Social Impact Performance Bonds
Our social investment entity raises money from private investors & contracts social service providers to deploy innovative social programmes to measurably (%)reduce youth crime & imprisonment. NZ Government saves money (>NZ$360K pp) on imprisonment costs & allocates 50% of savings back to investors to create Social Impact Performance Bonds: the incentive for private investment in social sector SME
About You
About You
First Name
Renee
Last Name
Lee
Website
Your Organization
Country
New Zealand
About Your Organization
Organization Name
Organization Website
Organization Phone
Organization Address
Organization Country
New Zealand, OTA
Organization Type
Non-profit/NGO/Citizen-sector Organization
Your solution
Name Your solution
Social Impact Performance Bonds
Describe Your Solution
Our social investment entity raises money from private investors & contracts social service providers to deploy innovative social programmes to measurably (%)reduce youth crime & imprisonment. NZ Government saves money (>NZ$360K pp) on imprisonment costs & allocates 50% of savings back to investors to create Social Impact Performance Bonds: the incentive for private investment in social sector SME
Country your work focuses on
New Zealand, OTA
If multiple countries, please list them here. If your solution targets an entire region, please select it below
Region(s) your solution focuses on:
Range of turnover in your target firms, in USD
$6-10 Million.
Average turnover in USD of your target firm
We target multiple providers with a combined turnover $NZD 15,000,000 or in $USD $10,000,000
Number of employees in your target firms
5-24.
Average number of employees of your target firm
7: NZ is a nation of SME's 98% of all business here have less than 20 employees
Specify the size, average and range of expected loans or investments in each target firm
Pilot Round: 24 months
Invested in 5 - 7 firms (including new entity)
Total | $2,750,000
Range | $50,000 - $750,000
Mean | $250,000
Providers of
Programmes & Outcomes | $2,000,000 - $2,250,000
New Investment Entity | $250,000 - $400,000
Technology Innovation | $100,000 - $150,000
Research& Performance | $150,000 - $200,000
What stage is your solution in?
Operating for less than a year
Innovation
What makes your innovative solution unique?
Our people: talented, passionate collaborators; world class social services, research & education providers. We work to develop a solution that will involve local communities,Runaka & Iwi. National & Local Government.
We work to establish a sustainable, scalable funding/investment model, the first investment entity of this kind in Aotearoa NZ, focused on social innovation & development. A model which will leverage available public finances to provide incentive and reward for private investment in the social service sector. We propose:
1. A new, independent entity focused primarily on raising private investment for the social service sector.
2. To establish government backed Bonds (bills & notes), as the incentive& reward for social investment.
3. To compliment& maximise existing funding.
4. To apply leading technologies for education & work & to facilitate micro-investment "by communities for communities"
Why Dunedin to trial this project? 1)we significantly exceed the national representation for people in our target population 15-24 yrs 2) Social Services is the largest employment sector in our region. Benefits & perspectives:-
Government:
• If the new entity solves a problem, the government saves money.
• Lowest possible risk: if unsuccessful the government does not pay.
• Money & people focused on improving social outcomes, without expansion of government budgets
• Only when the venture is a success & the government has saved dollars then the government pays a % of the savings to the new entity.
Social Investment Entity:
• We raise money from private investors.
• We use the money to fund social impact programmes which measurably improve social outcomes
• we collaborate with Govt. to prove impacts attributable to our programmes
• We quantify the money saved& receive a % of savings to provide a ROI & expand
Investors:
• Feel good factor
• ROI & possible tax break
How does your proposed innovation leverage public intervention in catalyzing private SME finance?
Besides goodwill there are few incentives for our people to invest in improving social outcomes. Instead we pay taxes to the government to deal to the resulting social problems via our justice system.
Each year the Government establishes a budget and allocates millions of dollars to spending on justice: including imprisonment.
By funding social impact programmes that quantifiably (%) reduce the numbers of people imprisoned (within a defined time and place)we will save the government dollars, and free up funds budgeted for imprisonment.
We seek to leverage these saving to 1) provide the incentive and reward for social investment 2) expand the funding available for social impact programmes.
We ask that the government share with communities the dollars saved in order to establish a new sustainable and scalable funding model for community developed social services.
In terms of community "public" intervention we are looking to leverage models for micro investment "by the community for the community". Local people investing small amounts to enable the expansion of social programmes that 1) improve social outcomes for the community in which they live and in doing so 2) provides a return on their investment.
What barriers does your proposed solution address?
Lack of financial capacity, Unavailability of financial products tailored to SME needs, Lack of competition / incentives for financial intermediaries to serve SMEs, General barriers to SME development related to investment climate.
If you checked any of these barriers, describe how your solution addresses them
Lack of financial capital | Social Impact Performance Bonds provide an additional source of funding to both charitable and for profit social service contractors.
Unavailability of financial products tailored to SME needs | We do not have a private social development investment body. We remain to reliant on the Govt. to improve social outcomes. Communities need the means to select and fund social problems from within.
We hope to leverage online micro-finance tools to encourage and enable individuals, families and communities to invest in improving local social outcomes, investment "by communities for communities" (Community Resilience vs Govt dependence).
Investment Incentives | Social Impact Performance Bonds provide incentive and reward social investment.
General Barriers of Investment Climate | The "kiwi love affair with property investment" means not enough small private investment goes into growth business' let alone the social sector.
Impact
Provide empirical evidence of your proposed solution's success/impact at present. If your project is in the idea phase, please provide evidence that speaks to its potential impact
Current Spending by Example based loosely on UK Social Impact Bond project
Government Spending on Repeat Offenders
Group released from Jail after 1 year term 3,000
Percentage expected to return in 1 year 60%
Actual number of people expected to return 1,800
Cost per DAY to jail 1 repeat offender $300
Cost per YEAR to jail 1 repeat offenders $109,500
=======
Total Annual Cost to Jail 1800 repeat offenders` $197,100,000
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Goal of Social Investment Bank (SIB)
Decrease Repeat Offender by a total of: 10%
Number of people that do not return to jail 300
Saving Generated by intervention $32,850,000
Commitment by Government to Share Savings
50/50 on all savings create by SIB 50%
Savings generates for Government $16,425,000
=======
Financial Picture of Social Investment
Performance based Revenue from Govt $16,425,000
Private investment to achieve outcomes $7,500,000
Profit to Social Investors $8,925,000
How many firms do you expect to reach?
Initially the pilot project may include up to seven collaborative, contracted SME organisations. Provided outcomes are achieved we will then have additional funds available to invest with a growing number of social service & technology contractors.
What is the volume of private SME finance you aim to catalyze?
Pilot Round:$2,750,000
Corporate & Private Investors | $2,000,000
Charitable Trust & Foundations | $700,000
Individual Micro-Investment | $50,000
What time frame will be required to reach these targets?
It is hoped that bonds (bills &/or notes) could be available for investment beginning April 2012.
Does your solution seek to have an impact on public policy?
Yes
What would prevent your solution from being a success?
Critical Success Factors: Government Backing of Performance Bonds
It is potentially a high risk investment until such time as we can quantify (reduction in youth re-offending rates over 24 months) and attribute impact to our programmes.
I believe our local youth service providers are world class and that they already impact immensely upon youth offending. This project is an effort to re frame their success in a compelling enough way so as to:-
1) save & divert government spending on imprisonment toward preventative and rehabilitative community developed programmes
2) to provide incentive and reward for private investors and communities to invest in achieving their own social outcomes
This Entry is about (Issues)
Describe the social impact of your innovation. Please include both numbers and stories as evidence of this impact
The principal Youth Court judge says a report shows the justice system is failing the country's serious young offenders.
Source: Radio NZ News 16 February 2010
In general, offenders who commence their offending careers during their teenage years are considerably more likely to become persistent offenders, particularly if their initial crimes are ones that result in a prison sentence. For the 2002/03 prison release cohort:
• about half of the prisoners were first imprisoned under the age of 20.
• About 75% of prisoners were first imprisoned at the age of 24 or under.
• 57% of Maori prisoners were first imprisoned at the age of 19 or under.
• 80% of Maori prisoners were first imprisoned at the age of 24 or under
The link between early onset and later persistence is even more pronounced when the figures for convictions and community sentences is examined. The figures indicate that, of the 2002/03 prison release cohort
• about 68% were first convicted (not necessarily imprisoned) at the age of 19 or under.
• About 85% of offenders were first convicted at the age of 24 or under.
• 76% of Maori prisoners were first convicted before age 20
• 91% of Maori prisoners were first convicted by age 24 or under.
Re-offending rates and re-imprisonment rates have not improved and it is time for our communities to take a more active role. Keeping young people (under 24) out of prison through preventative and rehabilitative support is the debt we owe for having already failed them. It is worth so much more than millions we can save the taxpayer. Its is about family and community supported youth development
Sustainability
List all the funding sources that are required for the sustainability of this solution
Private Investment: Which could include a mix of Corporate Private Investors, Charitable Investments, Community Investment (societies trusts) Local Govt & Individual Micro Investors.
Demonstrate how your proposed solution has the capacity to graduate from dependence on public finance. What is the time frame?
The time frame measuring repeat offending in NZ is 12 & 24 months so it is at these points that our performance against benchmarks would be defined. The first set of Performance Bonds would be trialled from April 2012 - March 2014.
At this early stage of venture development we can only provide an indication based on our understanding of:
1) similar trials in the UK which suggest that given only a portion of the money saved by keeping people out of prison we can expand social impact and establish a high growth social enterprise.
2) Information available on adult offending and imprisonment
In NZ terms
Cost per prisoner per annum $90, 885
Average length of sentence 4 years
Average cost per person sentenced & imprisoned $363,540.
Re imprisonment rates:-
Within 12 months 27%
Within 24 months 36%
If there are 500 people released from NZ prisons statistics indicate re-imprisonment of 180 people within 24 months. 180 people equals a minimum quantifiable cost to community of < 65 million
If we can raise $2,750,000 and invest the majority of this capital in preventative and rehabilitative programmes that prevent 25 people from returning to prison then we reduce govt spending by $9,088,500.
If Govt. is willing to share savings on 50/50 basis then $4,544,250 would provide both ROI to investors as well as profit on which to build a self sustaining entity through which to support and expand social impact programmes.
The question here regards graduating from dependence on public finance, which I take to mean Public Sector/Govt finance?
This project is the first step towards Community Resilience vs Govt Dependence. It is a much needed option to the current status quo which is almost 100% reliant on Charity and Government Funding.
As a catalyst for action now, the Govt recently allowed for foreign corporate privatization of our prisons. While privatization may prove to help rehabilitate people it also removes accountability and responsibility for rehabilitation and reintegration even further from the local community? There is of course the potential to work together.
Demonstrate how your proposed solution will survive a potential loss of its largest private funding source
Without funding we can not expand social impact programmes, we can not initiate "by community for community" micro investment or develop this social investment model.
Without a large private funding body the current system remains. A few great organisations making a difference in peoples lives, unfortunately limited by the funding they can access from charity and government,awash in the rising tide of social problems.
Social Service providers will remain in competition with each other over a limited supply of funding. We propose instead a model that requires collaboration with access to funding on the basis of collective purpose and shared outcomes
Please tell us what kind of partnerships, if any, could be critical to the greater success and sustainability of your innovation
Government backing is critical in order to provide investment incentive & reward.
Private investment is critical in order to establish the investment vehicle and provide initial funding to social impact service providers.
Collaboration is fundamental.
Are there non-financial issues that could threaten the sustainability of your proposed solution?
Undoubtedly. Political, legal, social, cultural which is exactly why we work to research & plan development of this social enterprise.
As Aristotle says "...For the things we have to learn before we can do them, we learn by doing them..."
Please tell us if your proposed solution aims to scale up through a high growth sector, expand immediately to multiple sectors, and/or scale up geographically
We aim to trial the service here in Dunedin and when successful expand the funding/investment model throughout Aotearoa and to any other global communities that could benefit.
It is a model that can be applied as a public/private funding catalyst to address many different social & economic outcomes ~ from education, employment and health to aged care, environment and new enterprise.
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Comments
"For the things we have to learn before we can do them, we learn by doing them " ~ Aristotle
To the collaborative:
Ladies & gentlemen we have until the 25 August to continue refining this submission. I look forward to leveraging this Challenge to build a clearer, shared understanding about this project. There's questions to be answered who'd like to get the ball rolling on the constructive criticism?
To pay back investors without using public financing, a rehabilitation program would need to operate an SME that earned a profit.
In Seattle, Washington in the United States, there is a program called FareStart that provides food-service industry training through operating a restaurant, catering, a cafe and contract meals. They also provide job placement services.
http://www.farestart.org/
It doesn't have to be a food-service business. It could be an SME with a higher profit margin like home construction, related skilled trades and business skills.
If the SME is home construction, they could practice initially with building homes for Habitat for Humanity and then work on commercial projects.
http://www.habitat.org.nz/
Investors could get a share of the profits from commercial projects.
Thanks for your input Rene you are right social enterprise innovations, like those you suggest are important to the long term sustainability and growth of the social service sector.
I am aware that if not all, at least one of our social service collaborators does indeed run a growing number of social enterprises in order to create jobs for people and generate revenue.
Their innovations in youth development and social enterprise are award winning and I believe world class hence the drive to provide them additional funding - through a independent investment entity - in order for them to expand their social impact.
Given increased funding our non-profits will undoubtedly grow the profits of their social enterprises. However, any such profits belong to the social enterprise entity &/or the non-profit that established them.
We are looking to establish a sustainable and scalable funding model one which will leverage available public finances to provide incentive and reward for private investment in the social service sector. To clarify we propose:
I really appreciate your insight Rene and will look to clarify these points in our submission.
Kind Regards
Renee Lee
Hi Renee,
How long do you think it will take you to become a self-sustaining enterprise?
-Rachna
Hi Rachna,
In answer to how long? the only thing about which I can be certain is that it will most likely take longer than expected. Ideally, provided we set the right measures with which to quantify social impact & performance the new entity can be self-sustaining within three years. Potentially, high growth within five years.
In additional to the new entity we will be working with social service enterprises that may already or may not be self-sustaining. While it is not for us to manage the performance of the contracted programme providers it is hoped that additional funding may provide a catalyst for ongoing social innovations and the growth of sustainable social enterprises.
Effective collaboration is integral to the performance, sustainability and growth of this funding/investment model. While I can not be more specific I hope that I've addressed your question.
Kind Regards,
Renee Lee
Social Impact Bonds
"...it provides long term funds for promising ideas; it transfers risk to private capital markets; and it costs public money only if the scheme provides specific social benefits..."
A copy of the full article can be viewed here The Economist
Our work is informed by the innovative research and work undertaken by organisations such as:-
Thank you
Our ultimate outcome ~ the establishment of a social investment sector to support and develop self sustaining social enterprises could not be possible with out the work of our collaborative supported by the feedback, insight of those that I have shared our work with.
Family, friends, mentors and advisors. Inspiring, talented supportive people, catalysts of social impact in their own right including representatives of:-
* The Malcam Charitable Trust
* The Youth Wellness Trust
* The University oh Otago
* Otago Polytechnic
* Otago's Entrepreneur Community
* Anglican Family Care
* Methodist Mission here in Dunedin
* Fellow board members at Te Kupeka Umaka Maori Ki Araiteuru KUMA Southern Maori Business Network
* Fellow board members at Malcam Charitable Trust Foundation
* Kati Huirapa i Puketeraki
* Te Runanga o Otakau
* Te Runanga o Moeraki
* Te Runanga o Hokonui
* Otakau Maori Police Advisory Group
* A3Kaitiaki Ltd
* Dunedin City Council
* Dunedin National MP
* Deloitte Dunedin
* Community Economic Conference
* Waitakere Community Social Innovation Hub
* Nexx
* Chapman Tripp Lawyers
* Foresters Research
* Entrepreneurship101.org/
* The Young Foundation
"...Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has..." ~ Margret Meade
In a book titled 'The Genius in All of Us', author David Shenk talks about genetic research that shows how the expression of genes is changed by the environment.
By environment, he means anything that can result in a biological change in your body (e.g. stress hormones, other hormones, behavior of others towards you, etc.).
He asserts that, while there are differences in ability, few people test the limits of what their abilities are.
Genes influence rather than dictate. You have some control over the environment in which you live and the environment in which someone else lives.
"A trait emerges only from the interaction of gene and the environment." - Michael Meaney, Director of the Program for the Study of Genes, Behavior and the Environment, McGill University
http://neurology.mcgill.ca/meaney_m.html
"Biologists have come to realize that if one changes either the genes or the environment, the resulting behavior can be dramatically different." - Massimo Pigliucci, evolutionary ecologist, City University of New York
http://rationallyspeaking.org/
Putting offenders back into the same hostile environment will lower the success rate.
People have a choice about how they react to hostility but, at some point, a hostile environment can change someone on a biological level affecting the choices they make and their reaction times.
Soldiers who spend years in combat maintaining a hyper-vigilant state resulting in post-traumatic stress disorder is one example.
Do all these treatment programs just treat the offenders or is their some public education component? By public, I am referring to parents and the general public.
Those in government not understanding how the environment affects gene expression deciding what treatment programs to fund could adversely affect your success rate.
http://fora.tv/2010/03/18/The_Genius_in_All_of_Us_David_Shenk
One area where people exhibit the belief that abilities are fixed is learning.
Carol S. Dweck, a Stanford University psychologist, has shown that the belief that ability is predetermined is destructive when it comes to learning. She has also shown that changing this belief results in a different outcome.
Someone with this "fixed mindset" attributes difficulty learning a subject to ability being predetermined.
Someone with a "growth mindset" believes their abilities can be developed through study and practice and do not give up if they encounter difficulty learning a new subject.
http://www.brainology.us/page/create-growth-mindset-culture-and-increase...
http://www.opednews.com/articles/1/Renowned-Stanford-Psycholo-by-Joan-Br...
Kia Ora Rene
Am I correct to understand that you are raising the issue of how we will influence the environment (vs gene's:)of the people we want to help? As it is on that basis that I will address you question:-
"...Do all these treatment programs just treat the offenders or is there some public education component?..."
Unfortunately, we could never affect the social change we envision if our programmes were that narrowly focused. Our interests lie much more in prevention than cure, which is a challenge to quantify. Our social service providers already have a significant impact on the communities (environment) that our young people live in through programmes that are:-
Under the existing system social service providers are primarily reliant on Govt. funding which, as you suggest & by our logic, limits the potential scope and impact of their social work.
Hence the social investment model we are working on which seeks to raise private funding to compliment, expand and enrich existing programmes.
That said, you identify that influences upon the environment "...anything that can result in a biological[social] change..." can be attributed to a number of factors not necessarily within our locus of control.
Indeed one of the greatest challenges we face is in establishing quantifiable measure for impact & performance that we can prove are directly attributable to our social service programmes. Research is currently underway to help us understand what programmes have the most impact and what gaps need filling.
Any additional information you can suggest that might provide insight on the type of Key Performance Indicators (KPI's) that private prison operators work to, would be very helpful. I hear that private prison systems is a major growth industry in the US? Appreciate your feedback.
Kind Regards,
Renee Lee
If the general public has the belief that genes exclusively determine the traits someone has and that some people are violent (or more likely to engage in some other criminal behavior) and nothing can be done to change that, that segment of the population is written off as "criminal" and marginalized by not getting hired and being isolated socially.
Those beliefs contribute to the hostile environment the segment of the population considered "criminal" lives in.
Regardless of how the situation started, the general public ends up contributing to the problem they are trying to solve and not realizing changing their own behavior would increase the success rate of treatment programs (see (3) below).
There are several ways you can measure the effect of treatment programs:
(1) Carol S. Dweck's program to teach students that they have the potential to be successful academically in combination with an academic or vocational program would result in a set of skills that could be objectively measured.
Such a program in schools and prisons could be considered a form of prevention.
People who are successful at learning new skills can see they have options other than resorting to crime.
The rate at which students or offenders successfully complete training programs or graduate from school can be measured.
Given the current demographics of which ages commit crimes, you could measure whether that age distribution changes after students graduate from schools where treatment programs operated.
(2) Methamphetamine is a drug that can decrease the success rate at school and work.
The changes to the brain can last several years after using methamphetamine has stopped.
http://www.icjia.state.il.us/public/pdf/ResearchReports/METHAMPHETAMINE%...
University of Minnesota Impulse Control Disorders Clinic:
http://impulsecontroldisorders.org/
After drug treatment and (1), you could measure the rate at which offenders test positive for drugs.
After offenders have had some success learning new skills, you could measure the rate at which offenders test positive for drugs.
Since drugs manage to find their way into prisons, you could test the rate at which prisoners test positive for drugs before and after treatment programs.
You can measure the number of drug offenses of people who graduated from schools or completed prison sentences with treatment programs.
(3) You can measure the unemployment rate and income of offenders before and after treatment. Here is where the beliefs of employers can affect how successful your treatment program will be.
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