1. Social Impact Bond Switzerland (Caton of Berne) Marc Baumann Lawyer, Notary, MBA, EMBA CEO Invethos Ltd.

2. Basic Structure and Transaction

3. Target group and goals
Target group and the social problem to be solved The target groups of the SIB are temporarily admitted immigrants and refugees in the canton of Berne. The employment rates of theses groups are between 10% and 20%.
Goals
Sustainable, long term integration into the labor market, triggering social inclusion of
immigrants in the Canton of Berne. Criteria for measurement were defined as follows:
Minimum number of participants in the program
Employment on a permanent basis (with and without training surcharge) at a level of 50%
Rate of termination of employment contracts
Completion of training/degree
Service provider The NGO Caritas has been mandated within the framework of a service level agreement to conduct a project on professional integration for five years. Caritas can draw on the funds of the SIB for the realization of the project.

4. Implementation of a “bond model”….
State
Target Group 4 3
Goal-
measurement
The government or another social organization takes a loan. The repayment of the loan and the interest depend on the degree a social problem could be solved. Typically the loan is guaranteed or has a floor. On the other hand the returns are capped. 2 3
finances 5
Performance contract
Solves social
problem 1
Interest
Premium if targets are met
Investor
Social Institution
Loss limited
Malus when goals are not reached 5

5. …..instead of an “equity model”
State
Target Group 3 3
Goal-
measurement
The government or another social organization offers a premium for solving a social problem. The premium is calculated on the basis of savings if the social problem is solved. The premium depends on the degree the targets are met. This means that potentially the whole premium can be lost.
Premium
when social
problem is solved 2 4
Solves social
problem
Gain
Investor
(Fund)
Social Institution
Loss un-limited
Financing 1
Malus when goals are not reached 4

6. Structure of the SIB of the Canton of Berne
Private Investors
more intuitive solution, but not possible in the current setting 1
Loan
Loan
Performance - related
State
Social Impact Bond Ltd. 1
Service level agreement with financial bonus and malus
Social Institution
Target Group
Evaluation
Reporting
Evaluation
Reporting
Reporting &
Support
Reporting
Scientific Advisory Board
Evaluation Board

7. Characteristics of the SIB Switzerland
Bond Model The SIB is a loan where the repayment and the interest depend on the question how a specific social problem could be solved.
Benchmark The target achievement is measured against a predefined benchmark.
Bonus – Malus – System A bonus and malus – system is implemented for the investor and for the social institution. In the case of success the investors and the social institution will get a bonus. In the case of missing the goals the investors will loose a part of their money and the social institution has to pay back part of the money received by the state. One reason to implement a bonus – malus system also for the social institution was the reversion of incentives in the social sector.
Pre-financing state activities Another effect is the pre-financing by the private sector (not very actual due to negative interest rates).

8. Characteristics of the SIB Switzerland
Performance measurement Higher priority to goal achievement than to process fulfillment
Create a data basis Creating a data basis that makes goal achievement possible.
Make comparability possible Make social institutions more comparable as far as their ability of goal achievement is concerned.
Reverse financial incentives and challenge thinking patterns The financial pattern challenges social institution to think differently.
Public statement The bonus and malus components are a public statement for a provident handling of public money.
Public Private Partnership The SIB is a way of cooperation that includes private and public stakeholders to solve a specific social problem.

9. Goal Measurement and Challenges

10. Goals and measurement of target achievement
Relative goals
Absolute goals
Low
employability
Medium
employability
High
employability
Secondary school education
Lower target scores for:
permanent employ-ment (>50% - < 50%)
termination
training surcharge/perma-nent employment
Higher target scores for:
permanent employ-ment (>50% - < 50%)
termination
training surcharge/perma-nent employment
Number of trainings/degrees x compensation
Benchmark-related goal achievement
Success rate

11. Financial Structure Payout service provider Payout investor
Relative goals
Effective labor market inclusion vs Benchmark
External steering inputs
Reduction of target values in case of deviation from target values
Unemployment (macro criterion)
Absolute goals
Education
100% = 0.25% p.a.
0.50%/degree
Success rate
Payout service provider
Payout investor
CAP
CAP
101.50%
105.00%
FLOOR
98.50%
95.10%
FLOOR
Rate of target achievement
Rate of target achievement

12. Challenges on the way to the first SIB in Switzerland
Idea and approach The idea was to solve a social problem by creating some sort of public private partnership structure. The initiative started in the private sector and the project was launched by Invethos AG and Focus Berne - an association of entrepreneurs in the Canton of Berne. The first idea was to have a different target group and a different structure, but the political discussion dominated the agenda and the choice of the final target group.
Obstacles
Benchmark data are scarce or fragmented
The proposed equity – premium model was not well perceived
The introduction of target success rates were perceived as criticism by the social institutions
The idea of measurement was perceived as “introducing capitalism” into the social world
Finding investors was not easy
Compromises As a consequence a lot of compromises had to be made, for example on the target group, the levels of possible gains, the levels of bonusses and maluses of the social institution and the comparison group.

13. What is needed to make it sustainable and scalable

14. Gaps in the social system
Learnings – how the SIB is perceived as new instrument for solving social problems
Social Institution
Politics
Govt. / Adm.
Private
Sector
PPP
Inclusion of private partners
into social problem solving
Investment
Investment with possible gains
and losses
Trial & Error
Try out new methods of problem
solving
Gaps in the social system
Are there gaps in the social
security system to be closed by
SIB’s?

15. What it takes to make SIB’s more sustainable and scalable
Benchmark
Longer term benchmark data are needed, the data need to be more standardized or at least made comparable. Ideally the costs of a social case / non inclusion could be quantified.
Equity Model
The equity model is easier to implement, is more problem solving driven and has a higher incentive for investors and the government / NGO. If the costs of a social case / non inclusion is quantified, the government could (publicly) offer a premium for problem solving.
Inclusion
PPPN
The inclusion of private investors, private entrepreneurs and the public sector / NGO is important for a success.
Pooling
Projects and assets could be pooled to reach the critical size in projects and or assets. A certain standardization is required.

16. Contact Marc Baumann Lawyer, Notary, MBA, EMBA Invethos AG
Schwanengasse 11
PO Box 428
3000 Bern 7
Switzerland