We believe that by offering a fair return, we can expand the use of SIBs to create a profound impact on how social issues are addressed in Canada. In this post, we discuss five considerations that will impact the future of SIBs as investment vehicles.
In conclusion, social impact bonds are one part of a broader solution. The SIB model has a unique way of supporting new (or expanding) services, that otherwise would not operate, and prioritizing data-based measurement. As this discussion demonstrates however, there are still thoughtful questions that need to be considered before implementing SIBs in Canada. Critical questions exist around measurement and valuation, investor return and transaction fees, and operating model design.
In April 2012, the JOBS Act was swiftly signed into law in the US by President Obama with bipartisan support. The speed at which the act went into legislation and the strong support that the act gained in its short legislative history was truly unprecedented.
In my previous post, we looked at the financing cost of social impact bonds (SIBs), their potential for fostering innovation and the transaction costs. In this second section we will take a closer look at whether SIB programs could crowd out or overshadow other social programs, and the challenges involved in measurement and proving that real change has taken place.
Recently a flurry of media (see the New York Times, National Post and Huffington Post, for example) has touted Social Impact Bonds (SIBs) as an innovative way of unlocking new, private sources of finance for effective social programs at no risk to government. While this description may hold true, SIBs are not a panacea: there are shortcomings to the SIB model that will limit its effectiveness to specific situations.