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Using SROI for a Social Impact Bond

Using SROI for a Social Impact Bond

Social Return on Investment (SROI) and Social Impact Bonds (SIBs) are two ideas that are increasingly mentioned in the same breath. SROI is a measurement and accounting framework and SIBs are a way to contract and finance a service. Both require three common ingredients:

  • the quantification of one or more social outcomes for beneficiaries,
  • a valuation of these outcomes, and
  • an estimation of the cost of delivering these outcomes.

While not a necessary ingredient, SROI can contribute to the design, operation and evaluation of SIBs.

*NB the word ‘outcome’ is used here to represent a change in someone’s life – some readers (particularly from the US) may use the word ‘impact’ to mean the same

SIBs and SROI 1

A Social Impact Bond is a contracting and financing model that involves a number of changes for most contracting environments. The shift towards outcomes-based contracting often poses the most significant change. It is challenging because the quantification and valuation of outcomes is new and difficult.

For many people, SROI is synonymous with the identifying and valuing of social outcomes of a program or organisation. It is a framework that consolidates measurements and values, to compare the value of inputs and outcomes. SROI is attractive for use with SIBs because it explicitly collates both financial and non-financial value.

SROI does not dictate how to measure effect size (change in outcome), or value outcomes, but does offer guidance on different tools that can be used for different purposes. To share other practitioners’ outcomes and values, the SROI Network has established the Global Value Exchange database. SROI assessments can be used to examine the effectiveness of one project, to compare different project designs, to compare different projects or to examine changes over time.

The principles of SROI are consistent with SIBs.

SROI principles and SIBs

SROI has not been used in the development of Social Impact Bonds to date, but conversations involving both concepts are increasingly occurring across the globe: in the UK; Japan; Australia; and Canada. The diagram below maps some of the opportunities for using SROI in the design, operation and evaluation of a Social Impact Bond.

SIBs and SROI

 

This post is a blog from Emma Tomkinson, originally printed on her personal blog here. Emma is a Social Impact Analyst working in Australia, and an active member of the SROI Network.

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