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Social impact bonds hit the retail market

An unusual opportunity has arisen for 'ethical' investors in the UK
February 8, 2013

An unusual opportunity has arisen for 'ethical' investors, or at least those with a degree of civic consciousness. UK retail investors now have the chance to make an investment through a social impact bond (SIB). These performance-based instruments are used to fund a range of remedial and social care services, and they have rapidly gained acceptance in other parts of the world where municipal budgets are under pressure, most notably the US and Australia.

Allia, a social investment organisation, has just launched the Future for Children Bond which will invest in the social impact bond (SIB) for Essex County Council (ECC), which is being used to fund intensive support programmes for 380 children aged 11-16 who are at risk of going into care. Aside from the social benefits that can accrue from these types of programmes, if successful, the utilisation of SIBs could substantially reduce the ECC's bill for welfare provision. The success of the SIB - and the subsequent level of return to bondholders - will be measured by the reduction in days spent in care by the children, improved school outcomes, and reduced levels of reoffending. Allia is offering £1m of bonds with a minimum investment of £15,000 for an eight-year term. The minimum return to investors will be 100 per cent of funds invested.