1. Employment Social Impact Bonds

2. Our partnership Numbers4Good and the Centre for Economic and Social Inclusion (Inclusion) are launching a new partnership to support public sector Commissioners - such as Local Authorities, City Deals and Local Enterprise Partnerships - to create better employment outcomes by creating social impact bonds. Specifically, through this partnership we will be looking to support public sector Commissioners to prepare for and bid to both the Big Lottery Fund’s Commissioning Better Outcomes and the Cabinet Office’s Social Outcomes Fund. The Big Lottery Fund are providing development grants to assist with this work. Numbers4Good and Inclusion bring an unparalleled combined expertise in the design, delivery and evaluation of employment programmes, and of the structuring of financial instruments and social impact bonds. 2

3. Supporting you to develop social impact bonds Stage 1: Define social problem Questions to answer What is the social issue needing to be solved? Which population should be targeted? What age range are we looking at? Which geographical area? Activities Assess stakeholder engagement Assess the feasibility of measurement with each target population Key Question: Is there an engaged commissioner interested in tackling the social issue? Stage 2: Develop Social Intervention Strategy Questions to answer What do the target population need? Where should the service intervene? What are the current gaps in service provision? What services will meet the needs of the target population to improve the outcome? Activities Analyse research reports Consult with public and voluntary sector organisations that work in the local area Focus group with target population Develop hypothesis on the most appropriate intervention strategy Key Question: Are there compelling intervention programmes to solve the social issue? Stage 3: Develop the outcome metric Questions to answer What programmes could be funded as part of a SIB? Do they have track record of improving outcomes? What are their costs? Can they operate alongside each other? Which metric should be used to evaluate outcome? How do we structure a baseline/ control against which to measure the impact (including population size)? Where are there cost savings from improved outcome? What is value of cost saving? Activities Map landscape of potential providers Review quantitative evaluations of programmes meeting needs of target group Review delivery budgets to understand delivery cost Work with commissioner & researchers to evaluate alternatives Ensure proposed metric is operationally feasible & meets investors’ needs Working with commissioner’s analytical team to estimate cost saving from an improved outcome Key Question: Can a robust outcome metric be developed? Stage 4: Develop financial model Questions to answer Can the SIB financial model work? What proportion of cost savings will need to be shared with investors? Activity Build a financial model and run a range of scenarios Key Question: Does the financial model generate savings to the Commissioner and a return to investors in an acceptable time frame? 3 Adapted from Social Finance’s http://www.socialfinance.org.uk/sites/default/files/Technical_Guide_Criminal_Just ice.pdf

4. Lessons learnt from investors Success based payment to Delivery PartnerNon-diversified risk of one Delivery PartnerEquity-style risk should assume equity-style returns Investors’ model likely to price the deal with discounted success 4

5. Lessons learnt from working with social ventures Buy in from Board & Senior Management is key Investment readiness preparation is essential – business planning, financial modelling and ensuring capacity to deliver Need for historical dataNeed for collaborative attitudeCommitment and willingness to acquire new skills e.g. data management 5

6. The stages of creating a social impact bond 6 Originate Deal Identify government champions & savings opportunities Vet models of intervention Perform nonprofit due diligence Conduct financial modeling Secure Public Sector Contract Develop & secure government contract Secure authorisation from commmissioner for multi-year contract Formulate partnership agreement with metrics & payment terms Structure instrument Develop operating model & structure investment vehicle Articulate cash flows, including financial & social returns for target milestones Finalise methodology, including metrics & evaluation strategy Raising Capital & Execution Recruit investors Finalise terms and negotations Sign contracts Issue the instrument & raise investment capital Managing SIB over its lifetime Provide active ongoing project & data management & financial intermediation Modify intervetions and structures as needed Coordinate third-party evaluation

7. Examples of what we can help you with Identifying savings & outcomes (to the commissioner and other organisations) and their value Understanding the evidence of “what works” and what savings could be achieved Estimating the monetary value of the savings and identifying ways of realising them Cohort definition and referral pathways Refining and pricing of outcomes Developing metrics Developing the structure of the SIB Developing the payment mechanism for outcomes Engagement with potential investors and providers 7

8. Thank you! 8 dominic@numbers4good.com tony.wilson@cesi.org.uk Contact us :