A social impact bond (SIB) is 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 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 are increasingly being piloted as additional funding mechanisms to existing government support for improving public health and launching new health promoting initiatives.
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. SIBs are a new mechanism providing investment to address social challenges, including health promotion and disease prevention. The mechanism can be visualised through the social impact bond diagram. In straightforward language, SIBs can be understood as a loan made by an investor, where repayment is linked to the achievement of specific agreed-upon health (or social) outcomes.
The Heart and Stroke Foundation of Canada launched a SIB, the Activate Programme, in 2018. This programme was developed in response to the high rate of heart diseases and stroke. Activate is a lifestyle-change programme to help people at risk of developing hypertension (one of the most important risk factors for heart diseases) to adopt healthier habits to get their blood pressure under control. This is Canada’s first health-related SIB.
The Health and Stroke Foundation selected this instrument as it allowed them to innovate and develop their own governance structures. They approached the Centre for Impact Investing seeking help to establish this bond. The main negotiation involved establishing the rate of return on investment for investors that took place between the Foundation and the federal government. (In Canada, prevention is a responsibility of the federal government while the provinces are mandated to manage healthcare).
The Activate Program
The Activate program is a 6-months community wellness program that was designed to prevent the onset of hypertension (high blood pressure) among older adults. It is funded by a social impact bond through a pay-for-success model over the course of 3 phases from 2018 to 2020.
- The outcomes of success for the Activate program are measured by the volume of enrolments and the average change in blood pressure between recruitment and a follow-up after at least 6-months of the program.
- The target for success was set by cardiologists at no increase in blood pressure readings, but an overall decrease is even more desirable. Without intervention, half of pre-hypertensive people in Canada over age 60 will go on to develop high blood pressure within four years.
- Cohort 1 of the Activate program enrolled 527 participants into the program and we observed an average change in blood pressure of -5 mmHg systolic.
- As of Week 19 in Cohort 2, there were ~1950 enrolled new participants, and the team expanded the program beyond the initial plan of the Greater Toronto Area to include several other regions in Ontario, Canada.
Hypertension is the number one risk for stroke and leading risk factor for heart disease. Without intervention, half of all pre-hypertensive people over 60 in Canada will develop hypertension within 4 years. Heart disease & stroke are leading causes of death, taking the lives of more than 66,00 Canadians every year. This program is an opportunity to assess the impact of preventative health measures on hypertension. The target for success was set by cardiologists at no increase in blood pressure readings, but an overall decrease is even more desirable.
Funding for Activate comes from a pay-for-success (PFS) model or social impact bond (SIB). Working closely with the MaRS Centre for Impact Investing, Heart & Stroke has attracted philanthropically minded private investors to provide upfront capital. The federal government, through the Public Health Agency of Canada, repays the investors based on successful outcomes. This is only the second time in Canada that this funding model has been used, and the first time for a large-scale chronic disease prevention initiative.
The Activate program uses two main outcome measures to determine its success. The first is volume; how many people are enrolled in the program? So far, 7000 people have been enrolled. The second outcome is blood pressure; were we able to halt the increase in blood pressure over the 6 month journey? Success was defined as a flattened blood pressure trajectory (meaning no increase). A decrease in blood pressure is seen as an over-performance.
Payment for investors
Investors get paid after the recruitment phase of each cohort based on volume, as well as a final payment based on blood pressure reading. The program entails 4 key payments:
- Volume Payment 1 - Summer 2018
- Volume Payment 2 - Summer 2019
- Volume Payment 3 - Summer 2020
- BP Payment - end of the entire program, so early 2021 if not the very end of 2020
The rate of return depends on both volume and blood pressure at the end of the program. While the funds come from the federal government, the outcome payments do not come from funds for existing for services (e.g., hospitals).