Research Handbook of Investing in the Triple Bottom Line
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Research Handbook of Investing in the Triple Bottom Line

Finance, Society and the Environment

Edited by Sabri Boubaker, Douglas Cumming and Duc K. Nguyen

The triple bottom line is an accounting framework with social, environmental and financial factors. This Handbook examines the nexus between these areas by scrutinising aspects of socially responsible investment, finance and sustainable development, corporate socially responsible banking firms, the stock returns of sustainable firms, green bonds and sustainable financial instruments.
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chapter 13: Financial innovation with a social purpose: the growth of Social Impact Bonds

Frédéric de Mariz and José Roberto Ferreira Savoia

Abstract

The UN’s Sustainable Development Goals, signed in 2015, call for a closer collaboration between the public and private sectors to solve social and environmental issues. We analyze the emergence of Social Impact Bonds (SIBs) – innovative financial instruments that join private risk-taking with public funding in a pay-for-outcome structure. SIBs were launched in 2010 in the UK and bridge the gap between private capital markets and public agencies to deliver a social outcome. After taking stock of the existing literature and lessons learned from more than sixty existing SIBs. Our contribution consists in an in-depth analysis of the financial structuring of SIBs, a theme not well covered in the literature. We found that financial structuring involves four key steps: legal structure, definition of the desired risk-return-impact, placement of the SIB and governance. We also make four recommendations to grow the sector, consisting in the creation of SIB Funds, the wide dissemination of knowledge, a standardization in processes and the definition of favorable regulations.

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