Jane Newman

WHERE CAN SOCIAL FINANCE TAKE US IN THE

FUTURE?

Social Finance is authorised and regulated by the Financial Conduct Authority FCA No: 497568

SYDNEY, AUGUST 2013

Jane Newman, International Director [email protected]

©Social Finance 2013

ABOUT SOCIAL FINANCE 2

SOCIAL

ORGANISATIONS

Social Issues

Change the way

government tackles social

problems

Expand the range of

investors participating in

social investment

Support growth of strong

and effective social

enterprises

INVESTORS

GOVERNMENT

DELIVER SCALABLE AND SUSTAINABLE SOCIAL CHANGE

OUR MISSION IS TO DEVELOP AND BUILD FUNDING MODELS TO TACKLE

ENTRENCHED SOCIAL PROBLEMS


THE VALUE OF ACTIVE MANAGEMENT OF SOCIAL INVESTMENT 3

Controlled

innovation

Due diligence

rigour

Immediate

capital

requirements

Investment in

management,

skills & info.

Service

integration &

partnerships

Active investment

Impac

t

New service

delivery

landscape

In our experience, the value of social investment is often in the expertise, rigour and capacity it can bring to addressing social needs and scaling enterprises


BUILDING A SOCIAL INVESTMENT MARKET 4

INTERMEDIARIES

Matching supply and

demand; product

development

“….practitioners agree that, for impact investing to work, attention needs to be paid to all the key dynamics of the marketplace.” (IMPACT – Australia, 2013)

DEMAND FOR

CAPITAL

Who needs

finance for social

or charitable

purpose

objectives?

SUPPLY OF

CAPITAL

Who will provide

capital and on

what terms?

EFFECTIVE ENABLING ENVIRONMENT

Source: Adapted from IMPACT – Australia. 2013,

DEEWR and JBWere; and Social Finance UK


BUILDING THE UK SOCIAL INVESTMENT MARKET 2001-2012

5

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Social

Impact

VCT to be

launched

Impact

Investment

Fund

launched

GSIF to be

launched

BSC

launched

Impact

Ventures

UK Fund

to be

launched,

Berenberg

Bank/LGT

BSC Results

Fund to be launched

Bridges Social Entrepreneurs Fund launched

Big Issue Invest Social

Enterprise Fund

launched

Deutsche

Impact

Investment

Fund

launched

Social

Venture

Fund UK

to be

launched

5

http://www.socialventurefund.com/eng/home/

http://www.thegiin.org/cgi-bin/iowa/home/index.html

http://www.bigissueinvest.com/

http://www.bigissueinvest.com/


BUILDING A SOCIAL INVESTMENT MARKET 6

INTERMEDIARIES

Matching supply and

demand; product

development

“….practitioners agree that, for impact investing to work, attention needs to be paid to all the key dynamics of the marketplace.” (IMPACT – Australia, 2013)

DEMAND FOR

CAPITAL

Who needs

finance for social

or charitable

purpose

objectives?

SUPPLY OF

CAPITAL

Who will provide

capital and on

what terms?

EFFECTIVE ENABLING ENVIRONMENT

Source: Adapted from IMPACT – Australia. 2013,

DEEWR and JBWere; and Social Finance UK

e.g. investment contract and readiness fund

Social investment tax relief? - consultation


7 OPPORTUNITIES FOR SOCIAL INVESTMENT AS THE MARKET

MOVES FORWARD

Health and Social Care

• Scale up established models – e.g. Shared Lives

• New models – support for long term conditions, palliative care

• ‘Internal investment’ models

Social Housing

• Housing e.g.

• Bringing empty homes back into use

• Development of affordable housing

• Specialist accommodation and support e.g.

• elderly; disabled; homeless etc

• Regeneration

Increasingly we see interest in exploring how social investment could be a used to tackle some of our ‘mature economy’ challenges. E.g.

Social Impact Bonds

• Children in care

• Addiction and reoffending

• Families with complex needs

• Social isolation

• Tackling long term conditions

• Thematic funds – e.g. care and wellbeing


HEALTH AND SOCIAL CARE IN THE UK – THE SOCIAL NEED 8

A radical shift is required to develop new forms of care and support, which are more preventative, more community based and better draw on people’s own resources.

Four major challenges :

• Forms of care for older people with

long-term health conditions that provide

better continuity and integration of support

and promote dignity and independence.

• A wider range of provision for people with

disabilities.

• Improving the health of the population,

particularly among more disadvantaged

groups.

• Supporting people to address health

conditions that prevent them from working.

• The number of over 65 yr olds is due to increase

from c. 11 million to c. 16 million by 2021. The

majority will have one or more long term health

conditions.

• Over a quarter of disabled people feel they do not

have control and choice over daily life.

• The average difference in disability-free life

expectancy between people living in the 5% most

deprived wards and the 5% least deprived wards is

17 years.

• The cost to the Exchequer alone of ill health among

the working age population is c. £70 bn per annum.

←

←

←

←


9 EXAMPLE 1: SHARED LIVES

Shared Lives is a service in which an individual becomes a carer and shares their family and community life with someone in need of care support. In many cases that person becomes a permanent part of their supportive family.

• Shared Lives carers are paid a modest amount to offer long-term accommodation, short-term breaks and respite care in their family home. There are now around 8,000 Shared Lives carers in the UK supporting nearly 11,000 people, with the sector doubling in size in the last six years.1

• Shared Lives arrangements are organised in the UK by 152 registered local schemes, which play a recruitment, training, support, and supervision role.

• Individuals in need of a placement are matched with a carer, through a collaborative process in which they have significant input. This lays the conditions for a strong personal relationship in an arrangement.

• Personalised care and the opportunity to share in their carer’s social networks encourages an individual to gain independence and work towards achieving personal goals,

improving their quality of life and reducing isolation.

Alan, aged 22 from South Tyneside,

suffers from Asperger’s Syndrome and

alcoholism.

His family care broke down, and this was followed

by a series of expensive residential placements,

none of which helped Alan and led to deteriorating

behaviour.

Alan was introduced to a Shared Lives carer and

his local Shared Lives scheme carefully managed a

matching process, which started with

get-togethers, progressed to overnight then

weekend stays, and finally a week-long stay prior to

a care arrangement formally being established for

him.

He is now settled and regularly participates in

community education classes and leisure centre

activities, and is working towards achieving a work

placement.

Alan’s Shared Lives arrangement has significantly

improved his quality of life, and saved the local

authority £49,000 per annum (£965 per week).

Notes: (1) Based on data from the NHS Information Centre.

We are developing an investment model to enable a substantial expansion of shared lives schemes, including through enabling in-house services to ‘spin-out’ and grow.


CARE AND WELLBEING FUND 10

Social Finance is developing a £20m proof of concept Fund with the following objective:

‘The Fund’s objective is to improve health and wellbeing in the UK with particular focus on disadvantaged groups such as the frail elderly, those with a long-term health condition and those with a disability.

The Fund aims to support, with investment, the growth of ambitious charities, social enterprises and ventures which deliver improved wellbeing. The focus will be on prevention, early intervention and community-based solutions.’

A strongly mission-driven fund, seeking to attract socially motivated investment with cornerstone from Big Society Capital and matched by co-investors

Investment Strategy

Equity-like investment approach:

• Active portfolio management

• Risk capital – using combination of

equity, quasi-equity and loan stock

• Aim to build diversified portfolio to

include a range of risk profiles

Key Themes

• Ageing and long term conditions

• Disability

• Health improvement

• Health and employment

Proof of concept fund:

mid single digit net IRR Social impact assessment and reporting


SOCIAL IMPACT BONDS 11

SOCIAL

IMPACT BONDS ARE

AN INNOVATIVE WAY

OF ATTRACTING

NEW INVESTMENT

THAT BENEFITS

INDIVIDUALS AND

COMMUNITIES


SOCIAL IMPACT BONDS:

PETERBOROUGH PRISON PILOT STARTED IN 2010

12

INVESTORS

£5 million

SOCIAL IMPACT PARTNERSHIP

3,000 male prisoners sentenced to less than 12 months

Reduction in

re-offending

MINISTRY OF

JUSTICE/

BIG LOTTERY

FUND

Payment

based on

reduced

convictions

Support in prison, at the

prison gates and in the

community

St. Giles Trust

Support to prisoners’

families while they are in

prison and post release

Ormiston Trust

Providing volunteer

support post intensive

phase or with lower

risk/need clients pre and

post release

SOVA

Support needed by the

prisoner, in prison and the

community. Funded as the

need is identified eg. Lower

level mental health support

Other Interventions

Return depends

on success


PERFORMANCE MANAGEMENT: AN ILLUSTRATIVE EXAMPLE

Performance management has enabled the manager of the Peterborough SIB to better direct resources in order to achieve outcomes among short-sentence prisoners.

13

The data dashboards developed in cooperation with providers has informed the changes in service provision: 1. Informed commissioning of additional services • Performance management highlighted the high proportion

of prisoners with mental health needs and a gap in the current service provision.

• In Year 2, the One Service Partnership commissioned MIND, a mental health charity, to be part of its service offering.

2. Better use of existing service providers • Analysis illustrated low numbers of prisoners accessing the

family support intervention despite having identified need. • In Year 2, the service offering was adjusted and a new, in

prison “Maintaining Family Ties” course was commissioned.

3. Improved case worker ownership of services • Case workers are able to understand the impact of their

service offerings. • There are indications of improved satisfaction among

service providers when they are part of the decision making mechanism for improved delivery.


PETERBOROUGH: AN EARLY GLIMPSE 14

90

95

100

105

110

115

120

125

130

Sep06-Mar08 Sep07-Mar09 Sep08-Mar10 Sep10-Mar12

Rebased reoffending data

Peterborough binary

Peterborough frequency

-1.7% -0.3%

4.7%

-11.8%

6.7%

-2.5%

2.0%

-23.0% -25.0%

-15.0%

-5.0%

5.0%

15.0%

25.0%Change in Peterborough reoffending relative to national

levels

Binary Frequency

Sept 06-Mar 08 Sept 07-Mar 09 Sept 08-Mar 10 Sept 10-Mar 12

* This should be interpreted with care since re-offending is measured over a shorter period of

time than will be used when calculating payments on the bond and the national comparator

group will be compiled on a different basis.

On 13 June 2013, the Ministry of Justice published data on the Peterborough pilot. This gives the first early sense of how the Social Impact Bond is doing. Peterborough has shown a 23% relative decline to the national data.


OTHER APPLICATIONS 15

Peterborough

reducing re-

offending - MoJ

Reducing

NEETS (x5)

- DWP

Reducing rough

sleeping - GLA

Reducing

NEETS (x4)

- DWP

Intensive

Fostering -

Manchester

Edge of Care

- Essex Edge of Care

Adoption

Social isolation

& long term

conditions

Drugs

Recovery

HMG Social Outcomes Fund

Big Lottery Support

Wider set of contractual developments – e.g. PBR, risk sharing, - and developments in social investment


Initial SIB model

2nd stage implementation

Scaling

EXAMPLE OF IMPACT DELIVERED SO FAR 16

Peterborough

SIB

Essex,

Manchester

and Liverpool

feasibility

studies

Further PbR pilots

-Doncaster

-Local Government Incentive models

Essex children at the edge of care

MST SIB launched

Procurement support in

Manchester

Announcement of large-scale PbR

focused on recidivism and including

short-sentenced prisoners

Work on additional four SIB models in

Essex, including drugs and social

isolation

Feasibility studies started in five other

local authorities on children in care

Criminal

Justice

Adolescents

in or on

edge of care

Social Impact Bonds are demonstrating an ability to create systemic change.


BUILDING MARKET INFRASTRUCTURE 17

Outcomes Funding Capacitybuilding Investors

£20m Social Outcomes

Fund (Nov 2012) (Cabinet

Office)

£40m Co-Commissioning

Fund (Big Lottery)

• Single EOI process

• ‘Top-up’ contribution to

outcomes-based

commissions (PbR or

SIBs) - aggregate savings

that accrue across

multiple budgets

• Aim of catalysing

innovation

Market building

• Social Finance

• Big Lottery Support

Funds

• £15m Bridges Social

Impact Bond Fund

In development

• Thematic funds

Investor base

• Social investment tax

relief? (Treasury

Consultation launched

June 2013)

• Investing4Growth

Resources

• Centre for Social Impact

Bonds

• Template contracts

• ‘Knowledge Box’

• http://data.gov.uk/sib_kn

owledge_box/knowledg

e-box

http://data.gov.uk/sib_knowledge_box/knowledge-box






18

INTERNATIONAL

DEVELOPMENTS


GLOBAL PERSPECTIVE 19

In Delivery In Development (??)

Uganda 0 1

Mozambique 0 1

Swaziland 0 1

Kenya 0 1

SIBs*

DIBs*

0

5

10

15

20

25

UK Australia US Europe Israel South Africa Canada Columbia

Demonstration SIB

In Development

Launched

*indicative

Source: Social Finance UK


DEVELOPMENT IMPACT BONDS 20

Working Group case studies

• HIV prevention in Swaziland

• Elimination of sleeping sickness in Uganda

• Business development services for SMEs

• Energy efficient buildings

• Low cost private schools in Pakistan

• Access to secondary education in Uganda

• Girls’ access to education in Kenya

Social Finance and the Center for Global Development Working Group to explore how development funders could improve aid outcomes. Draft Report launched 6 June 2013.


IN THE SPOTLIGHT 21

• G8 Social Impact Investment Forum June 2013

• G8 Taskforce

• OECD

• EU o Commission communiqué February 2013 o Social investment funds – EUSEF

• Global Learning Forum

• Etc

Social investment is increasingly attracting the attention of Government…..


22

GROWING THE

INVESTOR BASE


23 MAPPING OUR ENGAGEMENT WITH THE INVESTOR UNIVERSE

Trusts and

Foundations

Corporates

Local funds

e.g. Regional Growth

Funds, local authorities,

housing associations,

Investing 4 Growth

Professional social

investors

e.g. Bridges, Deutsche, Nesta,

Big Issue Invest, Social Venture

Fund, LGT/Berenberg

Blue chip asset

managers

e.g. Pensions Corp,

Rathbone

High net worth

individuals and

family offices Private banks

Mass affluent

investors

IFAs / IFPs

Deal-specific

engagement

Co-development

Deal-specific

engagement

Corporate finance

relationships

Corporate finance

relationships, sub-

adviser relationships

EIGHT NEW INVESTORS IN SOCIAL FINANCE PROJECTS THIS YEAR; £12.6M TOTAL RAISED TO DATE

Tailored products,

e.g. VCT, GSIF

Social Finance and

social care and

wellbeing fund

Fund

seeding


24

THANK YOU

Economy & Finance

Jane Newman