropic activity and social enterprise. The chapter goes on to consider the underlying theories and objectives of outcomes-based commissioning as well as how practice and theory may differ, focusing on issues relating to perverse incentives, conflicting policy objectives, risk management, and contracting. Finally, it examines questions of delivery and outcomes.

This book has examined some technical, economic and political questions about outcomes-based commissioning as well as key theoretical debates, arguing that outcomes-based commissioning in its various guises may be theorised as a logical extension of New Public Management (NPM) or marketisation. It has also shown that outcomes-based commissioning might be theorised as policy makers' response to complexity and risk management, and/or as a means of facilitating philanthropists and other private sector actors in social innovation. This chapter draws conclusions from the evidence that has been reviewed, discusses the theoretical issues that have been identified, and considers future directions for Payment by Results (PbR) and Social Impact Bonds (SIBs).

A major innovation in public sector commissioning in recent years is the recourse of the state to so called ‘Outcomes-based Contracts’ particularly Payment by Results (PbR) in the UK. A PbR contract contains three elements, a commissioner, a service provider and an outcomes metric. The outcomes metrics is designed, in theory, to align the incentive structures of the commissioner and the service delivery agency so as to achieve efficient results. Thus, PbR is theorised to allow public commissioners to pay a provider of services on the basis of specified outcomes achieved rather than the inputs or outputs delivered. A related innovation is that of Social Impact Bonds (SIBs). SIBs are distinguished from PbR contracts in that they supposedly allow financiers to contribute to the social innovation process by providing working capital. The return on the SIB is calculated using PbR methodology. Compared to a PbR contract, the SIB contract seeks to align the incentive structures, not only of commissioners and providers, but also financiers through an appropriate metrics-based payments scheme. PbR and SIBs have been referred to as key tools for delivering change. In this chapter we set out the theoretical and practical challenges arising from the development and application of PbR and SIBs and consider the evidence of their efficacy or otherwise.

This chapter considers the perspective of institutional donors like foundations and government in right-fit monitoring and evaluation. Institutional donors may have different data needs than the organizations they fund. This may occur when a donor wants to use the same metrics across its entire portfolio; when a donor supports organizations addressing different aspects of a broad social problem; when donors and organizations have different levels of trust in organizational staff; when they have different views on how to best apply the CART principles; when they have different levels of risk tolerance or place different levels of priority on generating transportable knowledge; or, when donor data requirements create internal tension within organizations. The chapter then examines how Pay for Success (PFS) programs can help to harmonize funder and fundee data incentives, as well as some of the drawbacks of the PFS approach.