Financial Innovation with a Social Purpose: The Growth of Social Impact Bonds

Chapter included in Boubaker, Sabri and Cumming, Douglas J. and Nguyen, Duc Khuong, Research Handbook of Investing in the Triple Bottom Line: Finance, Society and the Environment, Elgar, 2018, 520p.

Posted: 9 Jan 2019 Last revised: 29 Feb 2020

Date Written: September 1, 2018

Abstract

The triple bottom line is an accounting framework with social, environmental and financial factors. This Handbook examines the nexus between these areas by scrutinising aspects of socially responsible investment, finance and sustainable development, corporate socially responsible banking firms, the stock returns of sustainable firms, green bonds and sustainable financial instruments.
The Sustainable Development Goals (SDG) signed in 2015 call for a closer collaboration between the public and private sectors to solve social and environmental issues. This follows a gradual evolution in aid and policy-making that has resulted in the emergence of a body of research focused on public-private partnerships in both developed and developing countries, as well as a current of the literature looking at financial innovation as a tool favoring development. In this chapter, we analyze the emergence of social impact bonds – innovative financial instruments that join private risk-taking with public funding in a pay-for-outcome structure. SIBs bridge the gap between private capital markets and public agencies to deliver a social outcome. After taking stock of the existing literature, our contribution consists in an in-depth analysis of the financial structuring of SIBs, a theme not well covered in the literature. We make recommendations to grow the sector.

Keywords: Impact investing, Sustainable development, Socially responsible firms, Financial stability, Corporate social responsibility

JEL Classification: G1, G3, M1, M2

Suggested Citation

de Mariz, Frederic and Ferreira Savoia, Jose Roberto, Financial Innovation with a Social Purpose: The Growth of Social Impact Bonds (September 1, 2018). Chapter included in Boubaker, Sabri and Cumming, Douglas J. and Nguyen, Duc Khuong, Research Handbook of Investing in the Triple Bottom Line: Finance, Society and the Environment, Elgar, 2018, 520p., Available at SSRN: https://ssrn.com/abstract=3306818

Frederic De Mariz (Contact Author)

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Sciences Po ( email )

27 rue Saint-Guillaume
Paris Cedex 07, 75337
France

Jose Roberto Ferreira Savoia

FEA-USP ( email )

Av. Prof. Luciano Gualberto 908
São Paulo SP, São Paulo 05508-900
Brazil

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