HISTORY OF PAY FOR SUCCESS AND OVERVIEW OF ACTIVITY

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1 HISTORY OF PAY FOR SUCCESS AND OVERVIEW OF ACTIVITY FEBRUARY 2014 Caitlin Fleming, Associate Director, Social Finance 77 Summer Street, 2nd Floor, Boston, MA 02110

2 MISSION AND VALUES We believe that everyone deserves the opportunity to thrive, and that social impact financing can play a catalytic role in creating these opportunities. Who We Are History Our mission is to mobilize investment capital to drive social progress We structure and manage impact investments that will unlock capital to fund effective solutions and drive an outcomes-focused social sector. Social Finance is a registered 501(c)(3) organization. Our sister firm, Social Finance UK, launched the world s first Social Impact Bond in We work closely together but are independently funded, managed and governed. SF US: Launched operations in 2011 SF UK: Founded in 2007 Common mission, model and knowledge platform Core Values People: People are our mission and our inspiration; we are committed to our team, our partners, and the individuals we serve. Performance: Our work demands rigorous thought, inquiry, and analysis; we pride ourselves on the depth and quality of our endeavors. Social Finance 2013 Collaboration: We build strong, enduring relationships across sectors to align diverse interests and advance our collective mission of achieving social impact. Integrity: The highest standards of accountability and transparency underpin all of our work. 2

3 OUR WORK Our Focus is on Pay for Success Contracts and Social Impact Bonds* Advising Feasibility studies Development and implementation of proof-of-concept projects Transaction Execution Post Transaction Support Field Building Cost benefit analysis Financial structuring Outcome metric selection and evaluation design Contract development Arranging capital Performance and fiscal management Accounting and compliance Investor relations Market education, thought leadership, research and advocacy to support the development of a strong and sustainable Social Impact Bond and broader impact investment market * Social Impact Bonds are not traditional government issued bond and are also referred to as pay for success, pay for performance, social innovation financing, or outcomes-based financing Social Finance

4 CONVERGING FORCES Gap Between Social Need and Ability to Finance Social Impact Growing Social Need Limited Flexibility in Public Budgets Demand for Impact Investment 4

5 WORLD S FIRST SOCIAL IMPACT BOND Reducing Short-Term Prisoner Recidivism in Peterborough OUTCOME PAYOR Ministry of Justice and Big Lottery Fund Enter into performance-based contract INTERMEDIARY Social Finance UK Pay only if and to extent outcomes achieved Invest 5M Invest working capital INVESTOR Socially-minded investors Hire providers, fund operations and manage project SERVICE PROVIDER One*Service (collaboration of providers) Receive performancebased payment Deliver support services TARGET POPULATION 3,000 male short term prisoners 5

6 GROWING INTERNATIONAL MOMENTUM Multiple SIBs Launched in UK and US 14 SIBs underway in UK in criminal justice, education, child welfare, employment Interest in Australia, Columbia, Canada, France, and others Significant interest among US jurisdictions 4 SIBs underway New York City Utah New York State Massachusetts $495M proposed in President Obama s budget Multiple early-stage projects in criminal justice, education, health, employment, child welfare Map of Social Impact Bond Activity in US Source: Fact Sheet: Social Impact Bonds in the United States, Center for American Progress, February 12,

7 SOCIAL IMPACT BOND FEASIBILITY STUDIES Exploring Specific Social Investment Opportunities Population Needs Assessment Public Sector Cost Analysis Social Intervention Assessment SIB Performance Metric Assessment Cost-Benefit Analysis Provider Landscape Capacity Building Investor Landscape Social Impact Financing Recommendations 7

8 SOCIAL IMPACT BOND DEMONSTRATION PROJECT Reducing Childhood Asthma in Fresno, CA POTENTIAL OUTCOME PAYOR Government / Insurance Hire providers, fund operations and manage project INTERMEDIARY Social Finance US and Collective Health SERVICE PROVIDER Clinica Sierra Vista and Central California Asthma Collaborative Delivers comprehensive asthma services TARGET POPULATION 200 high-risk children Make grant Invest working capital INVESTORS California Endowment 8

9 NEW YORK STATE SOCIAL IMPACT BOND Improving Employment and Public Safety in NYC and Rochester OUTCOME PAYOR New York State / US Department of Labor Enter into performance-based contract INTERMEDIARY Social Finance US Pay only if and to extent outcomes achieved Invest $13.5M Invest working capital INVESTORS Social impact investors Hire providers, fund operations and manage project SERVICE PROVIDER Center for Employment Opportunities Receive performancebased payment Deliver comprehensive employment services TARGET POPULATION 2,000 high-risk formerly incarcerated individuals 9