A commitment initiated in 2016
Social Impact Bonds (SIB) (also named Pay For Success – PFS), promote the funding of social innovations by private investors who are ultimately reimbursed by the public administration depending on the achievement of agreed-upon concrete and measurable social impact objectives.
As early as 2016, in the United States, BNP Paribas co-structured (with Social Finance) and invested in an SIB worth more than $11 million in the state of Connecticut. Its goal is to avoid the placement in foster care of children whose parents have addiction problems. In 2018, the Bank launched “Veterans CARE” (co-structured with Social Finance), its second SIB in the United States, which aims to support 480 veterans of the US armed forces suffering from post-traumatic stress, over three years, to enable them to find long-term, quality employment.
A pioneer in France, BNP Paribas structured and financed France’s first SIB for Adie in 2016. This program aims to develop entrepreneurship in isolated rural areas and support 500 people in their sustainable professional reintegration, thus generating more than €2 million of savings for the state.
Since 2016, in France and the United States: 7 SIBs structured for a total of €21.5 million have been signed, in which BNP Paribas has invested or committed to invest a total of €7.8 million. If these SIBs meet their social targets, then more than 1000 vulnerable people will have obtained a suitable job, more than 1000 underprivileged students will have increased ambition and avoided dropping out and more than 500 minors will have avoided foster care.
BNP Paribas structures three new Social Impact Bonds in France
- Wimoov's “digital pathway” program, an association that supports 10,000 vulnerable people (disabled, unemployed, aged…) each year towards a sustainable, responsible, autonomous mobility. Conducted in partnership with 3 ministries, this SIB aims to set up an online tool, the "Mobility Test" to detect the mobility issues of vulnerable individuals. This “Mobility Test” will establish a mobility diagnosis for each beneficiary in order for Wimoov to be able to provide more effective and more responsive support, favouring their return to or retention in employment.
- The “La Cravate Mobile” project with La Cravate Solidaire, which fights against discrimination in hiring related to physical appearance, will allow a traveling device (fully equiped bus) to offer quality professional attire and coaching to 900 young people in Ile-de-France who could not attend the workshops in the Parisian premises.
- Finally, the SIB launched with Article 1, co-structured with Citizen Capital, aims to fight against school drop-out in several agricultural education institutions in Hauts-de-France and Occitanie, in order to significantly improve academic perseverance and ambition for 1130 underprivileged students, from the professional sectors, mainly scholarship students.
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BNP Paribas, SIB market leader in France
Having provided the financial engineering for more than 50% of the SIBs labelled by the French government and 100% of the SIBs actually signed and launched so far, BNP Paribas is positioned as the leader of this sector in France.
In fact, in the framework of these various projects, BNP Paribas plays the dual role of structurer, that is to say, architect of the system, and in the vast majority of cases also investor, alongside other companies (in particular the Bank of the territories (Caisse des Dépôts)).
BNP Paribas is the only financial institution to offer, to date, this double expertise, due to its privileged position with the various players involved (associations, investors and public authorities), which favours its role of connection and coordination. By ensuring the financial and legal engineering of the first French SIBs, BNP Paribas, in collaboration with the government in particular, is helping to create a standard for this new product.
A financial expertise to serve social impact
An Anglo-Saxon concept launched in 2010 by Sir Ronald Cohen, the SIB broadens the available range of funding tools for social innovation. A SIB directly links the creation of societal value to the creation of economic and monetary value.
For example, by funding a business start-up program, the investor contributes to the reintegration of unemployed individuals. The unemployment benefits that should have been paid to them are thus saved by the State, which allocates part of them to repay the investor. At the end of the project, investors are reimbursed and compensated by the State only if the project has achieved its impact goals.SIBs aim to create the right conditions for a tripartite partnership of trust between: a social operator wishing to experiment a socially innovative program over time, with stable funding for several yearsone or more public authorities, or one or more ministerial departments, identifying an issue requiring new responses, which will only provide funds when tangible results have been achieved and budget savings have been generated,investors wishing to invest in high-positive social impact projects.
A value-creating innovation for BNP Paribas
Through its involvement in the design of SIBs, BNP Paribas strengthens its position as a key player bank for social entrepreneurship, for which it has been developing a global support system since 2013: Act For Impact. Including microfinancing, the Group’s total support for social entrepreneurship amounts €1.6 billion as of 2018.
Beyond their ability to attract capital and investments to social programs, these new financial solutions strengthen BNP Paribas’ expertise in responsible finance. They should also allow the bank to offer its clients worldwide, new opportunities that can generate returns on investment, but also have lasting positive social impacts.
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