Given many readers of SIB News are not financial specialists per se, it is vital to note that the Financial Times is actually not quite the organ of progressive free markets its mythical reputation purports. Needless to say they grasp the ‘glass half empty’ side of the equation on the Rikers Bond. Yes, it is sad the programme did not work but what does not kill us makes us stronger and the worst thing which could have happened was not this loss correctly applied but the process being swept under the carpet and investors repaid. Meanwhile endless pedantic preening about lexicology is fundamentally misplaced – as anybody who understood the history of bonds would readily appreciate.
At the same time, it is important (and here my 20+ years of financial innovation frontline experience comes into play), the FT rarely, if ever, manages to be even close to appreciating the future of the financial markets in which they are alleged to have core competency.
The great news comes from Queensland, where the major parties on either side of the old left-right political spectrum, are endorsing SIB structures – hooray!
Social Impact Bonds Need Help To Fulfil Their Potential (subscription)
Stephen Foley – Financial Times
A loss of $7.2m will hardly sting Goldman Sachs, which earned $8.5bn last year, or Michael Bloomberg, the billionaire former mayor of New York, but it risks hurting the nascent asset class known as social impact bonds.
Goldman and Mr Bloomberg’s charitable foundation lost that money on an education programme designed to get teenagers at New York’s notorious Riker’s Island jail back on the straight and narrow. It turns out that participants were just as likely to be back at Riker’s a year later as other offenders.
There are several lessons from the disappointment, and the first is that people need to stop calling these things social impact bonds.
Queensland Labor, LNP Agree Social Benefit Bonds Are The Future
Amy Remeikis – Brisbane Times
From political obscurity to a big ticket item for both parties – Social Benefit Bonds are about to become a reality in Queensland.
Essentially a form of social finance, Social Benefit Bonds see the private sector work with the community sector to fund programs to help with social issues such as homelessness and early childhood education, essentially meaning the private sector pays the upfront costs, not the government.
In return the private sector investor receives a financial return from the Government based on the success of the program’s agreed outcomes.
The United Kingdom launched the initiative, also known as social impact bonds, in 2010. Since then, New South Wales has launched its own program and South Australia is looking into it.