Social Impact Bond - SIB

Want to buy a bond and do something for the good of society? Well, don’t look into Social Impact Bonds (SIBs) then...because they’re not actually bonds.

SIBs aren’t actually bonds, because the investor who buys them only gets repayment if the desired social outcome of the investment vehicle is reached. If the social outcome never comes to fruition, the investor losses the investment. Still, SIBs are great for those looking to make a social impact...just without the guaranteed payout you’d expect to eventually receive from a bond. So yeah, they’re risky. Rather than being affected like bonds by interest rates, reinvestments, and the market, SIBs are totally dependent on whatever social impact is written on the investment vehicle.

While Social Impact Bond proponents argue they’re doing great things, the government stays away from them, since they can’t quantify the impacts. They just don’t know how to justify pumping money into something where they can’t measure the returns.

What kind of social outcomes do SIBs aim for? Well, the first one was issued from a UK prison in 2011 to reduce recidivism rates for short-term prisoners to a certain level. How big the returns are depends on just how low they can get those recidivism rates.