Surveying the SIB economy: Social impact bonds, “local” challenges, and shifting markets in urban social problems

ABSTRACT

Confronted with the challenge of how to address complex urban problems in a climate of fiscal austerity, many governments around the world have turned to a new funding tool: the social impact bond (SIB). Pioneered in the UK in 2010, SIBs are investment contracts in which investors offer upfront funding for preventative social programs, with government agreeing to repay the investment and provide a return if these programs meet specified outcomes. Though SIBs have been the focus of a growing policy and academic literature, little is known about the work of building the SIB market infrastructure, the actors performing this labor, and the challenges and struggles encountered along the way. Drawing from the results of a larger 3-year study of SIBs in Canada, the United States, and the UK, this article maps out the essential features of each respective “SIB economy” and examines how the unique struggles encountered in each context reflect key tensions between the “financial” and the “local”; between urban financial elites and the logics of risk/return, standardization, and scale; and the local nature, contexts, and contingencies of urban social problems and related markets in social and public services. The result is a different lens through which to evaluate the nature, limitations, and future of social impact bonds.

Acknowledgments

This article is based on a conference paper presented at “Social Finance, Impact Investing, and the Financialization of the Public Interest,” March 23-24, 2017, University of Hamburg. I thank Eve Chiapello, Lisa Knoll, Mildred Warner, and the three anonymous reviewers for their detailed comments on earlier drafts of this article. All errors and omissions are my own.

Notes

1. This basic model actually goes by a number of different names. Social impact bond is typically used in the UK and Canada, whereas pay-for-success is the preferred term in the United States. For the sake of clarity, social impact bond will be used throughout the article.

2. A handful of interviews were also conducted in the Canadian cities of Saskatoon and Ottawa.

3. These include (a) intermediary, (b) government, (c) investor, (d) provider, and (e) trust or foundation.

4. A successful offender reintegration program could yield benefits not only to the criminal justice system but also to health and employment, with the question being who should pay for these outcomes.

5. This refers to the financial district of London, the UK equivalent of Wall Street.

6. There is a much stronger tradition of using RCTs as an arbiter of program success in the United States. This is institutionalized within both foundations and government and is closely tied to the much more advanced “what works” and “evidence-based policymaking” agendas in the United States.

Additional information

Funding

This work was supported by the Social Sciences and Humanities Research Council of Canada (435-2016-1039).

Notes on contributors

James W. Williams

James W. Williams is an Associate Professor in the Department of Social Science at York University in Toronto, Canada. He has published extensively in the areas of financial crime and regulation as well as the financialization of food and agriculture. Williams is the recipient of a 3-year grant (2016–2019) from the Social Sciences and Humanities Research Council (SSHRC) to study the funding of social service nonprofits in Canada, the United States, and UK and the viability of alternative models such as social impact bonds.