In England there are at present 7, 160 children waiting for an adoption, 15% more than a year ago. While it is relatively easy to find families for new-borns and babies, it is more difficult for siblings, for children older than four and for children belonging to ethnic minorities and in poor health conditions. Those children wait for the adoption for years, remaining in charge of the British welfare state.
The Consortium of Voluntary Adoption Agencies (CVAA), a group of adoption agencies, has developed a method to improve the performance of this social process, investing in the training of families, in psychological counselling and in cultural mediation. It has convinced the government to fund each successful adoption with 52, 000 pounds. The estimated savings in social spending for each adopted child are of 800, 000 pounds in the medium term.
Together with this project, whose aim is to increase the number of children adopted each year, the first adoption social impact bond will be issued: private investors will be able to buy bonds to finance the CVAA directly. The bonds will be paid only in case of success and whether there is a clear and measurable improvement of public spending.
New York City is studying the release of a new SIB aimed at supporting children from low-income families.
The picture on this page describes the model of the first social impact bond issued by Social Finance in Britain, by which everybody is being inspired. Globally, there are very few cases, not because of the lack of investors, rather of the lack of models and guarantees on the payment.
Knowing the propensity of the financial market to build speculative bubbles, caution in this case is twice more appropriate. Buying financial products of the kind means, in fact, changing people’s lives, improving the impact on public spending and getting a return of the investment.
Tools such as the social impact bonds are believed to be conceived outside traditional finance market. Social finance is based on transparency and on sharing the big data: the traditional financial industry has always promoted it reluctantly. Moreover it has applied rating models and risk assessments so complex that they so far seem opaque.
The issue of transparency also concerns the state, which must admit, following the British example, not to know how to and not to be able to realize the social innovation that the third sector is willing to manage in a measurable way. In order not to focus more on the financial side than on the one of social impact, it is necessary that the involved actors (the state, the investor and the NPO) share guarantees and common risks. When an adoption is not successful, all three actors, with different roles and weight, of course, need to take over that responsibility.