Social Impact Bonds (SIBs) are a powerful new tool to align the interests of social organisations, governments and investors around proven social impact. While this form of funding is still in its early stage, there are some principles that are emerging. It is clear that a SIB will not be appropriate for all social programs - the need for robust proof of impact attributed to the intervention, and the involvement of investors and multiple government departments makes SIBs complicated instruments.
We encourage social organisations to think about the future of outcomes-based funding for programs. With new SIB funding rounds opening up, social organisations are asking - do I have the right kind of program and support to be successful in applying for a SIB?
There are several key dimensions to consider before beginning your application for a SIB.
> A vision
What is it that you are trying to achieve and for whom? A SIB is a long, challenging process, so your senior management need to have a clear and unified vision of why you want to proceed. While this will help sustain you when the complexity is greatest it will also help you convince Government that your organisation – your intervention – is ready to be taken through this process.
> A clearly defined problem
SIBs allow you to create, fund, measure and adapt an existing or new service response to a specific health or social need and for a specific cohort of people. The organisation needs to be very clear about the target cohort for the program. Develop a view on why, where and how the existing sets of services are inadequate. Demonstrate (ideally with existing evidence) how your proposal will solve the problem. Ideally, you have an existing intervention that you wish to ‘scale’ through a SIB, although this is not essential.
Latitude Network was the advisor to Sacred Heart Mission in the negotiation for Victoria's first social impact bond announced in December 2017. The article below first appeared in Pro Bono News.
Sacred Heart Mission (SHM) will deliver the state’s first SIB with the Victorian government, expanding the welfare not for profit’s successful Journey To Social Inclusion Program (J2SI).The Victorian government allocated $1.2 million for a targeted program in March to end long-term homelessness following a pilot of J2SI, agreeing to contribute a third of the overall $3.69 million cost of the three year program.
A SIB is a partnership with government, the social services sector and investors to create positive change for communities and individuals and has been used worldwide to address complex social issues. SHM said unlike traditional SIB capital raising, a portion of the funds would be sought from philanthropy. SHM general manager of business, Catherine Harris told Pro Bono News that the SIB was “departing from the standard capital raising process”.
Latitude Network is excited to announce that we are supporting Sacred Heart Mission in negotiating one of Victoria’s first Social Impact Bonds (SIBs). Sacred Heart Mission was one of two organisations successful in applying to the Victorian Government to enter negotiations to conclude SIB contracts this year based on expanding its Journey to Social Inclusion program, which is setting a new benchmark for addressing long-term homelessness in Australia.
Social Impact Bonds are being explored by commissioning agencies around the world in an attempt to find more effective ways of funding social and health services. SIBs (also known as ‘Pay For Success’ or ‘Payment by Results’ contracts) are part of an emerging set of funding mechanisms which aim to pay for service outcomes instead of service outputs – something the Productivity Commission discussed in depth in its recent report into competition, contestability and informed user choice.
Russ Wood is leading this work for Latitude, and is acting as strategic adviser and project manager through the ‘Joint Development Phase’ of the SIB which is expected to run until the end of 2017.
If your organisation is interested in exploring which programs might be suitable for outcomes-based commissioning such as Social Impact Bonds, then let us know - we'd be happy to share our learning. Just email us.
Should social organisations pursue growth, and if they do, how should they do it?, asks Dale Renner. (First published Pro Bono News 13 June 2017)
“Growth” can be a controversial word in the social sector. Social service leaders sometimes say “our job is eventually to go out of business”, implying that in some unspecified way, social problems will be solved and will remove demand for assistance. Yet, as the sector moves from grant-based to individualised funding, it becomes important to have a view on what growth means to social services organisations.
The ethical case for growth
Growth in this context doesn’t mean growing the amount of money spent on social programs in the aggregate. The focus is on growth at the program, or possibly organisation, level.
To understand the case for growth, agreement is first needed on what outcomes the community desires – many are obvious such as reducing crime, family violence, homelessness and Indigenous disadvantage. It is also important to understand what programs are proven to achieve that outcome for a certain cohort of people (noting there are levels of proof from anecdote through to randomised controlled trial). Growing the reach of those proven programs to benefit a greater number of people is surely an ethical pursuit as it reduces human suffering and harm. So at first blush, if a program is successful, for example, in helping to improve universal child literacy, it has a prima facie case for growth.
The Prime Minister, Malcolm Turnbull, had some advice for CEOs attending the Business Council of Australia dinner recently: “You’ve got to ensure that you’re always testing existing practices… the old phrase ‘not invented here, we’ve always done it that way’ is disastrous”.
And we might add this addendum to that quote: “We also have to bust the myth that only large organisations or special or creative people can innovate.”
This is sage advice, not only for corporate CEOs, but for CEOs of social service organisations. Large parts of the sector are moving from the ‘block funded’ process of winning multi-year funding contracts to the ‘consumer-directed’ process of winning each customer.
In many ways, the transition to consumer-directed funding for the aged care, disability and community mental health sectors is demanding more change, more quickly than commercial businesses usually face. For example, energy and mining companies have known for years that governments would eventually take action on climate change — this is not a surprise, it is a factor that any strategic planner would have had in their sights at least ten years ago.
Opinion: Change is upon the social sector – but we can’t just busy ourselves with NDIS readiness projects. The Not for Profit sector needs to wrestle with questions of identity to keep what’s important and be willing to change the rest, writes innovation consultant Dale Renner. (first published in Pro Bono News)
With the impending arrival of individualised funding (consumer directed care) in disability, aged care and mental health, social organisations are in the midst of reform and readiness projects to make the operational changes required. But in all the sound and fury of the busyness, issues of fear, change and identity are ever present.
Not for Profits have some reason to fear these changes. In the UK, which has implemented individualised funding, 78 per cent of aged care residential beds are now provided by the private sector, with 58 per cent of these run by large corporate providers (Grant Thornton UK 2014).
While there are some differences, this points to the direction of change – increasing numbers of commercial organisations and small firms winning business in social markets. And while there will be teething problems, with some people missing out during the changes, service users are clearly demanding the ability to make choices about their services. This demand will continue to drive change.