A social impact bond designed to reduce homelessness among 400 rough sleepers in London has attracted the £900,000 of investment it needs to go ahead.
The three-year Street Impact programme, run by the homelessness charity St Mungo’s, has received about £650,000 from external investors and the charity has invested another £250,000.
The largest external investor was the social lender CAF Venturesome, which has put in £250,000. Another £130,000 came from a smaller charitable foundation, and the remainder has come from four private investors. All investors except Venturesome asked to remain anonymous.
The money will be spent on funding the early stages of a payment-by-results contract to alleviate homelessness. The project is expected to cost about £2m to run, and if St Mungo’s hits all its targets, it will receive up to £2.4m from the Greater London Authority.
Once the first payments are received, the money will be used to finance the remainder of the project. Once the project makes a profit, it will begin to make repayments to external investors.
Those investors will receive interest payments of between 5 and 8 per cent a year. The charity will receive all remaining profit.
Dan Hird, head of corporate finance at the social lender Triodos, which arranged the deal, said he was pleased by the innovative structure, which shared risk between investors and the charity.
"The investors are taking a sub-commercial return but could still make good money," he said. "I think we will see more vehicles like this; we’re learning more about how to set up this sort of social investment.
He said that in future he would prefer the commissioning authority to share some of the risk of the venture.