Frontiers of Sustainable Finance in Europe: The Social Impact Bond

Policy Letter No. 24

Ester Faia
Research Area:
Financial Intermediation
May 2014
social impact bonds, risk premia, incentives for investment

Social impact bonds are a special type of bond whose purpose is to provide long term funds to projects with a social impact. Especially in the UK and in the US these bonds are increasingly being used to raise funds to finance government projects. Their return depends on the social improvements achieved. Especially in times of crisis, governments lack funds to prevent the social consequences of recessions. Faia argues that the European Union should develop an equivalent to the British Social Finance Ltd. to finance projects for social improvement.

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