The name's Bond, Social Impact Bond: film questions investors profiting from social services

by Lee Mannion | @leemannion | Thomson Reuters Foundation
Wednesday, 9 May 2018 13:08 GMT

Students at Genevieve Melody elementary school stand in line. The students' pre-kindergarten education was funded by private investors who can profit from their success. Credit Nadine Pequeneza

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"The one thing I want people to take away is that you can make a difference in people's lives."

By Lee Mannion

LONDON, May 9 (Thomson Reuters Foundation) - Should governments and charities pay financiers, like Goldman Sachs investment bank, to profit from funding education and housing services?

A new documentary "The Invisible Heart" traces the growth of an innovative tool offering the private sector returns on investments that tackle chronic societal problems, from crime to homelessness - social impact bonds (SIBs).

"People need to see this (film) because it's a fundamental shift in the way we deliver and finance social services," director Nadine Pequeneza told the Thomson Reuters Foundation.

"It could potentially have a very detrimental impact on basic services that people rely on to survive."

Also known as pay-for-performance contracts, SIBs funnel private capital into social projects usually funded by governments and charities. The investors only receive a return if predefined results are achieved.

Globally, there are 108 social impact bonds in operation in more than 20 countries, according to Social Finance, the London-based charity which pioneered the nascent market in 2010 to mobilise capital for cash-strapped municipalities.

The film follows four-year-old Reginald, whose brother was shot and killed outside his home in Chicago, as he receives a year of pre-school education to ready him for kindergarten.

He is one of some 2,600 children from low-income families attending the nursery, one of several receiving $17 milllion in funding from Goldman Sachs and the Pritzker Family Foundation, set up by the wealthy owners of the Hyatt Hotel chain.

If the children test well, the investors will profit. They are set to receive $9,100 per student who does not require special education services, for every year up until the end of high school, project manager Joe Schmidt says in the film.


The film questions the impact of profit incentives on the delivery of social services as it follows pioneering venture capitalist Ronald Cohen on his global travels, pitching SIBs to politicians and investors.

Award-winning filmmaker Pequeneza said she was encouraged by the model's focus on investing in prevention and early intervention - she filmed the launch of Canada's first healthcare bond to reduce heart disease.

"The one thing I want people to take away is that you can make a difference in people's lives. You can solve some of these problems," she said from Toronto.

Canada will pay investors a 9 percent profit if a community initiative enrolls hypertensive Canadians in an education programme and maintains their blood pressure.

But Pequeneza expressed concern that some social services without measurable outcomes would be sidelined.

"Wealthy people, or those more willing to invest the sums of cash necessary to get involved in SIBs, are going to have undue influence over what programmes get funded," she said.

The film shows Reginald being tested at the end of his year. He can count from one to 10 but cannot identify certain numbers written down in front of him.

Head teacher Michelle Stewin said in the film that his performance did not meet her expectations.

"Some days he doesn't do as well as others," she said.

"He has a difficult time being still and focusing on tasks for a long time. Some are and some aren't ready for kindergarten - some could use an additional year of support."

"The Invisible Heart" will be shown on television in Canada and at special screenings and film festivals globally before becoming available on streaming services. (Reporting by Lee Mannion @leemannion. Editing by Katy Migiro.

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