There is great interest from stakeholders to collaborate around SIB development and to understand how this fits into a Nordic context, according to Camilla Backström from Forum for Social Innovation Sweden.

Social impact bond is an innovative financial solution designed to address a particular outcome and social problem, also referred to as “pay-for-results/success bonds” and “social benefit bonds”. The SIB come in many different implementations but the basic idea is to involve three parties: a commissioner of a particular social outcome (usually a government body such as a municipality), a service provider organization that delivers the intervention, and private investors that take the initial investment and the financial risk. If the social outcome improves, the commissioner repays the investors plus a return for the financial risk. If the social outcomes are not achieved, the investors stand to loose their investment.

The Social Impact Bond instrument, first developed in the UK for the UK market, has become increasingly popular and Social Finance UK estimated in august 2014 that 25 SIBs have been commissioned around the world during the past four years. At the same time as the number of SIB initiatives around the world is growing rapidly, each region and country is realizing there are specific challenges in adapting the concept to local culture, legal structures and welfare systems.

Forum for Social Innovation Sweden has put special focus on social impact investment during the past year and reached out to key stakeholders in the different Nordic countries. Today there are initiatives up and running in Norway, Sweden, Denmark and Finland building on the social impact bond concept. During discussions with stakeholders of these initiatives a need was expressed to collaborate on a Nordic level. This makes sense as the cultures are closely related, the welfare systems similar and the common view on social service delivery is comparable.

The idea behind the Nordic SIB development network is to create a forum for practitioners to meet and exchange ideas and experiences, difficulties and solutions, and much more that is relevant in developing financial instruments with an impact/outcome focus. The network consists of representatives from all different sectors that are directly involved in SIB development in the Nordics.

The main conclusion from the group was that through collaboration and information sharing everyone involved will improve their conditions for success in developing the market for SIB-like initiatives. It will also provide a platform and opportunity to validate different initiatives and ideas.

Local government

The Network participants shared some similar challenges encountered in their collaboration with municipalities in SIB development. The discussions touched on such issues as the conflict between long-term SIB investments and 12-month governmental budget cycles as well as the difficulty for a particular local government administration to motivate a specific outcome focused SIB-investment when a different administration with a different budget will get the benefit from the initiative in the end.

Models for cross sector collaboration

The Nordic countries need to create a better understanding of how to create new collaborative models to facilitate working cross sectors. The different sectors are unaccustomed to collaborating around societal outcomes and there are many unanswered questions, such as how different agreements should be developed. It is particularly important to understand the municipality perspective in order to support the development reaching a point where they are comfortable taking the position as a commissioner.

Impact measurement

Several discussions landed on impact measurement and unit pricing. There was a common view that this is a key area where the group can learn from each other. The Swedish Association of Local Authorities and Regions (SKL) is currently working together with the municipalities of Norrköping and Örebro to develop unit costs. At the same time The Swedish Research Council (Vetenskapsakademin) is funding a research initiative to translate a model developed by The Washington State University of Public Policy that calculates benefit-cost results of interventions that has a certain established outcome. In the end there is an aspiration to create a database with standard unit costs for Sweden. The group showed great interest to follow the development of these initiatives and to explore possible future opportunities to expand to a Nordic level. This would make it easier for all stakeholders in their decision-making process.

The entire area of measurement is clearly occupying all participants. Unless there are models that can quantify the results it is difficult to get the attention from investors, and even harder to get a commitment.

Outcome focused investment

Lastly, by tradition our mindset is focused on outputs when making investment, i.e. number of units produced, number of clients served, and number of hours of access. Social Impact Bonds and social innovation is about outcomes and less about activities performed. There is a great effort required to move the mindset with both commissioners and investors from output to outcomes.

Objectives

The closing discussion of the day focused on a discussion around the intention and objectives for the SIB Network. The participants agreed that the most important objective at this point is to generally promote the use of SIBs by sharing learning’s and best practices. The group also proposed to approach decision makers in the Nordic Council of Ministers to engage and inspire policy development and learning between the countries.

The next network meeting will take place in October.

Members: