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This is going to be an interesting arena to keep tabs on.
Social impact bonds are unlikely to attract commercial investors unless they offer lower risks or higher returns, according to a report published today by the think tank the Social Market Foundation.
The report, Risky Business, says there is a “huge gulf” between what commissioners are prepared to pay and the return investors will accept.
It says commissioners are keen to pay for results only when they can be sure that those are down to an intervention, and this requires a high level of risk to be taken by investors, who will lose their money if the SIB does not hit commissioners’ targets.
To make an investment worth the risk, this means that investors must be extremely well rewarded if the SIB succeeds. But commissioners are reluctant to pay this level of return, it says.
via Social impact bonds should offer lower risks or higher returns, says report | Third Sector.