Social Impact Investing

additional capital for social programs, but instead displace funding for other programs.
Given the need to budget for a return on investment, a program evaluation, middle
managers, and the expenses of designing the complex financial and contractual
mechanisms, social impact bonds, according to critics, may be an expensive method of
operating social programs. Other criticisms include:
Criteria for success – donors will seek to fund that which can be observed and
measured, the outcomes (not just the outputs). This will leave agencies
addressing the huge structural problems in society unable to access these funds.
This is going to be particularly true for advocacy, arts and alternative
organizations. It will be difficult for social coalitions to get funding as their
contributions are dispersed through member organizations and the effect they
have on government policies, for example. The terms of these instruments may
be set to overpay for more readily achievable goals. Doing so would increase
long term government spending and divorce such spending from direct
deliverables.
More donor influence – donors, or now investors, will want to make sure their
money is being used according to contract, and will therefore want to be more
involved in the delivery of social services. They may even want to see NGOs
adopt a more business style of delivery.
Unfair competition – among NGOs will emerge. Agencies that secure funds will
be able to operate in areas where NGOs now operate, but they will have greater
resources, more narrowly defined goals (and therefore successes to publicize)
and will set the standard for government funded agencies and their actions.
Reduces Public responsibility – by reducing the government’s responsibilities
and accountability for delivering services. Though governments may not
genuinely represent their societies, they are still the best representatives of the
public will and governments play an important role in maintaining a civil society
sector. Social services are a part of our national social contract and the
government is devolving their responsibility to businesses though encouraging
such funding when other tax and program options can be made available.
Ronnie Horesh has expressed his ambivalence about Social impact bonds on the
basis that, because they are not tradable, they favour existing institutions, are
inherently narrow and short-term in scope, and impose relatively high monitoring
costs. They could, though, offer advantages over existing policy.
Pilots
Governments across the world are currently piloting Social Impact Bond initiatives.
Below are a few examples of these initiatives.
Public safety and recidivism
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