Social Impact Bonds Research Articles

At a cost: A review of the public accountability risks of Social Impact Bonds

AbstractSocial Impact Bonds (SIBs) have gained popularity as an alternative financing method for public services. SIBs promise to have lower risks for public budgets than traditional approaches. However, integrating private finance instruments into established public accountability procedures is notoriously difficult. Through a systematic review of the empirical research on implemented SIBs, this article examines those public accountability concerns. The results indicate that narratives of a new, more horizontal way of holding organisations accountable should not be accepted too easily. Risks are identified in the literature in four public accountability dimensions: transparency, controllability, responsiveness, and liability. Accountability safeguards will need to centre on establishing detailed procedures that precisely delineate the role of each actor, building effective platforms for both gathering and sharing information, and adequately transferring risks. At the same time, these safeguards could come at the cost of the attractiveness of the instrument for investors, creating a catch‐22 in which making the SIB a sustainable model of service delivery at the same time may undermine its viability.Points for practitioners To address public accountability risks, practitioners can focus on establishing procedures that clearly define the roles of each actor involved in the SIB, creating effective platforms for gathering and sharing information between partners and making sure that financial risks are adequately transferred to private partners. At the same time, implementing safeguards for public accountability may prove challenging, as it increases transaction costs and undermines the attractiveness of SIBs for all actors. Administrations should use SIBs sparingly and transition from multiplex SIBs to two‐party contracts once programmes prove effective.

Sustainable investments: a scientometric review and research agenda

PurposeSustainable investments (SI) represent a promising class of investments, combining financial returns with mitigating environmental challenges, achieving SDG goals and creating a positive business impact. An enhanced global focus on climate change developments in the backdrop of COP26 and COP27, raised the need for comprehensive literature mapping, to understand the emerging themes and future research arenas in this field.Design/methodology/approachThe authors apply a quali–quantitative approach of bibliometric methods coupled with content analysis, to review 1,022 articles obtained from the Web of Science (WoS) database for 1991–2023.FindingsThe results identify the leading authors and their collaborations, impactful journals and pioneering articles in sustainable investment literature. The authors also indicate seven major themes of SI to be financial performance; fiduciary duty; CSR; construction of ESG-based portfolios; sustainability assessment tools and mechanisms; investor behavior; and impact investing. Further, content analysis of literature from 2020 to 2023 highlights emerging research issues to be SDG financing via green bonds and social impact bonds; investor impact creation via shareholder engagement and field building strategies; and governance related determinants of firm-level sustainable investments. Finally, the authors discuss the research gaps across these themes and identify future research questions.Originality/valueThis paper crystallizes research themes in sustainable investment literature using a vast coverage of globally conducted studies published in reputed journals till date. The findings of this study coupled with future research questions provide a well-grounded foundation for new researchers to further explore the emerging dimensions of this field.

Barriers to social impact bond implementation: a review of evidence from the UK and US

PurposeThis study investigates barriers to social impact bond (SIB) implementation through a review of academic and gray literature. A SIB is a type of public policy instrument that leverages payment for performance (P4P), contracting together with private investments in the delivery of welfare programs. Outcome-based contracts, such as SIBs, are gaining attraction for public service providers in developed countries, but research regarding their implementation remains underexplored both empirically and theoretically.Design/methodology/approachA literature review is conducted in which two types of documents are included: (1) empirical research papers and (2) evaluations of completed SIB projects. In total, 43 documents have been investigated. The study engages in a comparative design where insights across sectors (healthcare, social care and employment/education), are leveraged. The insights rest on evidence from the UK and US.FindingsThe investigation reveals five types of barriers to SIB implementation related to: (1) the SIB model, (2) organizational competencies, (3) data infrastructure, (4) stakeholder engagement and (5) the institutional context. The study discusses ways of managing these barriers and develops a conceptual framework for empirically investigating SIB implementation.Originality/valueThis study is the first academic paper to systematically assess insights regarding the implementation of SIBs. Also, the article proposes a conceptual framework for investigating SIB implementation.

Contractual acrobatics: a configurational analysis of outcome specifications and payment in outcome-based contracts

ABSTRACT Outcome-based contracting (OBC) seeks to improve public services by paying for service outcomes rather than service activities. This article explores the link between how outcomes are contractually specified and how much is paid for their achievement. Using fuzzy-set Qualitative Comparative Analysis, we test a framework for assessing the strength of outcome specifications in 34 UK-based social impact bonds, a particular form of OBC. Results show that contract features which define intended participant cohorts and include deadweight estimation approaches help constrain suppliers’ ability to appropriate value and thus reduce the likelihood that public managers pay for social outcomes of questionable value.

What's in a name? Exploring the intellectual structure of social finance

PurposeThis paper offers a bibliometric analysis of the scientific literature on social finance. It provides an overview of the research field by identifying gaps in the existing academic literature and presenting future research directions.Design/methodology/approachThe study uses co-word analysis and visualization mapping techniques.FindingsThis study's findings show that the social finance research field comprises five main research clusters and four main research hotspots—impact investing, social entrepreneurship, social impact bonds, and social innovation—which represent the core of this research domain. The authors also identify the researchers and the research institutions that have contributed to the development of social finance. In addition, emerging research areas are mapped and discussed.Originality/valueCompared with most previous literature reviews, this work provides a more complete and objective analysis of the entire social finance landscape by revealing the trends and evolving dynamics that characterize its development. To this end, clear terminological boundaries have not yet been established in social finance. The field appears immature because only a few researchers have contributed to it, and papers have yet to be published by top finance journals. Finally, the findings of this research provide directions for future studies.

Finance interrupted: Social impact bonds, spatial politics, and the limits of financial innovation in the social sector

An enduring legacy of the 2007–2009 financial crisis is the growth of “social” and “impact” investing, markets dedicated to the use of financial capital to achieve social good. This paper examines one key manifestation of these markets: the social impact bond, a financial device which uses private capital to fund social programs. While social impact bond (SIBs) have been viewed as a testament to the power of finance and the “financialization” of the social sector, the paper instead highlights the struggles and limits of the SIB enterprise. Informed by a multi-year study of SIBs in Canada, the USA, and UK, and the theoretical lens of the social studies of assetization combined with an ecological approach, these struggles are conceived in terms of the challenge of operationalizing SIBs’ financial imaginary and managing the gaps between finance and the social sector as distinct ecologies. Particular emphasis is placed on three valuation devices—liquidity, risk, and rigor—which are central to this effort. Rather than “hinges” connecting these worlds, these devices have emerged as points of conflict, revealing a distinctly spatial politics which helps to explain the limits not only of SIBs but also other forms of financialization at the frontiers of (social) finance.

New development: From social impact bonds to impact bonds—an outcomes-based framework

IMPACT This article presents a classification of impact bonds (IBs) that has practical implications for practitioners designing IBs. The framework shows how the nature of the targeted outcomes can affect the financial structure of an IB and influence the capacity to design workable business plans for the projects being financed. Given the reconsideration of cost savings in the newer IB models, the authors recommend that public sector managers and policy-makers question the relevance and advantages of IBs over other types of financing.

Policy mobilities in federal systems: The case of Proyectá tu Futuro, a social impact bond for education and employment in the city of Buenos Aires

Global policy mobilities have been studied predominantly at the national level of education, but their implications and effects at the subnational level have been disregarded. This paper analyzes Proyectá tu Futuro, the first social impact bond (SIB) for education and employability implemented in Buenos Aires, Argentina. Since 2010, SIBs have become a booming type of policy, rapidly traveling and being adopted across countries and policy spheres. SIBs aim to align the incentives of the private sector—the third sector—and the public sector to obtain results while improving public-policy efficiency. However, often it is policy entrepreneurs’ agendas and not results or efficiency goals that trigger SIBs’ adoption. In this study, we analyze the diffusion of SIBs as policy mobilities and the processes of adoption and translation in the context of Buenos Aires. To this end, we draw on an analysis of policy documents, existing legal frameworks, and interviews with key actors. Our findings point to the role of “glocal” policy entrepreneurs as key agents for the adoption and translation of SIBs, as well as their capacity to advance their own agendas in the context of global policy mobilities in federal education systems.

Quantitative revenue estimates and qualitative assessments of innovative fundraising sources for treating rare diseases in Colombia

ABSTRACT Background: Like many developing countries, Colombia faces difficulties in financing health-care services as well as programs for health promotion and health education and there is evidence that its health-care system is underperforming. Objective: To provide evidence-based estimates of potential funding levels and assess the strengths, weaknesses, and viability of innovative funding mechanisms with a focus on treating rare diseases in Colombia. Methods: The strategy involved evidence-based projections of potential funding levels and a qualitative viability assessment using an expert panel. Results: Crowdfunding, corporate donation, and social impact bonds (SIBs) were deemed to be the most viable of numerous potential strategies. Expected funding levels over 10 years for rare diseases in Colombia from crowdfunding, corporate donations, and SIBs were roughly $7,200, $23,000, and $12,400, respectively. Conclusions: Based on the combination of projected funding potential along with expert consensus regarding viability and operability, crowdfunding, corporate donations, and SIBs, especially in combination, have the potential to substantially improve funding for vulnerable patient populations in Colombia.

The impact of social impact bond financing

AbstractSocial impact bonds (SIBs), also known as Pay for Success, are an innovation in Payment by Results contracting. Investors finance programs and are repaid based on the “SIB effect,” which includes changes in outcomes attributable to financing. We generate a quantitative estimate of this part of the SIB effect for two active labor market programs in the Netherlands and Switzerland. Comparing program impacts within providers using SIB and non‐SIB contracts suggests financing has positive impacts on public benefit receipt, employment, and income. Qualitative research suggests this is because SIB contracts increased pressure for all involved parties, leading to the institutionalization of selection and greater resources for SIB‐financed services. Contracts with high pressure, like SIBs, may compromise both performance requirements and the potential to measure performance. We examine the implications of these findings in relation to agency and stewardship theories and highlight the significance of SIBs as multilateral as opposed to bilateral contracts.

Limits to the financialisation of the state: exploring obstructions to social impact bonds as a form of financialised statecraft in the UK, Israel, and Canada

ABSTRACT Within the financialisation literature, scholars have turned their attention to the state, exploring the adoption of financial activities by state actors, paying less attention to the limits of state financialisation. This paper explores these limits using the case of social impact bonds (SIBs). Pioneered in the UK in 2010 and subsequently trialed in some 35 countries, SIBs use private capital to fund social programs, with governments providing a return based on the degree of success. Despite expectations of dramatic growth, the SIB model has never truly taken hold. Based on the rollout of SIBs in the UK, Israel, and Canada, the paper considers the challenges encountered by the SIB enterprise as a form of financialised statecraft and identifies three barriers: (1) resistance to political agendas of state financialisation; (2) clashes between finance and public sector cultures; (3) financial innovation seen as ‘risk’ and ‘disruption’ to entrenched socio-technical routines. These barriers reveal tensions both within the state itself and between finance and the public sector, and indicate the importance of thinking about the limits and failures of state financialisation.

Missing finance in social impact bond research? A bibliometric overview between past and future research

AbstractThis paper provides a bibliometric review of 156 articles published between 2011 and 2021 on social impact bonds (SIBs). We identified five research streams, namely studies that: (i) place the origins of SIBs in the neo‐liberalism framework; (ii) consider SIBs as an evolution of the new public management approach; (iii) focus on conceptualizing SIBs as an impact investment approach rooted in the social finance landscape; (iv) look at SIBs as a funding source for social entrepreneurship; and (v) detect an emerging phenomenon labeled as sustainable financial partnerships for the SDGs. Our results suggest that the current literature is strongly based on those that we have defined as a sort of UK influence, which is dominating the scientific perspective and the current use of SIBs, and that there is still less “finance‐based” research in this field. We conclude by proposing areas for future research.

Charitable assets: social outcomes, financial values, and the new, nonprofit funding regime

ABSTRACT Amidst growing signs of inequality, poverty, and marginalization, there have been calls for a new approach to funding the social sector organizations tasked with addressing these challenges. Rather than paying for services, governments and philanthropists are being encouraged to fund programs based on their ‘outcomes.’ This paper explores this growing movement around ‘outcomes-based funding’ (OBF) suggesting that outcomes in this context embody a distinctly financial logic and reflect an effort to turn the work of charities and nonprofits into a type of pseudo asset. The paper teases out these dynamics and their implications based on one particular form of OBF, the social impact bond, a financial instrument which uses private capital to fund social programs and calculates returns based on program outcomes. While SIBs have struggled as a market, the operations underlying these projects and informing the production of outcomes as investable assets have been carried forward into non-SIB work informing flows of public and philanthropic capital and embodying the practices of the larger OBF ecosystem. As a window into the new, outcomes-based nonprofit funding regime, the paper offers a unique lens and set of critical tools for exploring the relationship between capital, the social sector, and poverty governance.

Social Impact Bonds and Socially Responsible Public Procurement in the 21st Century

Purpose: Socially Responsible Public Procurement is an important tool to support both Social Economy Organisations and wider public policies. The object of this paper is to examine the financial instrument of Social Impact Bonds (SIBs) by the Public Administration in order to support on the one hand sustainable development and social integration and on the other hand the Social Economy Bodies in their efforts to secure resources to achieve their mission (sustainable and socially inclusive development). Through the presentation of case studies, stakeholders will be able to understand the importance of Socially Responsible Public Procurement and the importance of Social Impact Bonds in ensuring an inclusive and environmentally respectful society.
 Methodology: Concise review of the theory of Social Impact Bonds and the connection with the Public Procurement through representative case studies from UK, USA and Israel. 
 Findings: Presents the results that the utilization of social impact bonds had for contracting authorities, the development of the Social Economy and wider public policies (such as employment, social inclusion, etc.)
 Unique Contribution to Theory Practice and Policy: Through this paper, stakeholders will have the chance to understand the importance of SIB in relation to Socially Responsible Public Procurement. SIB is a new financial tool which can financially support Social Economy Bodies in order to fulfill their missions, but it also has disadvantages. The specific article includes proposals in order to improve the institutional framework of Social Impact Bonds.

Comparative study of social impact bonds – capital per beneficiary and scheme duration

Despite numerous articles on Social Impact Bonds (SIBs), the current academic debate lacks in-depth empirical research on how countries differ in terms of the direction and level of support using SIBs. The purpose of the article is to examine whether in countries issuing SIBs the intervention objectives differ between countries in terms of the amount of capital allocated per support beneficiary and the term of repayment from the bonds. It shows that schemes classified as ‘social’ have on average higher capital allocated per beneficiary and a longer repayment date. This is confirmed for both SIBs issued worldwide and those issued in the UK and USA. The results of this study provide guidance for public policy makers on the scale of expenditure and the duration of intervention depending on objectives, which can be important both in the sustainable budget planning process and for the issue itself.

The investor's participation in social impact bonds

Considering 181 Social Impact Bonds (SIBs) until 2020, we study the factors impacting on the number of investors, those influencing the institutional investor's participation, and the determinants of the philanthropic investor's commitment. We find that the risks of the projects are shared by several investors, the institutional investors are more attracted by less risky SIBs, the commitment of philanthropic investor translates into a greater investment. SIBs prove more attractive to non-mainstream investors. Results permit the exclusion of a social washing phenomenon in the SIBs' world and could be a starting point for harmonizing the controversial positions of academics on SIBs.

Social Impact Bonds as a Tool for Healthcare Response to Prevention of Noncommunicable Diseases

Background: In the situation of economic instability, when the problem of financing welfare and other social and healthcare services is aggravated, the importance of raising funds and attracting business investors becomes particularly urgent. Results of recent studies show that a synergistic effect can be achieved by introducing a social impact bond model in collaboration of external investors and health authorities. Projects aimed at improving children’s health in order to prevent subsequent costs in healthcare have been increasingly developed and proposed recently. Objective: To substantiate and develop a social impact bond aimed at preventing chronic noncommunicable diseases in children based on past experience. Materials and methods: We reviewed the content of regulations on the development and implementation of social impact bonds in the Russian Federation and examined the system of providing preventive health services for the child population, including overweight and obese children. Results: We have found that a regulatory framework for testing social impact bonds (SIB) has been already established in the Russian Federation and ten SIBs were implemented in seven constituent entities of the country in 2022. Due to a high prevalence of overweight and obesity among children in the Sverdlovsk Region and limited opportunities of implementing comprehensive, long-term preventive programs, a SIB for prevention of obesity in children aged 6 to 9 years living in the Sverdlovsk Region has been developed. The regulatory framework for the implementation of the project has been formed, the project passport approved, the targets of the social outcome set, the project implementation mechanism developed, and the participants identified. Conclusion: The ultimate goal of social impact bonds is not so much the solution of a specific local task, but elaboration of new techniques and mechanisms for their implementation through testing, enabling replication of successful models at the municipal and regional levels, and obtaining an overall cumulative effect from sustainable positive changes.

Social Impact Projects in Russia: First Results of 2022

By the end of 2022, Social Impact Projects in Russia (SIPs), aka Social Impact Bonds (SIBs), were 2/3 of the way through pilot testing. The new financial instrument designed to improve the quality of public services was approved by a special resolution of the Russian Government in 2019. The first three projects implemented on the SIB model have already been completed to date. What are the tasks addressed by SIPs in Russia, what are their features, what changes in the quality of life do they bring to our citizens, and who can they become an inspiration to? More on that in this article by a VEB.RF expert.

Trade Unionism v. Neoliberalism: Different Paths to Impact Investing in the U.S.

Goal – privatization and outsourcing help public and private employers, respectively, to reduce their costs and even to increase productivity and output. The state has retained its role in developing and implementing policies in reducing unemployment, providing related social benefits and maintaining core public services. However, the increased use of novel financial instruments such as social impact bonds (SIBs) may result in the privatization of these core state functions as well. With SIBs, private investors are given a goal or target – for example, to reduce unemployment by a certain percentage in a specific community or region-and are rewarded with a return on their investment if these targets are met. This article analyzes and criticizes the use of SIBs in the U.S., and contends that labor unions would do a better job in implementing elements of state employment policy than private investors. Research methodology – the author used the qualitative empirical, doctrinal and analytical research methodologies. Originality – it is an original work evaluating different ways in which private actors (financial investors or labor unions) may assist governments in solving social problems such as unemployment.

Social Impact Bonds and Social Innovation: Benefits and Weaknesses

Social Impact Bonds and Social Innovation: Benefits and Weaknesses