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Social Impact Bonds: the experience from Australia since 2013

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Australia’s first social impact bonds were launched in New South Wales in 2013, making them some of the earliest SIBs in the world. Three years on, Jill Carman from Aleron takes a look back at lessons from Australia and comparisons to the UK market.

What are the New South Wales SIBs?

Two bonds were launched in New South Wales, both focusing on families involved in the child protection system, aiming to keep children with their birth families in safe, stable environments.

The first bond is a $AUD7 million (£4 million) bond over seven years. It funds the Newpin intensive parenting programme, which aims to restore children in foster care to their families. The second bond is worth $AUD10 million (£5.7 million) over five years and funds the Resilient Families service, which supports at-risk families to keep their children safe and out of foster care.

How are the bonds performing?

Both bonds have now been running long enough for us to see some early results. The Newpin bond is showing promising results.  It measures success by the number of children who are successfully restored to their families, which in the first two years was 66 children. This gives a restoration rate of 61.6%, against a baseline of 25%. Investors received a return of 8.9% last year, which is around the middle range of results they would expect.

The results from the Resilient Families bond to date have shown a more mixed picture. Success under this SIB is measured by reduced numbers of interactions with the child protection system. In comparison to a control group, families in the programme had slightly lower numbers of new foster care placements – a key measure of stability in care. However, in the same period their number of risk assessments and calls to a helpline were higher than the control group. These results are only provisional though, and the population involved is too small to yet draw conclusions about outcomes. At this stage investors are projected to receive a return of 5-8% at the term of the bond.

What have we learnt?

Building Australia’s first SIBs took a lot of work and goodwill. Each bond involved around twelve months of intense joint development between service providers, investors, intermediaries, experts and government. Some key lessons along the way have included: get the measurement framework right; build in flexibility to adapt within the life of the bond; and use outside experts to help build the market.

Choosing the right outcomes data was a challenge. The two bonds both seek to show causality by comparing outcomes against a counterfactual. Establishing this counterfactual was a time consuming process, hampered by often inconsistent existing data. For the Newpin bond, it was decided to use a historical baseline for the first three years, before moving to a rolling control group of 300 children. This has required new data systems to build and track this rolling control group.

The growing popularity of rate cards in the UK is a different approach to setting outcomes measures. Instead of measuring impact against a counterfactual, rate cards rely on administrative data to measure success (e.g. number of participants who complete a certain qualification.) While this is a much simpler approach to measurement, it’s harder to prove the impact of the programme. There’s a trade-off to be made here, and funders will have to decide what they value most in each new case.

Another learning point from Australia has been the importance of keeping the programmes flexible enough to adapt and improve. Much is made of the potential for SIBs to foster innovation, but we haven’t always seen this play out in practice. If the original service model isn’t working, SIBs have to be allowed to change. To take a small example, the Newpin programme has begun to see a growing number of fathers being referred to the programme. In response, last year for the first time Newpin began employing family workers to work specifically with fathers in what used to be mothers-only centres.

As social investment becomes more familiar, we would like to keep pushing this further and see SIBs used to test out new or more experimental models of service delivery. If we’re committed to making change, SIBs have to be allowed to adapt, and sometimes even fail.

It is also vital that as the market develops there are more opportunities for smaller charities, with a unique view on delivery, to get involved. Commissioners chose to work with large, established organisations for the initial New South Wales bonds, and this is a common trend worldwide. But it’s important that high impact smaller organisations don’t get locked out.

Intermediaries can play an important role here in helping smaller organisations get ready for social investment, and linking up organisations for joint bids. In Australia, intermediaries and independent experts played a key role in developing the initial bonds, providing help to navigate the different perspectives involved as well as technical assistance. Since then, the government has also set up a pro bono advice network connecting charities with legal and financial firms, to help prepare for social investment opportunities.

Where to from here?

In Australia, as across the world, the social investment market is expanding rapidly. The New South Wales government announced in July a third social impact investment, this time aimed at reducing parolee reoffending. This new transaction is not being referred to as a SIB because it has a simpler investment structure, suggesting the market is expanding to experiment with other, simpler forms of outcomes-based contracting to complement SIB programmes.

Ultimately, social investment is a rapidly growing field and the SIB model will continue to adapt. Governments are increasingly funding services based on outcomes, and we should view SIBs within this broader lens. Only time will tell what the social services landscape will look like in fifty years and where SIBs fit within it. Right now though, the social investment market is brimming with opportunity and the time is ripe to get involved.

By Jill Carman, Aleron

Jill is an Associate at the consultancy Aleron, and previously worked at the New South Wales Department of Premier and Cabinet. While there, she was part of the team responsible for developing the state’s social impact investment strategy. 

Last updated | 
26 July 2016

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