A fascinating risk approach to the SIB issue leads today’s newsletter, worth reading.
Risk Allocation In Impact Bonds: Fair Game?
Fred Werneck & Tanja Havemann – clarmondial
Since our article on Social Impact Bonds (SIB), Clarmondial has had numerous discussions with clients and potential clients about impact bonds. Given that a financial structure needs to ultimately meet the specific program conditions, and local conditions were not suited to a ‘standard’ impact bond, we created and will help local organisations implement a conditional donation instrument. We hope to provide more information on this as a concrete case study in due course.
One issue that has been raised repeatedly by ODA (Official Development Assistance) providers and private donors is that of risk: When we use a Results-Based Funding (RBF) structure such as a SIB or a DIB (Development Impact Bond), who is actually exposed to financial risk? How are the risks assessed and allocated? We wish that investors would focus more on this same issue with respect to “mainstream” structured products, but we will keep this discussion to the sphere of ‘impact finance’ in this article.
Social Impact Bond
A new supported living home for at-risk single mothers was opened today at 600 Queen Street in Saskatoon. This new home, Sweet Dreams, was made possible by a funding model that is the first of its kind in Canada. The funding model, which is called a Social Impact Bond, is between the Government of Saskatchewan, Conexus Credit Union, Wally and Colleen Mah, and EGADZ.