Working with Social Finance, a not-for-profit organisation, this innovative Connecticut bond married capital markets innovation with social objectives.
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."
