Financial innovation with a social purpose: the growth of Social Impact Bonds

Frédéric de Mariz and José Roberto Ferreira Savoia

Chapter 13 in Research Handbook of Investing in the Triple Bottom Line, 2018, pp 292-313 from Edward Elgar Publishing

Abstract: The UN’s Sustainable Development Goals, signed in 2015, call for a closer collaboration between the public and private sectors to solve social and environmental issues. We analyze the emergence of Social Impact Bonds (SIBs) – innovative financial instruments that join private risk-taking with public funding in a pay-for-outcome structure. SIBs were launched in 2010 in the UK and bridge the gap between private capital markets and public agencies to deliver a social outcome. After taking stock of the existing literature and lessons learned from more than sixty existing SIBs. Our contribution consists in an in-depth analysis of the financial structuring of SIBs, a theme not well covered in the literature. We found that financial structuring involves four key steps: legal structure, definition of the desired risk-return-impact, placement of the SIB and governance. We also make four recommendations to grow the sector, consisting in the creation of SIB Funds, the wide dissemination of knowledge, a standardization in processes and the definition of favorable regulations.

Keywords: Business and Management; Economics and Finance; Environment (search for similar items in EconPapers)
Date: 2018
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