Who will invest in the new Social Impact Bonds?

In the past week the Government has shown more commitment to using innovative funding models with the announcement of four new Social Impact Bonds.  This has made us think about whether the funds raised for the bonds will bring in new capital, or whether investment will come from the same Trusts, Foundations and Philanthropists that are already committed to tackling social problems. 

The notion that bonds can bring significant additional resource into the social sector is only applicable if new, private investors come on board.  If investors are solely philanthropic, the opportunity to raise new capital may not be fully realised.  If this were to be the case, a major consideration for the sector is whether – given the bonds allow the government to transfer all risk to the investor – is it sensible or indeed fair to deploy our precious supply of philanthropic capital in such a way?

Government hopes the trial could raise up to £40 million of investment – none of which will be returned if targets are missed.  Who will be investing in the four new bonds is yet to be revealed, but we hope to see some new, private investors on the list.