Social Impact Bond - SIB

AAA

DEFINITION of 'Social Impact Bond - SIB'

A contract with the public sector or governing authority, whereby it pays for better social outcomes in certain areas and passes on part of the savings achieved to investors. A social impact bond (SIB) is not a bond, per se, since repayment and return on investment are contingent upon the achievement of desired social outcomes; if the objectives are not achieved, investors receive neither a return nor repayment of principal. SIBs derive their name from the fact that their investors are typically those who are interested in not just the financial return on their investment, but also in its social impact.

INVESTOPEDIA EXPLAINS 'Social Impact Bond - SIB'

In 2011, Peterborough Prison in the United Kingdom issued one of the first social impact bonds anywhere in the world. The bond raised 5 million pounds from 17 social investors to fund a pilot project with the objective of reducing re-offending rates of short-term prisoners. The relapse or re-conviction rates of prisoners released from Peterborough will be compared with the relapse rates of a control group of prisoners over six years. If Peterborough's re-conviction rates are at least 7.5% below the rates of the control group, investors receive an increasing return that is directly proportional to the difference in relapse rates between the two groups and is capped at 13% annually over an eight-year period.

RELATED TERMS
  1. Relapse Rate

    The rate of re-offending or re-conviction in a target group. ...
  2. Green Economics

    A methodology of economics that supports the harmonious interaction ...
  3. Ethical Investing

    Using one's ethical principles as the main filter for securities ...
  4. Dow Jones Sustainability World ...

    A global index consisting of the top 10% of the largest stocks ...
  5. Fair Trade Investing

    Investing in companies or projects that promote fair trade with ...
  6. Socially Responsible Investment ...

    An investment that is considered socially responsible because ...
Related Articles
  1. Insurance

    Green Investors Get Heard

    Find out how to make your portfolio and the companies in it greener.
  2. Mutual Funds & ETFs

    Change The World One Investment At A Time

    Socially responsible investing allows you to express your political views in an unlikely way.
  3. Personal Finance

    Go Green With Socially Responsible Investing

    Find out how morals and ethics can bring you a surprising return.
  4. Mutual Funds & ETFs

    Socially (Ir)responsible Mutual Funds

    Not concerned about being an ethical investor? Maybe "sinful stocks" have a place in your portfolio.
  5. Mutual Funds & ETFs

    Socially Responsible Mutual Funds

    It is possible to avoid unethical investments and still profit from mutual funds. Find out how!
  6. Mutual Funds & ETFs

    Socially Responsible Stocks: Do Good Deeds Punish Profits?

    Socially responsible investing doesn't mean accepting lower returns. Find out why squeaky-clean stocks shine as investments.
  7. Options & Futures

    Socially Responsible Investing Vs. Sin Stocks

    Can your principles make you richer or poorer? Find out if it pays pick your portfolio based on ethics.
  8. Bonds & Fixed Income

    Should Junk Bond ETFs Be a Part of Your Portfolio?

    Should junk bonds be a part of your portfolio? Here's what you need to know.
  9. Professionals

    Vanguard Readies Muni Bond ETF

    Vanguard is set to roll out a muni bond ETF, the firm's first.
  10. Mutual Funds & ETFs

    Is the TLT ETF a Good Bet for the Long Run?

    Is the iShares 20+ Year Treasury Bond ETF (TLT) a good bet for the long run?

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center