A new report outlines lessons learned from the development of the world's first Social Impact Bond (SIB) created to fund interventions at Peterborough Prison and cut re-offending. The report is based on interviews with 22 people involved in the implementation of the SIB.

The Ministry of Justice sold £5m worth of bonds to Investors who could achieve financial returns as well as social ones depending on how far levels of re-offending are cut.

Key funders include the Barrow Cadbury Trust, Esmée Fairbairn Foundation, Friends Provident Foundation and LankellyChase Foundation. Many used their endowment capital rather than giving a grant. (Read more about Social Impact Bonds in Philanthropy UK's Summer Magazine).

The report says measures that might encourage investment in future SIBs include clarifying trustees’ fiduciary duties with regards to social investments and offering tax incentives for investing.

It also recommends that developers of future bonds should find a way to monitor the additionality of funding.

Outcome measurement is an area that needs continued development, it says.  The report says a risk of payment by results (PBR) models is that providers focus on members of the target group who are the easiest to help. However, in Peterborough, outcomes were measured among all offenders discharged from HMP Peterborough. The report warns: “Future SIBs in new policy areas may wish to take into account the time and skills needed to develop outcome measures.”

Some interviewees suggested developing standard contract terms and definitions for SIBs, which could make drafting and signing up to future SIB contracts an easier process.

The research highlighted some potential barriers to investment, namely tax rules that restrict charities’ ability to put money into a SIB, and lack of clarification of trustees’ duty to maximise financial return. The government could consider whether any steps could be taken to offer tax incentives.

Interim outcome payments  were also suggested as a way to allow investors to use their capital more efficiently. To see the full report visit the Ministry of Justice site.

Read more about Social impact investment in our latest magazine.