Canadian Government Executive - Volume 25 - Issue 03

August/September 2019// Canadian Government Executive / 13 GOVERNMENT interventions achieved a reduction of re- conviction of at least 10% for each of the three recruited cohorts, and/or a reduc- tion of at least 7.5% in the combined three cohorts together. If neither outcome target is achieved, the private investor will not be repaid. By the end of the operation of the SIB, in 2017, the outcome assessment showed a reduction of the reconviction of the three cohorts reached 9%. Private investors were repaid in full with a three percent annual return. From the surface, a SIB looks similar to a pay-for-performance arrangement. How- ever, a closer look begs many questions. First of all, why would private investors take such a risk? According to the report produced from the Peterborough SIB ex- perience, certain investors are drawn to SIBs because SIBs not just offer the con- ventional profiting opportunity, but also potential social returns – a “blended re- turn”. For instance, the first SIB launched in the United States to reduce recidivism in Rikers Island jail was funded by Gold- man Sachs’ Urban Investment Group (UIG) and the Group states the SIB provided “an opportunity to fulfill UIG’s commitment to double bottom line investing.” Nonethe- less, some investors might be attracted to a SIB because the SIB model presents an opportunity to convert donations into do- nation capital. Unlike a donation which is a one-time payment, a SIB investment has a reasonable likelihood of being “recycled” once the targets are achieved and the in- vestors repaid. The other question is that, in the case that the program is successful, SIBs do not seem to lead to cost-savings for the cash- strapped government because the govern- ment will repay the private investors, and even with a return. Under the original de- sign of the SIB, SIBs should be financially beneficial to the government if two condi- tions are fulfilled. First, the funded inter- vention services can lead to substantial cost-savings that are greater than the SIB SIBs are most suited to preventive services but not core services, because effective preventive services can lead to cost-savings. Popular social policy areas for SIB operations include reduction of recidivism, prevention of institutionalization of children, prevention of unemployment, and chronic homelessness.