UK writers discuss their experience of Canada while more on incarceration in the USA and leading today, a useful insight into the DIB-world, happy reading!
SIBs For Early Childhood Development: Making “Dollars And Sense” In Developing Countries
Tamar Atinc & Emily Gustafsson-Wright – Brookings
In a recent article, Early Childhood Development, The Promise and the Path Forward, we lay out what we see as the current state of affairs for early childhood development (ECD) in the developing world, we identify the main constraints to successfully scaling up ECD and we propose an agenda of research and policy action that attempts to address those constraints head on. The first of the constraints is around financing. This problem is twofold. First, budgets allocated to early childhood development are often far below the levels needed for the quality programming necessary to ensure that children reach their greatest potential later in life. Second, a focus on inputs alone leads to sub-optimal levels of service quality, which results in children not receiving the proper health care, education and social protection needed for them to develop to their highest capacity.
In response to the failure of existing systems, increasing attention is being given to new ways of financing and delivering social services. Innovative financing, which encompasses a broad spectrum of non-traditional private, donor and domestic financing mechanisms, was the topic of a panel session in our recent symposium on scaling up and financing global education. It was clear from that session and from subsequent smaller discussions on the topic that the landscape of financing the social sector is rapidly changing. We can’t help but think that there may be promising potential for harnessing this new landscape to benefit ECD.
Impact Investing
One of these innovative financing mechanisms, impact investing, is increasingly being used in the social sectors in both developed and developing countries. Impact investing pursues both financial and social or environmental returns (or so-called blended value), and has begun to attract such diverse groups as financial institutions, family endowments, foundations and pension funds to invest in addressing complex social challenges, including health, homelessness, affordable housing, education, agriculture and crime. Impact investing is complementary to existing investments as it provides an opportunity to leverage government and philanthropic contributions and thereby funnel in additional resources for social and environmental issues. Designed well, impact investing can also lead to increased accountability, efficiency gains, innovation and improved social outcomes.
Social Impact Bonds
One specific class of impact investing, the social impact bond (SIB), has gained particular attention in recent years. In this model, private investors put up capital to fund a social intervention and governments repay the investor only if an agreed-upon outcome is achieved. An independent evaluator then confirms whether the outcome is achieved through a rigorous impact evaluation. The key feature of a SIB is funding for prevention programs that have the potential to reduce more costly remediation later on. In addition, SIBs introduce an incentive for government agencies to work together to capture savings jointly. This model also benefits from the involvement of the philanthropic sector. For philanthropists, SIBs are an opportunity to achieve higher social yields than possible through direct donations, and they also allow the possibility of recycling funds for future investments. For private investors, the amount of risk is reduced, making investments more attractive. In the end, SIBs do much to align the desires of a diverse set of stakeholders, such as investors, governments, communities and nonprofit organizations. As a result, they can achieve both financial and social returns that in particular benefit the poor and vulnerable.
Currently, SIBs have been developed and are being explored in Australia, Canada, Colombia, India, Ireland, the United Kingdom and in several U.S. states. A development impact bond (DIB), is a variation of a SIB in which a donor agency, on its own or with a government, funds the repayment to the investor contingent on the achievement of the agreed outcome or savings. While no DIB has been implemented to date, two are in the works (India for low cost schooling for girls and Mozambique for malaria prevention) and several case studies are being examined for the purpose of exploring this mechanism.
Tackling Mass Incarceration
Dax-Devlon Ross – New York Times
In January Roca was selected to lead the seven-year, $27 million Massachusetts Juvenile Justice Pay for Success Initiative, in partnership with five private foundations and Goldman Sachs’ Social Impact Fund.
This kind of Pay for Success program, also known as Social Impact Financing or Social Impact Bonds, brings together public and private funds to provide upfront money for prevention programs. The basic idea has been around since the late 1980s and in play in Britain since 2010, but first gained notice in the United States in 2012 when New York City and Goldman Sachs launched the nation’s first pay-for-success pilot to reduce recidivism among 16-to-18-year-olds on Rikers Island. Now such programs are exploding throughout Britain and the United States and in many other countries. The Massachusetts initiative is easily the largest, most ambitious and risky experiment in the United States to date.
The arrangement requires Roca to realize a 40 percent reduction in incarceration days compared to a control group among a cohort of up to 1,320 young men in Chelsea, Springfield and Boston over the next seven years. If Roca hits that target, investors will receive $22 million in success payments. If it does even better — if it reduces the days by 70 percent — investors could realize close to $27 million in payments and Massachusetts would save $45 million in taxpayer dollars. However, if the project fails, then the Goldman fund would lose its $9 million loan, as would each of the junior philanthropic lenders, including Roca, who put up 15 percent of its service fees in the deal — more than $4 million.
Canada Draws On UK Experience To Scale Up Social Investment
Katie Hill – The Guardian
On an unusually cold day in late March, over 400 people gathered for the MaRS Centre for Impact Investing’s Impact Ontario conference in the impressive, new tech building of MaRS, a large scale, Toronto-based, mission driven innovation centre focused on building Canada’s next generation of growth companies.
On the agenda were informed fireside chats, well moderated discussion panels and pacey, interactive and polished investment pitches to social investors. My colleague from the UK, Geoff Burnand, from Investing for Good, and I had been invited by the British Council to share our experiences on social investment with Canadian entrepreneurs, foundations and policy makers.