Triodos Corporate Finance

1. Triodos Corporate Finance E3M Social Enterprise Seminar New opportunities for partnerships 8 July 2014

2. Triodos Corporate Finance Triodos – our experience in the SIB market The SIB market in the UK Case study – Street Impact Limited (London) Lessons learnt from early SIBs What support is available Potential investors in SIBs What are investors looking for? Getting something “off the ground” Presentation content

3. E3M – New Opportunities for Partnerships Triodos Bank is one of the world’s leading ethical banks – we operate across Europe and only support businesses and organisations which generate positive social or environmental impact. Our experience in the SIB market Advised on 2 SIBs – DWP Innovation Fund and GLA Rough Sleeping SIB Ongoing management contract with existing DWP Innovation Fund SIB Advised DCLG and Cabinet Office on the Fair Chance Fund Advisers to third sector clients in the MoJ Transforming Rehabilitation programme Currently working at early stage with range of potential commissioners Triodos and our experience in the SIB market

4. E3M – New Opportunities for Partnerships Centrally commissioned SIBs: DWP Innovation Fund – 10 SIBs targeting NEETs GLA – 2 SIBs targeting homelessness DCLG Fair Chance Fund likely to result in 5 – 10 SIBs nationwide targeted at young homeless people DWP Youth Engagement Fund – likely to result in 4 – 8 SIBs nationwide targeted at younger NEETs aged 14 – 17 Locally commissioned SIBs: MOJ Peterborough prison – 1 SIB (the first one) targeting reoffending Essex County Council and Manchester City Council – 2 SIBs targeting children in care Alternative structure – provider initiated model: Nationwide adoption SIB (iaam – its all about me) – targeted at commissioners nationwide targeted at vulnerable children The SIB market in the UK

5. SIB Example – Street Impact Limited GLA & St Mungo’s

6. E3M – New opportunities for partnerships 100% payment by results contracts are very high risk for investors and providers to deal with.... and could be counter productive for a number of reasons • Encourages investment in only those clients who will deliver positive paid outcomes, and • High risk for investors = high financial return requirements = high bids for successful outcomes There is a limited (but growing) pool of potential investors for SIBs at the moment £2 - £3m financing is a large deal and syndication of investment is common Some useful learning in how to run a PBR tendering process - this is important to encourage adviser and investor engagement Different investors have different views on how to manage these investments Importance of risk sharing by the provider (and commissioner) Some positive lessons as well.... flexibility, clarity as to tender and scoring process, ability to listen to bidders and investors, consultation period, Q&A Some important lessons from earliest SIBs in the market

7. E3M – New opportunities for partnerships For Commissioners: Up to £150,000 of development funding through BLF’s Commissioning Better Outcomes Fund –to help commissioners design a SIB proposition £60 million of “outcomes top up” funding from BLF’s Commissioning Better Outcomes Fund and Cabinet Office’s Social Outcomes Fund SIB Centre of Excellence - template contracts, “How To” guides, data gathering templates Cabinet Office – best practice support Growing pool of advisers and commissioners with experience in this space For providers and intermediaries: • Investment and Contract Readiness Fund (ICRF) – grant funding for advisory fees • More funds (capital) in the market chasing good opportunities What support is available?

8. E3M – New opportunities for partnerships Institutional social investors: • National and local social impact funds, Charitable trusts and foundations, Family offices, Big Society Capital Alternative investors (depending on risk profile): • Housing Associations • Local Authorities? • Angel groups? • Providers themselves – own resources • Retail investors? Potential investors in SIBs

9. E3M – New opportunities for partnerships • Evidence based interventions • Provider – management and operational track record (with that client group) • Positive social impact (some more than others) • Risk adjusted financial returns • Governance, structure and board representation • Contract management and reporting process • Risk sharing – provider financial input (skin in the game) • Straightforward investor engagement process • Co-investors • Tax relief What are investors looking for?

10. E3M – New opportunities for partnerships • Commissioner or provider - Identify a social problem area where there is a clear indication of both cashable and long term savings (e.g. children in care, residential mental health care, homelessness etc) • Activating the project– create working group, hire advisers, access BLF development funding etc • Feasibility study - identify both immediate (cashable) and long term cost of status quo, calculate what can be paid for successful outcomes? • Is an evidence based solution at hand or is there a need for innovation? • Evaluate procurement requirements and plan the process • Consider investor appetite and engagement • Start with something of modest scale or go big? Getting something “off the ground”

11. E3M – New opportunities for partnerships Thank you Dan Hird 0117 9809588 dan.hird@triodos.co.uk www.triodos.co.uk Contact details