The UK has long been a leader in both the development of social impact bonds and the adoption of impact investing as a tool to promote economic and social progress. In recent years, the country has seen a rapid increase in the number of organisations and initiatives using such instruments to support community development. In this article, we will explore the key aspects of social impact bonds and impact investing, and how they are being used to drive progress in UK communities.
What Are Social Impact Bonds?
Social impact bonds are a type of financial instrument that involves investors fronting the money to fund certain social projects. These projects are in a variety of fields, such as health, education, corrections, and urban development, with the aim of achieving measurable social outcomes. In return for their investment, the investors receive a return based on the success or failure of the project, typically from a government entity. Social impact bonds have been used to fund various projects around the world, including a project to reduce youth recidivism in New York State and an innovative project to tackle homelessness in Birmingham.
What Is Impact Investing?
Impact investing is an emerging form of finance that seeks to generate positive social or environmental outcomes alongside their financial returns. It is a type of socially responsible investment which has grown in popularity in recent years, with a range of firms now offering a variety of such investments, such as funds targeting affordable housing or clean energy. The impact investing industry in the UK is still relatively small but is rapidly growing, with a number of dedicated funds now available to investors, such as the Ethex Impact Investor Bond Fund, the Big Society Capital’s Social Impact Bond Fund, and the Global Impact Investing Network’s (GIIN) Impact Investing Network.
How Are Social Impact Bonds and Impact Investing Helping Foster Community Development in the UK?
The UK has seen a surge in the use of social impact bonds and impact investing in recent years, as these instruments have been increasingly viewed as high-impact tools for driving progress in UK communities.
One prominent example is the Social Impact Bond (SIB) developed in Peterborough, which used money from social investors to fund a range of projects designed to reduce reoffending. The SIB was so successful it was extended into a second phase and is now viewed as the benchmark for SIBs around the world.
Impact investing has also been used to support a range of initiatives, such as tackling youth unemployment or supporting small businesses. In particular, funds such as the Ethex Impact Investor Bond Fund or the Big Society Capital’s Social Impact Bond Fund have been used to finance projects that promote job creation and entrepreneurship in the UK.
Social impact bonds and impact investing are increasingly viewed as powerful tools for driving progress and supporting community development in the UK. These instruments are helping to fund projects focused on tackling pressing social problems, such as unemployment, homelessness, and recidivism. As more investors become aware of the potential of such investments, it is likely that we will see an increased number of initiatives and projects arising from these vehicles in the years to come.