EXECUTIVE SUMMARY

This report explores the nature of Social Impact Bonds (SIBs) and identifies policy and market constraints to their extensive use. It provides a strategy that focuses on the key steps required before a comprehensive assessment can be made as to whether SIBs should be trialed in New Zealand. A SIB is a specialist mechanism that falls within the ambit of Social Financing. The key features of SIBs are they: Are a contract between the government and private investors, usually through a bond issuing intermediary (referred to in this report as “Broker and Contract Manager”); The contract is for the delivery of improved social outcomes to a defined group of people; The Broker and Contract Manager obtain funds from private investors to achieve the improved social outcomes. In exchange, the investors receive bonds; The investors can cash in their bonds and achieve a return on their investment only if the contracted for social outcomes are achieved. If the performance targets are not achieved, the government does not pay. The key advantages of SIBs over current approaches to social policy are that they offer the opportunity to introduce new, private money, into social programmes without increasing public debt and without th