OPPORTUNITIES FOR SOCIAL IMPACT BONDS: PROGRESS IN WORCESTERSHIRE Social Finance is authorised and regulated by the Financial Conduct Authority FCA No: Lauren Fulton Ben Jupp

©Social Finance 2013 INTRODUCTION AND TERMINOLOGY 1) Social Finance Social Impact Bonds One way in which social investment is deployed; a social investment “product” 2) social investment 3) Social Impact Bonds social investment money that is provided on the basis of social and financial return other forms of social investment an independent not-for profit organisation 2

©Social Finance 2013 KEY PRINCIPALS OF SOCIAL IMPACT BONDS The Social Impact Bond is a means of investing in prevention services where improved social outcomes are likely but not certain. Social Impact Bonds are contracts with public sector commissioners under which government commits to pay for improved social outcomes. On the back of this contract, investment is raised from non-governmental investors. This investment is used to pay upfront for a range of interventions to improve social outcomes. Investors are repaid only if successful outcomes are achieved. Investors stand to lose some or all of their capital if positive outcomes are not achieved. The investor takes the risk that the interventions do not deliver the desired outcomes. The greater the improvement, the greater the financial return to investors. SOCIAL IMPACT BONDS BRING NEW FUNDING TO COMPLEX SOCIAL PROBLEMS AND FOCUS ALL STAKEHOLDERS ON PREVENTION Social Impact Bonds are a response to systematic underinvestment in prevention across public services. 3

©Social Finance Ministry of Justice – Peterborough Reducing reoffending DWP – West Midlands Disadvantaged year-olds DWP – Stratford and surrounds Disadvantaged year-olds DWP – Perthshire and Kinross Disadvantaged year-olds DWP – Nottingham City Disadvantaged year-olds DWP – Shoreditch, London Disadvantaged year-olds DWP – Greater Merseyside Disadvantaged year-olds Essex County Council – Essex Children at risk of going into care Greater London Authority – London Rough sleepers DWP – West London boroughs Disadvantaged year-olds DWP – Cardiff and Newport Disadvantaged year-olds DWP – Greater Manchester Disadvantaged year-olds DWP – Thames Valley Disadvantaged year-olds CVAA – England-wide Adoption Manchester City Council Children in Care In development Source: emmatomkinson.com UK COMMISSIONED SIBS

©Social Finance 2013 LONELINESS AS AN AREA OF UNDERINVESTMENT Loneliness has an equivalent impact on mortality as smoking 15 cigarettes a day. Preventing loneliness and isolation should enable older people to stay active and reduce periods of ill health and disability. In developing the Social Impact Bond we have reviewed a number of impacts in order to assess the likely benefits in reducing loneliness. 5 Loneliness* Less active lifestyles Diabetes Stroke CHD Increased disability Attendance Allowance claims Dementia Depression Lack of support structures Short term health care costs of treatment Medium term health and social care costs of treatment Loss of quality adjusted life years Potential value to local and national stakeholders Mechanism which directly impacts service usage. Increased likelihood of entry to care Increased risk of developing LTCs that lead to additional expenditure GP visits, A&E visits, hospital admissions Value included in financial model * For the purposes of modeling, Social Finance has focused on the impact of loneliness, where the research base is stronger than isolation per se. Clearly there is a relationship between the two.

©Social Finance 2013 A SOCIAL IMPACT BOND TO REDUCE LONELINESS AMONGST OLDER PEOPLE INVESTORS Funding Commissioners - CCGs, Local authorities, central government Payments on basis of outcomes Lead delivery organisation Reduction in loneliness Group Activity and Exercise Reduced loneliness CBT for most isolated Befriending Peer support groups Outline approach A Social Impact Bond would be an appropriate tool to develop a targeted service to reduce loneliness. Loneliness can be measured robustly using the Revised UCLA short form survey of loneliness. There is a mixed evidence base for interventions that reduce loneliness. The oversight and rigour brought by social investors can support the development of an effective intervention. Payments made on the basis of average reductions in loneliness scores align interests of commissioners and providers. 6

©Social Finance 2013 THERE HAS BEEN SIGNIFICANT NATIONAL AND LOCAL INTEREST IN THE BUILDING CONNECTION SIB There has been significant national and local interest in the Building Connections Social Impact Bond. Department of Health funded initial cost/benefit modelling work through its Social Enterprise Investment Fund. Cabinet Office has committed to contributing up to £1 million of outcomes funding for reductions in loneliness through the Social Outcomes Fund. Development partners Nesta and the Calouste Gulbenkian Foundation have committed grant funding for testing areas of innovation within service delivery and for an independent evaluation of the service impact on health outcomes. Investors, including charitable trusts and foundations, have been introduced to the Social Impact Bond design and are ready to conduct due diligence once procurement begins. Interested commissioners, including other Local Authorities and Clinical Commissioning Groups, have initiated conversations about replicating the model. 7

©Social Finance 2013 PROGRESS IN WORCESTERSHIRE 8 Information is available on WCC Portal PQQ will be published once timeline confirmed Marketplace engagement events will take place Maximum of 5 bidders invited to tender Bids will demonstrate ability to provide investment and delivery Outcome-based contract Prime contractor, consortia, single provider model Aim is for winning bid to be awarded by Oct/Nov Project to commence by the end of the year Outcomes evident and paid approx. 6/18 months later