Social impact bonds for commercial investors likely to come next year

Emily Bolton of Social Finance, which created the bonds, tells Charity Finance Directors' Group conference that private banks and rich people are the next targets

Social Finance
Social Finance
A social impact bond suitable for commercial rather than charitable investors is likely to be developed early next year, the Charity Finance Directors’ Group conference heard yesterday.

Social impact bonds allow charities to raise money from investors to carry out early intervention work and solve a social problem. If they reduce the scale of that problem, the government repays the investors at a profit. But if the intervention does not work, the government does not make a payment and investors lose their money.

Emily Bolton, a director at Social Finance, the organisation that created the bonds, told the conference that all investors in the bonds had so far been charitable foundations and philanthropists, but private banks and high net worth individuals would be targeted as the next tranche of investors.

Bolton said institutional investors, such as insurance companies and pension funds, would be a later target.

She said Social Finance was hoping to make social impact bonds more attractive to commercial investors by introducing much bigger bond issues and creating a fund that would allow investors to put money into several bonds at the same time.

She said other ideas being explored included a "capital guarantee" scheme to ensure that investors did not lose all of their money if a bond was not successful, and using the Enterprise Investment Scheme, a government tax relief for investors buying shares in small companies.

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