Social impact bonds are still relatively new and can be complex and challenging to implement. However, they can also be a game-changer for everyone involved. Our role as an advisor and intermediary is to assist with the development of projects that will have a lasting positive impact – and to make the process as straightforward as possible.
As a non-profit organisation, we have a deep understanding of the aspirations and practical realities of the service delivery organisations we work with. Our team also has deep experience in the financial sector, and SVA holds an Australian Financial Services License. In short, we are comfortable navigating the space where social purpose meets high finance.
Our work is multi-faceted and includes advising service providers, governments and the investor community on the opportunities and practicalities involved in implementing SIBs and payment-by-outcome structures.
The support we provide service providers covers the full spectrum from the exploration of an idea to the nitty-gritty of the contract implementation and management:
Pre-proposal advisory services
- Feasibility exploration
- Program design and modelling
- Measurement and evaluation frameworks to support ‘SIB readiness’
- Defining the target cohort
- Developing the intervention program logic and structure
- Selecting outcome metrics and estimating the baseline or counterfactual
- Analysis of program impact
- Refinement of operating model and program costs
- Financial modelling and designing outcome payment structures
- Determining the optimal capital structure
- Proposal construction
- Joint Development Phase planning
Joint Development Phase
- Participation in negotiations with government, refining all project assumptions and commercial terms
- Working with lawyers to develop legal structures and documentation
- Raising any capital required (using SVA’s Australian Financial Services Licence)
- Setting up and registering appropriate legal entities
- Development of ongoing performance management, governance and reporting requirements.
Service Delivery Phase
- Ongoing investor reporting and financial management
- Program performance oversight and governance
- Management of any Special Purpose Vehicle, including Trustee services
If you are a service delivery organisation interested in exploring whether a SIB makes sense for you, please get in touch.
SVA also advises governments on the procurement of outcomes-based contracts and SIBs. If you represent a government organisation and would like to know how SVA could support your agency, please contact us.
If you are an investor interested in investing in SIBs or other impact investing products, please email us.
What is a social impact bond?
SIBs provide a funding mechanism to enable social service providers to enter into outcomes-based contracts with government.
When a service provider enters into an outcomes contract, a portion of payments are dependent on the results achieved by the program. SIBs raise private investor capital to fund upfront service delivery costs and share in the financial risk of service providers achieving the targeted outcomes.
The general structure of a SIB is outlined below:
- Government enters into an outcomes contract to pay for services on an outcomes basis (rather than fee-for-service or block funding)
- Investors provide upfront capital to fund services and share performance risk
- A service provider delivers services to support people with specific needs
- Outcomes for the individuals enrolled in the program are measured, often compared to a baseline
- Government makes payments according to the outcome results achieved
- Outcome payments are used to repay investors and provide them with a return
If the service provider has sufficient capital and risk appetite, they may not need investor capital and the arrangement is an outcomes-based contract.
Articles and useful links
After seven years ‘in the trenches’ as part of Australia’s foray into social impact bonds, Elyse Sainty shares her insights around SIB myths and legends. (Published 2019)
For any organisation thinking of embarking on the SIB journey or considering whether their program might suit a SIB, this article provides key questions that organisations should consider and some viability ‘rules of thumb’ for those questions. (Published 2015)
Elyse SaintyDirector, Impact Investing
Elyse leads SVA’s Social Impact Bond related work. She was instrumental in the development...Contact Elyse
Patrick BollenAnalyst, Impact Investing
Patrick is an analyst with the Impact Investing team and primarily supports SVA’s social impact bondContact Patrick