Demystifying social impact bonds: the Arc SIB

Social Ventures Australia (SVA) has launched the Arc Social Impact Bond aimed at breaking the cycle of reoffending and homelessness, whilst expecting to deliver competitive risk-adjusted returns to impact investors. Pat Bollen, Impact Investing Manager at SVA, explains how social impact bonds work and the innovative collaboration behind the Arc SIB.  

Social Ventures Australia (SVA), Vacro, the Victorian Government and housing providers have formed a first-of-its-kind partnership, the Arc Social Impact Bond (SIB), to better support people leaving prison and reduce reoffending and homelessness.  

What is a social impact bond? 

A SIB is a financing mechanism that enables a service provider to enter into an outcomes contract with government. Under an outcomes contract, a portion of payments from government are linked to the outcomes achieved by the service provider’s program. With a social impact bond, private investors provide upfront working capital for the delivery a program, and investor returns are linked to the outcomes achieved by the program. 

How SIBs can work – though the model may vary. 

Outcomes contracts and SIBs have different names depending on the government jurisdiction, including payment by outcomes (PBO), social impact investments (SII), payment by results (PBR) and Partnerships Addressing Disadvantage (PAD). 

Who is Social Ventures Australia? 

SVA is a not-for-profit organisation that works with partners to alleviate disadvantage – towards an Australia where all people and communities thrive. SVA influences systems to deliver better social outcomes for people by learning about what works in communities, helping organisations be more effective, sharing our perspectives and advocating for change.  

SVA supports government and service providers with the end-to-end process of designing, negotiating and managing outcomes contracts, with or without a SIB – and to make the process as straightforward as possible for everyone involved. 

The Arc SIB is the ninth that SVA has launched over the last decade, including Australia’s first homelessness SIB, the Aspire Social Impact Bond. 

What is the Arc Social Impact Bond? 

Currently in Australia, more than half of people leaving prison face homelessness on release and almost half are reincarcerated within two years, with clear evidence linking these two statistics. The new $9 million Arc SIB aims to disrupt this cycle, which comes at a significant social and financial cost for the community, with a program that is unique in both the solution it offers and how that solution is financed.   

The Arc program will be the Victorian Government’s fifth Partnerships Addressing Disadvantage initiative and draws on Vacro’s innovative reintegration framework and a housing-first approach. This evidence-based program provides people leaving prison with at least three months of pre-release support, two years of intensive case management support post-release and access to stable housing, providing a base to create a new narrative arc for their life. 

Vacro CEO Marius Smith says: “When they leave prison, our participants plan to find a job, reconnect with their children and much more, but they face often insurmountable barriers. Arc brings together everything that evidence – and our experience – tells us is necessary for success, including a stable home base and sustained case management support. Our goal is to demonstrate that this model is the best way to assist people leaving prison, with the aim of changing reintegration support in Victoria forever.” 

Vacro will deliver the Arc program in partnership with a number of experienced housing providers, including Housing Choices Australia, Beyond Housing, Haven Home Safe, Women’s Property Initiatives, Uniting Vic. Tas and Aboriginal Housing Victoria. 

The Arc SIB will measure participants’ reductions in the justice, health and homelessness services. These measured reductions become the basis of outcomes-based payments by the Government, which ultimately provide a return to investors. 

Arc SIB structure overview. 

Why is the Arc SIB unique? 

The Arc Social Impact Bond will provide a rare opportunity to fund an innovative intervention that breaks the cycle of disadvantage and generates measurable outcomes. The Arc program is expected to provide the base from which around 420 people leaving prison can create a new narrative arc for their life, move away from patterns of offending and establish a stable home. Through the SIB mechanism, outcomes will be measured and reported on to contribute to the evidence base around “what works” for individuals caught in the cycle of reoffending and homelessness. 

SVA CEO Suzie Riddell says: “We are thrilled to be part of this partnership that breaks down traditional silos by working across three government agencies, service and housing providers, and private investors. We hope it will be a model for collaboration that puts people at the centre of policy, commissioning and service decisions.” 

For more information, visit the SVA website. 

SVA will be running a webinar on the Arc SIB for anyone interested in learning more on 24 August at 10.30am: Arc Social Impact Bond: breaking the cycle of reoffending and homelessness.