A Responsibility to Profit? Social Impact Bonds as a Form of “Humanitarian Finance”

ABSTRACT

Recent years have seen the emergence of social impact bonds (SIBs), geared toward funding social interventions while earning financial returns. The article proposes to conceive of SIBs as a practice of contemporary humanitarianism. In an effort to trace the politics of such humanitarian finance, the article analyzes a SIB that sought to improve outcomes for homeless persons in London. It argues that, instead of relying on sentimental stories, the project was animated by a results-oriented, technocratic culture geared at solving social problems (rather than just alleviating suffering). Its mode of reasoning, however, directed attention to highly vulnerable individuals – and away from the structural conditions that perpetuate poverty. But at the same time, the scheme reworked exclusionary constellations “from within.” Thus, such humanitarian finance simultaneously performs a relation of inequality and a relation of assistance. The article makes the case for an ongoing engagement with both dynamics.

Acknowledgments

Previous drafts of this article were presented at the following conferences: “Everyday Humanitarianism: Ethics, Affects and Practices,” London School of Economics and Political Science, April 2016; “International Social Innovation Research Conference,” Glasgow Caledonian University, September 2016; “Interdisciplinary Perspectives on Global Finance: Taking Stock,” University of Bremen, September 2016; “Selling (critical) finance: Getting your work published,” University of Warwick, September 2018. I would like to thank the organizers and those in attendance for questions and crucial feedback in the development of the argument, especially Natalia Besedovsky, Pamela DeLargy, Pascal Dey, Manolis Kalaitzake, Philip Mader, Christopher May, Gary Robinson, and Marcus Wolf. The piece has also greatly benefited from discussions with James Brassett, Fabian Jucker, Max Montgomery, and Lena Rethel. I am also very grateful to the editors of this Special Issue, Lilie Chouliaraki and Lisa Ann Richey, and the two anonymous reviewers who commented on the article and helped me sharpen the analysis. Any mistakes or errors belong to me.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ Lester M. Salamon, Leverage for Good: An Introduction to the New Frontiers of Philanthropy and Social Investment (Oxford, NY: Oxford University Press, 2014), pp. 20–21; for an exhaustive discussion of “social value” see Emily Barman, Caring Capitalism: The Meaning and Measure of Social Value (New York, NY: Cambridge University Press, 2016), pp. 217–20.

² Jeremy Balkin, Investing with Impact: Why Finance is a Force for Good (Brookline, MA: Bibliomotion, 2015); Anke Schwittay, New Media and International Development: Representation and Affect in Microfinance (London, UK: Routledge, 2014).

³ Katharyne Mitchell, “‘Factivism’: A New Configuration of Humanitarian Reason,” Geopolitics 22:1 (2017), p. 123.

⁴ Paul Mason, Richard Lloyd, and Fleur Nash, Qualitative Evaluation of the London Homelessness Social Impact Bond (SIB): Final Report (London, UK: Department for Communities and Local Government, 2017), p. 1, available online at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/658921/Qualitative_Evaluation_of_the_London_Homelessness_SIB.pdf.

⁵ Lilie Chouliaraki, The Ironic Spectator: Solidarity in the Age of Post-Humanitarianism (Hoboken, NJ: Wiley, 2013), p. 192.

⁶ Mason, Lloyd, and Nash, Final Report, p. 23.

⁷ Ibid., 85.

⁸ Annie Dear, Alisa Helbitz, Rashmi Khare, Ruth Lotan, Jane Newman, Gretchen Crosby Sims, and Alexandra Zaroulis, Social Impact Bonds: The Early Years (London, UK: Social Finance, 2016), pp. 80–88.

⁹ Compare Ann Griffiths and Christian Meinicke, Introduction to Social Impact Bonds and Early Intervention (London, UK: Early Intervention Foundation, 2014), p. 6, available online at: http://www.eif.org.uk/wp-content/uploads/2014/04/Social-Investment-Report-final-for-publication-04-Apr.pdf.

¹⁰ Compare Emily Gustafsson-Wright, Sophie Gardiner, and Vidya Putcha, The Potential and Limitations of Impact Bonds: Lessons from the First Five Years of Experience Worldwide (Washington, DC: The Brookings Institution, 2015), p. 63, available online at: https://www.brookings.edu/wp-content/uploads/2016/07/Impact-Bondsweb.pdf.

¹¹ Gabriel Kasper and Justin Marcoux, Case Studies in Funding Innovation (New York, NY: Deloitte University Press, 2015), available online at: https://www2.deloitte.com/content/dam/Deloitte/de/Documents/Innovation/Funding-Innovation.pdf.

¹² Compare Alec Fraser, Stefanie Tan, Mylene Lagarde, and Nicholas Mays, “Narratives of Promise, Narratives of Caution: A Review of the Literature on Social Impact Bonds,” Social Policy & Administration 52:1 (2018), pp. 4–28; Gustafsson-Wright, Gardiner, and Putcha, Potential and Limitations of Impact Bonds, pp. 47–51.

¹³ “Of Humanitarian Bondage: A New Bond Taps Private Money for Aid Projects in War Zones,” The Economist (September 17, 2017), available online at: https://www.economist.com/news/finance-and-economics/21728627-social-investors-aid-donors-and-humanitarian-organisations-join-forces-new-bond.

¹⁴ Wolfgang Spiess-Knafl and Barbara Scheck, Impact Investing: Instruments, Mechanisms and Actors (New York, NY: Palgrave Macmillan, 2017), p. 90.

¹⁵ David Floyd, Social Impact Bonds: An Overview of the Global Market for Commissioners and Policymakers (London, UK: Centre for Public Impact, 2017), p. 3.

¹⁶ Mitchell, “Factivism,” p. 124.

¹⁷ Balkin, Investing with Impact; Alex Nicholls, “SIBs May be Overhyped but their Focus on Outcomes is a Vital Policy Innovation,” The Policy Innovation Research Unit (PIRU) (January 19, 2017), available online at: http://blogs.lshtm.ac.uk/piru/2017/01/19/sibs-may-be-overhyped-but-their-focus-on-outcomes-is-a-vital-policy-innovation; Robert J. Shiller, Finance and the Good Society (Princeton, NJ: Princeton University Press, 2013).

¹⁸ The Economist, “Faith, Hope and Impact; The Catholic Church’s Investments,” The Economist (August 19, 2017), available online at: https://www.economist.com/finance-and-economics/2017/08/19/the-catholic-church-becomes-an-impact-investor.

¹⁹ Natascha van der Zwan, “Making Sense of Financialization,” Socio-Economic Review 12:1 (2014), pp. 99–129.

²⁰ Christine Cooper, Cameron Graham, and Darlene Himick, “Social Impact Bonds: The Securitization of the Homeless,” Accounting, Organizations and Society 55, pp. 63–82; Emma Dowling, “In the Wake of Austerity: Social Impact Bonds and the Financialisation of the Welfare State in Britain,” New Political Economy 22:3 (2017), pp. 294–310.

²¹ Robert Ogman, “Social Impact Bonds: A ‘Social Neoliberal’ Response to the Crisis?” in Barbara Schönig and Sebastian Schipper (eds), Urban Austerity: Impacts of the Global Financial Crisis on Cities in Europe (Berlin, DE: Theater der Zeit, 2016), pp. 58–69; compare Malcolm Campbell-Verduyn, Professional Authority After the Global Financial Crisis: Defending Mammon in Anglo-America (Cham, CH: Springer International Publishing, 2017), pp. 138–39.

²² Compare James Brassett and Chris Clarke, “Performing the Sub-Prime Crisis: Trauma and the Financial Event,” International Political Sociology 6:1 (2012), pp. 4–20.

²³ Viviana A. Zelizer, Economic Lives: How Culture Shapes the Economy (Princeton, NJ: Princeton University Press, 2010), pp. 153, 200–01.

²⁴ Marion Fourcade and Kieran Healy, “Moral Views of Market Society,” Annual Review of Sociology 33:1 (2007), pp. 299–300.

²⁵ Marieke de Goede, Virtue, Fortune, and Faith: A Geneaology of Finance (Minneapolis, MN: University of Minnesota Press, 2005), pp. xxii, 7.

²⁶ Mason, Lloyd, and Nash, Final Report, p. 16.

²⁷ Jason Glynos and David R. Howarth, Logics of Critical Explanation in Social and Political Theory (London, UK; New York, NY: Routledge, 2007).

²⁸ Dave Hill, “The Rise and Rise of Rough Sleeping in London,” The Guardian (December 11, 2012), available online at: https://www.theguardian.com/politics/davehillblog/2012/dec/11/boris-johnson-rough-sleeping-rising-in-london; the term “rough sleeping” refers to street homelessness.

²⁹ DCLG, No One Left Out – Communities Ending Rough Sleeping (Wetherby, UK: Communities and Local Government Publications, 2008), p. 4.

³⁰ HM Government, Putting the Frontline First: Smarter Government (London, UK: HM Government, 2009), p. 32.

³¹ Mason, Lloyd, and Nash, Final Report, p. 16; the DCLG was renamed “Ministry of Housing, Communities and Local Government” in 2018.

³² Paul Mason, Richard Lloyd, Meagan Andrews, and Nick Henry, Learning from the Development and Commissioning of the London Homelessness SIB – A Summary Report from the Qualitative Evaluation (Birmingham, UK: ICF Consulting Services), pp. 8–9.

³³ For a detailed overview of the results see Mason, Lloyd, and Nash, Final Report, pp. 38–77.

³⁴ Ibid., 13.

³⁵ Thus, the financial return was not contingent on the project’s outcomes. The only performance-dependent payment was agreed with Big Issue Invest, but on top of a fixed rate. Compare DCLG, Qualitative Evaluation of the London Homelessness Social Impact Bond: First Interim Report (London, UK: DCLG, 2014), pp. 50–52, available online at: https://www.gov.uk/government/publications/qualitative-evaluation-of-the-london-homelessness-social-impact-bond-first-interim-report.

³⁶ Interviewees made contradictory statements regarding the final profit earned by the service providers but there decidedly was a surplus for both organizations.

³⁷ Mason, Lloyd, and Nash, Final Report, pp. 26–28.

³⁸ Ibid., 26–37.

³⁹ Ibid., 14–15.

⁴⁰ Phone interview with a former navigator (October 10, 2017).

⁴¹ DCLG, The Impact Evaluation of the London Homelessness Social Impact Bond (London, UK: DCLG, 2017), p. 34, available online at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/658881/SIB_Impact_evaluation_report.pdf.

⁴² Mason, Lloyd, and Nash, Final Report, p. 7.

⁴³ Interview with one of the evaluators of the SIB (September 27, 2017).

⁴⁴ Mason, Lloyd, and Nash, Final Report, pp. 38–77.

⁴⁵ DCLG, Qualitative Evaluation of the London Homelessness Social Impact Bond: Second Interim Report (London, UK: DCLG, 2015), p. 3, available online at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/658881/SIB_Impact_evaluation_report.pdf.

⁴⁶ In the end, the "better health management" target could not be assessed because the NHS retracted a previous data sharing agreement, compare Mason, Lloyd, and Nash, Final Report, p. 29.

⁴⁷ Interview with a Senior Executive of one of the service provider organizations (October 2, 2017).

⁴⁸ Interview with a former DCLG Commissioner (September 8, 2017).

⁴⁹ Interview with a Service Development Manager of one of the service provider organizations (September 5, 2017).

⁵⁰ Interview with an individual who acted both as an investor and as an advisor to one of the institutional investors (November 20, 2017).

⁵¹ Katy Pillai, “Investors Need Rigorous Assessments of Social Impact Bonds,” The Policy Innovation Research Unit (PIRU) (April 30, 2018), available online at: https://blogs.lshtm.ac.uk/piru/2018/04/30/investors-need-rigorous-assessments-of-social-impact-bonds.

⁵² Interview with an Investment Director of one of the institutional investors (November 1, 2017).

⁵³ Interview with a Service Development Manager of one of the service provider organizations (September 5, 2017).

⁵⁴ Ibid.

⁵⁵ Interview with a former DCLG Commissioner (September 8, 2017).

⁵⁶ Mason, Lloyd, and Nash, Final Report, pp. 58–60.

⁵⁷ Interview with a former DCLG Commissioner (September 8, 2017).

⁵⁸ Interview with a Service Development Manager of one of the service provider organizations (September 5, 2017).

⁵⁹ Interview with an individual who acted both as an investor and as an advisor to one of the institutional investors (November 20, 2017).

⁶⁰ Interview with a Service Development Manager of one of the service provider organizations (September 5, 2017).

⁶¹ DCLG, Second Interim Report, p. 7.

⁶² Interview with a former DCLG Commissioner (September 8, 2017).

⁶³ Jack Hunter and Clare McNeil, Breaking Boundaries: Towards a “Troubled Lives” Programme for People Facing Multiple and Complex Needs (London, UK: Institute for Public Policy Research, 2015), p. 29, available online at: http://www.ippr.org/files/publications/pdf/breaking-boundaries_Sep2015.pdf?noredirect=1.

⁶⁴ DCLG, Second Interim Report, p. 8.

⁶⁵ Didier Fassin, “Humanitarianism as a Politics of Life,” Public Culture 19:3 (2007), p. 500.

⁶⁶ Mason, Lloyd, and Nash, Final Report, p. 23.

⁶⁷ Comptroller and Auditor General, Homelessness (London, UK: National Audit Office, 2017), p. 7, available online at: https://www.nao.org.uk/wp-content/uploads/2017/09/Homelessness.pdf.

⁶⁸ Pat McAllister, Edward Shepherd, and Peter Wyatt, “Policy Shifts, Developer Contributions and Land Value Capture in London 2005–2017,” Land Use Policy 78 (2018), pp. 316–26.

⁶⁹ Maurice Stierl, Migration Resistance as Border Politics: Counter Imaginaries of Europe (Warwick, UK: Doctoral Thesis, Warwick University, 2014), p. 164, available online at: http://wrap.warwick.ac.uk/66963.

⁷⁰ Cooper, Graham, and Himick, “Social Impact Bonds,” p. 70.

⁷¹ See also Zenia Kish and Justin Leroy Kish, “Bonded Life,” Cultural Studies, 29:5–6 (2015), pp. 637–39.

⁷² DCLG, First Interim Report, p. 1.

⁷³ Corporate Watch, The Round-up: Rough Sleeper Immigration Raids and Charity Collaboration (London, UK: Corporate Watch, 2017), available online at: https://corporatewatch.org/wp-content/uploads/2017/03/CW%20rough%20sleepers%20investigation.pdf.

⁷⁴ Compare John Picton, “Making Profit From Rough Sleepers: The Perils of Social Investment,” The Guardian (May 10, 2018), available online at: https://www.theguardian.com/voluntary-sector-network/2018/may/10/making-profit-rough-sleepers-perils-social-investment; Diane Taylor, “Charities Referring Rough Sleepers to Immigration Enforcement Teams,” The Guardian (March 7, 2017), available online at: https://www.theguardian.com/society/2017/mar/07/charities-giving-home-office-details-of-rough-sleepers-says-report.

⁷⁵ Didier Fassin, Humanitarian Reason: A Moral History of the Present (Berkeley, CA: University of California Press, 2012), p. 244.

⁷⁶ Alexander De Waal, Famine Crimes: Politics and the Disaster Relief Industry in Africa (Oxford, UK: James Currey, 1997), p. 6.

⁷⁷ Interview with a service Development Manager of one of the service provider organizations (September 5, 2017).

⁷⁸ Allan Pred and Michael Watts, Reworking Modernity: Capitalisms and Symbolic Discontent (New Brunswick, NJ: Rutgers University Press, 1992).

⁷⁹ Cindi Katz, Growing up Global: Economic Restructuring and Children’s Everyday Lives (Minneapolis, MN: University of Minnesota Press, 2004), p. 247.

⁸⁰ Cited in DCLG, Second Interim Report, p. 47.

⁸¹ Cited in Mason, Lloyd, and Nash, Final Report, p. 74.

⁸² Interview with an Investment Director of one of the institutional investors (November 1, 2017).

⁸³ GLA, Social Impact Bond for Rough Sleepers Update (London, UK: Greater London Authority, 2015), p. 3, available online at https://www.london.gov.uk/moderngov/documents/s48981/11_rough%20sleeping%20social%20impact%20bond.pdf.

⁸⁴ DCLG, Second Interim Report, p. 41; Corporate Watch, Round-up: Rough Sleeper, p. 13.

⁸⁵ Interview with an individual who acted both as an investor and as an advisor to one of the institutional investors (November 20, 2017).

⁸⁶ James Brassett and Lena Rethel, “Sexy Money: The Hetero-Normative Politics of Global Finance,” Review of International Studies 41:3 (2015), pp. 429–49; compare Tsilly Dagan and Talia Fisher, “The State and the Market – A Parable: On the State’s Commodifying Effects,” Public Reason 3:2 (2011), p. 45.

⁸⁷ Christian Berndt and Manuel Wirth, “Market, Metrics, Morals: The Social Impact Bond as an Emerging Social Policy Instrument,” Geoforum 90 (2018), p. 33; compare Aeron Davis and Catherine Walsh, “The Role of the State in the Financialisation of the UK Economy,” Political Studies 64:3 (2016), pp. 666–82.

⁸⁸ Alan Travis, “Immigration Bill: Theresa May Defends Plans to Create ‘Hostile Environment,’” The Guardian (October 10, 2013), available online at: https://www.theguardian.com/politics/2013/oct/10/immigration-bill-theresa-may-hostile-environment.

⁸⁹ Interview with a Senior Executive of one of the service provider organizations (October 2, 2017).

⁹⁰ Jacques Derrida, Aporias: Dying – Awaiting (One Another) the “Limits of Truth” (Stanford, CA: Stanford University Press, 1993).

⁹¹ Jacques Derrida, On Cosmopolitanism and Forgiveness (London, UK; New York, NY: Routledge, 1997); Pascal Dey, On the Name of Social Entrepreneurship: Business School Teaching, Research, and Development Aid (Basel, CH: Doctoral thesis, University of Basel, 2008), p. 131, available online at: https://www.alexandria.unisg.ch/30721/1/Promotion%20Pascal%20Dey.pdf.

⁹² Jenny Edkins, “Humanitarianism, Humanity, Human,” Journal of Human Rights 2:2 (2003), p. 257.

⁹³ Iason Gabriel, “Effective Altruism and its Critics,” Journal of Applied Philosophy 34:4 (2017), pp. 457–73.

⁹⁴ Emily Gustafsson-Wright, Izzy Boggild-Jones, Dean Segell, and Justice Durland, Impact Bonds in Developing Countries: Early Learnings from the Field (Washington, DC: Center for Universal Education at Brookings; Convergence, 2017), p. 6, available online at: https://www.brookings.edu/wp-content/uploads/2017/09/impact-bonds-in-developing-countries_web.pdf.

⁹⁵ Andrew Billo and Kevin Boyer, “Investing in Communities Affected by Conflict and Crises,” Stanford Social Innovation Review (August 24, 2016), available online at: https://ssir.org/articles/entry/investing_in_communities_affected_by_conflict_and_crises1?platform=hootsuite.

⁹⁶ I borrow this term from John Dale and David Kyle, “Smart Humanitarianism: Re-Imagining Human Rights in the Age of Enterprise,” Critical Sociology 42:6 (2016), pp. 783–97.

Additional information

Funding

This work was supported by the University of Warwick.

Notes on contributors

Marco Andreu

Marco Andreu is a PhD candidate in International Political Economy in the Department of Politics and International Studies (PAIS) at the University of Warwick, funded by the PAIS Departmental Scholarship 2015–2019. He studied at the University of St. Gallen for a BA in Business Administration and at the University of Warwick for an MA in International Political Economy. His work explores the politics of the emergence of social impact bonds in historically situated terms and in relation to their concrete, and complex, everyday operations. In 2016, he was Visiting Researcher at the Hertie School of Governance in Berlin. He also works as a project manager for the company socialdesign.