BNP Paribas Launches Social Impact Bond in the United States

BNP Paribas launched its first-ever Social Impact Bond in September 2016, capitalizing on a multi-year effort to expand the Bank's corporate responsibility efforts in the United States.  By partnering with the State of Connecticut, the Social Impact Bond - or pay-for-success transaction - aims at providing funds for in-home treatment for parents dealing with substance abuse.  The core of the treatment focuses on promoting positive parent-child interaction, developing emotional attachment, increasing parental awareness and understanding of child development, and ultimately sustaining parents on a path to recovery. The return to the bond's investors is driven by the successful rehabilitation of the parents receiving care.

The "C" in CSR

"Our effort to structure a Social Impact Bond is a great way to exercise our corporate social responsibility, and is part of the Bank's commitment to providing its business expertise to create solutions for society," said Hervé Duteil, Managing Director and Regional Coordinator for Corporate Social Responsibility & Sustainable Finance in the Americas.  "The key is to develop products that allow private sector capital to flow in a fair risk/return basis in sectors that typically rely on philanthropic or government funding." BNP Paribas and the financial services industry are uniquely positioned to bridge the gap between investors and the needs of society.

A New Product for a New Era

Social impact bonds are still in their infancy, with each being unique and distinct from one another. This was true for the Connecticut Social Impact Bond, and required BNP Paribas to develop the product in a new way. "Critical to BNP Paribas' strategy was to treat this financing as much as possible as a traditional syndicated deal, with standard legal documentation, despite its intrinsic pay-for-success characteristics," said Elisabeth Seep, Director, Corporate Banking & Coverage Americas.  "This approach allows internal stakeholders, such as the credit and risk functions, as well as external stakeholders and investors to examine the merits of this Social Impact Bond in the same manner as they would for a more traditional loan". Ms. Seep continued: "Our clients and investors continue to seek innovation and social impact with new financial products. It is therefore our responsibility to leverage our resources and creativity to meet that demand.  The Social Impact Bond is one example of serving our clients by addressing the issues that are important to them."

CSR as Innovation

The execution of the Connecticut Social Impact Bond was a team effort across the Bank, gathering employees to provide their expertise.  Senior Management was also involved and saw the value and legitimacy of a product that yields both social and financial benefits. The structure adopted by the Connecticut Social Impact Bond is a template for replication and an opportunity for further innovation in both social and environmental areas. Cambyse Parsi, Account Manager in Leveraged Finance at BNP Paribas, concluded, "The Social Impact Bond allowed us to get to the roots of Corporate Social Responsibility.  An emerging class of investors requires impact in their financial investments.  By providing our business expertise, we are able to chart new territory for the Bank and better meet investor demand - which is critical to accelerate the pioneering and scaling of financial solutions."