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Financial innovation with a social purpose: the growth of Social Impact Bonds

In: Research Handbook of Investing in the Triple Bottom Line

Author

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  • Frédéric de Mariz
  • José Roberto Ferreira Savoia

Abstract

The UN’s Sustainable Development Goals, signed in 2015, call for a closer collaboration between the public and private sectors to solve social and environmental issues. We analyze the emergence of Social Impact Bonds (SIBs) – innovative financial instruments that join private risk-taking with public funding in a pay-for-outcome structure. SIBs were launched in 2010 in the UK and bridge the gap between private capital markets and public agencies to deliver a social outcome. After taking stock of the existing literature and lessons learned from more than sixty existing SIBs. Our contribution consists in an in-depth analysis of the financial structuring of SIBs, a theme not well covered in the literature. We found that financial structuring involves four key steps: legal structure, definition of the desired risk-return-impact, placement of the SIB and governance. We also make four recommendations to grow the sector, consisting in the creation of SIB Funds, the wide dissemination of knowledge, a standardization in processes and the definition of favorable regulations.

Suggested Citation

  • Frédéric de Mariz & José Roberto Ferreira Savoia, 2018. "Financial innovation with a social purpose: the growth of Social Impact Bonds," Chapters, in: Sabri Boubaker & Douglas Cumming & Duc K. Nguyen (ed.), Research Handbook of Investing in the Triple Bottom Line, chapter 13, pages 292-313, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:17813_13
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    Cited by:

    1. Antaya March & Tegan Evans & Stuart Laing & Jeremy Raguain, 2024. "Evaluating the World’s First Sovereign Blue Bond: Lessons for Operationalising Blue Finance," Commodities, MDPI, vol. 3(2), pages 1-17, April.

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