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Finance that turns people’s lives around: social impact bonds



Blending social investment, public funding and social enterprise, social impact bonds are a groundbreaking way of raising private funds to finance essential public services.

Public contracts are awarded on a payment-by-results basis, so investors are only rewarded if a set of agreed social outcomes are met. At a time when there’s huge pressure on the public purse, they offer a mechanism through which we can mobilise private investment to help tackle social issues affecting the UK today, harnessing the expertise of charities and social enterprises to help some of society’s most vulnerable groups.

Will Ferguson, communications officer at Triodos Bank, delves deep into this form of financing and explains why for investors, it could bring about potentially lucrative social and financial results.

This article was first published in The Colour of Money, Triodos Bank’s customer magazine. You can subscribe for free here.

Payment by results

Britain is blazing a trail for a new type of finance deal, which raises private sector social investment to help deliver positive social impact to disadvantaged groups. Crucially, when public funds are stretched during hard times, they unlock private finance and put it to work tackling some of our most pressing social issues – with government only paying when progress is delivered.

Social impact bonds (SIBs) are an innovative way of raising private sector funds to support a social need – from reintegrating ex-prisoners into society to helping vulnerable young adults find employment or education – which links investors’ return to specific social outcomes.

If, and only if, the targeted social outcomes are met, investors receive payments from the government which repay the initial investment plus a financial return. This potential return is what’s attractive to socially motivated investors, making it possible to raise finance.

SIBs change the focus of service provision from what has been done to what is achieved

SIBs change the focus of service provision from what has been done to what is achieved. Rather than focusing on inputs (for instance, the number of doctors) or outputs (the number of operations), SIBs are based on outcomes (improved health).

The programmes they finance are often in areas where prevention and early intervention can prevent strain on other public services, amounting to considerable cost savings over the long-term.

Helping a drug user kick the habit, for instance, will mean a significant reduction on the strain they would otherwise place on the NHS, police and other public services. In this way SIBs can theoretically pay for the return to successful investors several times over.

Capital injection

This model provides a number of advantages over conventional public sector funding. Perhaps the most significant of these is that risk is transferred from the public sector to the investors.

If the outcomes are not met, government payments are not made – ensuring the taxpayer only pays for services that have been delivered as agreed. And because investors only receive payments from the government if the social outcomes are met, there’s a real incentive for them to support the service providers to achieve the results.

Attracting private investment provides working capital at the start of the programme, which pays for a range of interventions to improve the social outcomes.

Access to this funding up front means that delivery organisations can put in place the facilities and infrastructure they need to meet the outcomes – again without having to draw on increasingly limited public funds. It also opens up the commissioning of public services to a wider range of organisations, including those which have the skills and expertise to deliver the outcomes, but perhaps lack the capital needed to develop their infrastructure.

Street impact

Triodos Bank is one of a small group of social investment specialists that are pioneering the new model. Its corporate finance team completed two payment-by-results projects last year.

In May it launched the Triodos New Horizons programme with youth service provider Greater Merseyside Connexions Partnership. The scheme helps young people in Merseyside, many of whom are young offenders, have learning disabilities, or are in or leaving care.

And in December, Triodos was instrumental in an innovative social investment bond, designed to alleviate homelessness in London. The Street Impact programme is the result of a partnership between the Greater London Authority, homeless charity St Mungo’s and a group of socially motivated investors.

St Mungo’s will deliver the Street Impact programme with the aim of helping 415 named individuals who are sleeping rough, or who have slept rough, to sustain their lives off the streets. Each has a history which may involve prolonged or repeat episodes of rough sleeping as well as complex issues around alcohol, drug use, mental illness and physical health.

To help them off the streets for good, St Mungo’s will provide focused support tailored for each individual. This may include support with finding stable accommodation or with a tenancy, and linking in with better healthcare as well as access to skills, work and training opportunities that will help them successfully maintain a home and a better quality of life.

The target outcomes for this particular SIB include reducing rough sleeping by the individuals, achieving sustained accommodation, a reduction in visits to hospitals’ accident and emergency departments, supporting people into volunteering or work, or reconnections overseas for foreign nationals.

Because the individuals targeted by the Street Impact programme are named and known to the authorities, it’s possible to measure these outcomes in a meaningful way using information provided by the relevant public services. The programme recognises that these services will already have very good working relationships with most of these 415 individuals.

Street Impact is not looking to replace these but to honour and support current programmes while filling any gaps with targeted personal support to help people really sustain their recovery.

We’re doing this because we want to help people rebuild their lives away from the streets”, says Mike McCall, executive director of operations at St Mungo’s.

The social impact bond is a new way of working for us but we have been helping people with complicated alcohol, drug, mental or physical health histories to get their lives back on track for many years and we know that personalised, long-term support is what makes the difference. This is an opportunity to really make an impact for some of the most disadvantaged people in London.”

Impact investors

SIBs have demonstrated that it’s possible to raise private sector finance to support public needs

The three-year contract was commissioned by the Mayor of London’s office and will enable the St Mungo’s to earn up to £2.4m. To enable the cost of programme delivery, the Triodos corporate finance team raised £650,000 upfront working capital needed by St Mungo’s from social investors CAF Venturesome and several socially driven investors.

London Mayor Boris Johnson said, “The commitment shown by Triodos Corporate Finance is a fantastic example of a private company working with the voluntary sector and not-for-profit CAF Venturesome to help get people off the streets and into the services they need to turn their lives around.

As we push on with the challenge of ending rough sleeping in the capital, it will be forward-thinking innovative partnerships such as this which will play an increasingly important role in achieving this goal.”

With few SIBs up and running, and none yet to run their course, they’ve yet to prove they can deliver the social outcomes. They’re certainly not a panacea for the issues affecting our society, and are not without potential problems of their own – we’ve seen, for instance, how targets in the NHS and education have been met while the service has suffered as a result.

But, managed correctly, and focusing on early intervention, SIBs could be a way of getting more from our public spending, breeding efficiency rather than cutting back services.

SIBs have also demonstrated that it’s possible to raise private sector finance to support public needs. At a time when the public funds are stretched, the reality is that this money would not otherwise be available.

Instead, SIBs provide a mechanism through which actively addresses social problems and helps to turn people’s lives around.

Further reading:

£14m Social Impact Bond fund launched

Impact investment to grow by £1bn in 2013

‘Good Investor’ guide launched for socially-motivated investors

What kind of investor are you?

The Guide to Sustainable Investment 2013


How Going Green Can Save A Company Money



going green can save company money
Shutterstock Licensed Photot - By GOLFX

What is going green?

Going green means to live life in a way that is environmentally friendly for an entire population. It is the conservation of energy, water, and air. Going green means using products and resources that will not contaminate or pollute the air. It means being educated and well informed about the surroundings, and how to best protect them. It means recycling products that may not be biodegradable. Companies, as well as people, that adhere to going green can help to ensure a safer life for humanity.

The first step in going green

There are actually no step by step instructions for going green. The only requirement needed is making the decision to become environmentally conscious. It takes a caring attitude, and a willingness to make the change. It has been found that companies have improved their profit margins by going green. They have saved money on many of the frivolous things they they thought were a necessity. Besides saving money, companies are operating more efficiently than before going green. Companies have become aware of their ecological responsibility by pursuing the knowledge needed to make decisions that would change lifestyles and help sustain the earth’s natural resources for present and future generations.

Making needed changes within the company

After making the decision to go green, there are several things that can be changed in the workplace. A good place to start would be conserving energy used by electrical appliances. First, turning off the computer will save over the long run. Just letting it sleep still uses energy overnight. Turn off all other appliances like coffee maker, or anything that plugs in. Pull the socket from the outlet to stop unnecessary energy loss. Appliances continue to use electricity although they are switched off, and not unplugged. Get in the habit of turning off the lights whenever you leave a room. Change to fluorescent light bulbs, and lighting throughout the building. Have any leaks sealed on the premises to avoid the escape of heat or air.

Reducing the common paper waste

paper waste

Shutterstock Licensed Photo – By Yury Zap

Modern technologies and state of the art equipment, and tools have almost eliminated the use of paper in the office. Instead of sending out newsletters, brochures, written memos and reminders, you can now do all of these and more by technology while saving on the use of paper. Send out digital documents and emails to communicate with staff and other employees. By using this virtual bookkeeping technique, you will save a bundle on paper. When it is necessary to use paper for printing purposes or other services, choose the already recycled paper. It is smartly labeled and easy to find in any office supply store. It is called the Post Consumer Waste paper, or PCW paper. This will show that your company is dedicated to the preservation of natural resources. By using PCW paper, everyone helps to save the trees which provides and emits many important nutrients into the atmosphere.

Make money by spreading the word

Companies realize that consumers like to buy, or invest in whatever the latest trend may be. They also cater to companies that are doing great things for the quality of life of all people. People want to know that the companies that they cater to are doing their part for the environment and ecology. By going green, you can tell consumers of your experiences with helping them and communities be eco-friendly. This is a sound public relations technique to bring revenue to your brand. Boost the impact that your company makes on the environment. Go green, save and make money while essentially preserving what is normally taken for granted. The benefits of having a green company are enormous for consumers as well as the companies that engage in the process.

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5 Easy Things You Can Do to Make Your Home More Sustainable




sustainable homes
Shutterstock Licensed Photot - By Diyana Dimitrova

Increasing your home’s energy efficiency is one of the smartest moves you can make as a homeowner. It will lower your bills, increase the resale value of your property, and help minimize our planet’s fast-approaching climate crisis. While major home retrofits can seem daunting, there are plenty of quick and cost-effective ways to start reducing your carbon footprint today. Here are five easy projects to make your home more sustainable.

1. Weather stripping

If you’re looking to make your home more energy efficient, an energy audit is a highly recommended first step. This will reveal where your home is lacking in regards to sustainability suggests the best plan of attack.

Some form of weather stripping is nearly always advised because it is so easy and inexpensive yet can yield such transformative results. The audit will provide information about air leaks which you can couple with your own knowledge of your home’s ventilation needs to develop a strategic plan.

Make sure you choose the appropriate type of weather stripping for each location in your home. Areas that receive a lot of wear and tear, like popular doorways, are best served by slightly more expensive vinyl or metal options. Immobile cracks or infrequently opened windows can be treated with inexpensive foams or caulking. Depending on the age and quality of your home, the resulting energy savings can be as much as 20 percent.

2. Programmable thermostats

Programmable thermostats

Shutterstock Licensed Photo – By Olivier Le Moal

Programmable thermostats have tremendous potential to save money and minimize unnecessary energy usage. About 45 percent of a home’s energy is earmarked for heating and cooling needs with a large fraction of that wasted on unoccupied spaces. Programmable thermostats can automatically lower the heat overnight or shut off the air conditioning when you go to work.

Every degree Fahrenheit you lower the thermostat equates to 1 percent less energy use, which amounts to considerable savings over the course of a year. When used correctly, programmable thermostats reduce heating and cooling bills by 10 to 30 percent. Of course, the same result can be achieved by manually adjusting your thermostats to coincide with your activities, just make sure you remember to do it!

3. Low-flow water hardware

With the current focus on carbon emissions and climate change, we typically equate environmental stability to lower energy use, but fresh water shortage is an equal threat. Installing low-flow hardware for toilets and showers, particularly in drought prone areas, is an inexpensive and easy way to cut water consumption by 50 percent and save as much as $145 per year.

Older toilets use up to 6 gallons of water per flush, the equivalent of an astounding 20.1 gallons per person each day. This makes them the biggest consumer of indoor water. New low-flow toilets are standardized at 1.6 gallons per flush and can save more than 20,000 gallons a year in a 4-member household.

Similarly, low-flow shower heads can decrease water consumption by 40 percent or more while also lowering water heating bills and reducing CO2 emissions. Unlike early versions, new low-flow models are equipped with excellent pressure technology so your shower will be no less satisfying.

4. Energy efficient light bulbs

An average household dedicates about 5 percent of its energy use to lighting, but this value is dropping thanks to new lighting technology. Incandescent bulbs are quickly becoming a thing of the past. These inefficient light sources give off 90 percent of their energy as heat which is not only impractical from a lighting standpoint, but also raises energy bills even further during hot weather.

New LED and compact fluorescent options are far more efficient and longer lasting. Though the upfront costs are higher, the long term environmental and financial benefits are well worth it. Energy efficient light bulbs use as much as 80 percent less energy than traditional incandescent and last 3 to 25 times longer producing savings of about $6 per year per bulb.

5. Installing solar panels

Adding solar panels may not be the easiest, or least expensive, sustainability upgrade for your home, but it will certainly have the greatest impact on both your energy bills and your environmental footprint. Installing solar panels can run about $15,000 – $20,000 upfront, though a number of government incentives are bringing these numbers down. Alternatively, panels can also be leased for a much lower initial investment.

Once operational, a solar system saves about $600 per year over the course of its 25 to 30-year lifespan, and this figure will grow as energy prices rise. Solar installations require little to no maintenance and increase the value of your home.

From an environmental standpoint, the average five-kilowatt residential system can reduce household CO2 emissions by 15,000 pounds every year. Using your solar system to power an electric vehicle is the ultimate sustainable solution serving to reduce total CO2 emissions by as much as 70%!

These days, being environmentally responsible is the hallmark of a good global citizen and it need not require major sacrifices in regards to your lifestyle or your wallet. In fact, increasing your home’s sustainability is apt to make your residence more livable and save you money in the long run. The five projects listed here are just a few of the easy ways to reduce both your environmental footprint and your energy bills. So, give one or more of them a try; with a small budget and a little know-how, there is no reason you can’t start today.

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