Позитивные изменения. Том 2, № 2 (2022). Positive changes. Volume 2, Issue 2 (2022)

4. greater risks for investors: under comparative risk levels, greater return can be achieved from investing under general market conditions than by dealing with the government.

MEDIATORS AND THEIR ROLE

It is important to note the role of mediators who handle the interaction within the triangle of stakeholders — the government, the contractor, and the investor. There are two types of mediators (Urban Institute, 2020): financial and expert. Financial mediators, also known as transaction coordinators, provide support for project planning, investor protection, and contract negotiation. Expert mediators review the project design, costs, and offer methods for researching the intervention's social impact.

The VEB.RF state corporation, one of the major social impact operators in Russia, represents (2021) the following list of stakeholders: the contractor, investor, public body, independent evaluator, and operator. This list correlates to the three key stakeholders and two mediators, as described above. However, the Russian mediator's role is somewhat limited compared to traditional expert mediators: specifically, it does not provide project review or assistance in designing the project prior to its launch. The Russian model also does not allow for a participant to guarantee the investor's interests, other than by the investors themselves. However, these two models are not the only options for implementing social impact bonds. Below we will examine project cases from different countries.

THE UK EXPERIENCE. DEVELOPING INNOVATION THROUGH AN EVIDENCE-BASED APPROACH

The world's first social impact bonds project was implemented in the UK (The Economist, 2013). In 2010, Peterborough, a town in Eastern England, launched a six-year privately-funded prisoner rehabilitation program. No payments from the state fund to investors were projected until 2014, and not until the Department of Justice acknowledged that the criminal reoffending rate within the pilot project area differed from the national average. What made the Peterborough case unique:

• a longer implementation period for greater service flexibility — the investor’s multi-year funding for the services gave the contractor more autonomy to flexibly implement the project tasks;

• not just a one-time fixation on results — monitoring was conducted regularly during the project, with monthly reports being provided to investors;

• visible social effect — the requirement to demonstrate social impact on an ongoing basis resulted in the continuous development of new methodologies to study the social problem being addressed, which could only yield a positive social outcome.

As we can see, the very first social impact bonds project offered the contractors plenty of room to develop efficient impact tools, and innovate in analyzing the social problem at hand, while investors received regular opportunities to monitor the project’s progress.

Since then, more than 30 social impact bonds have been implemented in the UK (A guide to Social Impact Bonds, 2017). In describing the British program of state support for social projects (Guidance on developing a Social Impact Bond, 2017), it is emphasized that the private contractor’s main interest is to develop innovations in the evidence-based approach for assessing impact effectiveness. Costs are treated as current costs multiplied by a percentage of the maximum rate of return. The estimated value of social change is added to the formula, based on the value of the social results achieved.

Academic researchers (Warner, 2013) argue that Britain’s experience shows the inevitable emergence of an industry of social impact evaluators and contract mediators who will ultimately become the main beneficiaries of these projects. Moreover, the effect on public policy turns out to be highly controversial, since projects are often limited by their context and are not reproducible. On the other hand, the project itself is a de facto instrument for privatizing state social functions within the framework of the New Public Management program. The contradiction here is that the social problem is broader than the ongoing project, or the project is too extensive, and would be cheaper to implement with the government’s tools. However, it is worth noting that the state is less flexible in inventing new problem-solving methods.

The authors quote (Warner, 2013, p. 313) a British investor who participated in a social impact bonds project:

"[These projects] involve high-risk investments with low or medium rates of return," which reduces the appeal for investors because, in addition to less than favorable financial conditions, they have to deal with the state which, by definition, is more demanding and more rigid than private sector players.