/ Impact Funding / by Niklas Ruf

How does a Social Impact Bond work? – A sample agreement

As a charitable foundation, we are obliged to act for the common good. Carrying out projects that serve the common good are a necessary part of this, but by no means everything. We can only do complete justice to our obligation by making the findings and materials that come to light in the course of our work available to the public.

It is not because this is our particular point of view, but because the public has a right to know. This is the only way we can help others copy our recipes for success – rather than repeat our mistakes – and adapt them to their specific concerns.

It is our goal to make the welfare state in Germany stronger and more capable of effective action. We are convinced that Social Impact Bonds can make an essential contribution to this goal so we want this relatively new tool to be used by as many people as possible, in order for us all to learn quickly what can – and cannot – be achieved with Social Impact Bonds.

For the first Social Impact Bond in Germany, we negotiated the draft agreement of the Bavarian State Ministry for Labour and Social Services, Family and Integration until a final version was created.

That agreement then became the basis of discussion for the first Social Impact Bond in Austria, which we negotiated with the Austrian Social Ministry and launched in 2015. A few months ago, we made an amended version of it available to the Bertelsmann Foundation, to support it in its SIB negotiations with a local body. Fortunately the length of the agreement did not increase with each amendment, but rather decreased. After making some final adjustments over the past few weeks, we are now pleased to be able to make available a clearly worded sample agreement that will hopefully be useful to any interested parties.

Our solicitors from Sozietät Oppenhoff & Partner in Cologne, who provided their expertise pro bono to help us create the original agreement and also work on the revisions, point out that the wording of this agreement may have general applicability but it by no means constitutes a ready-to-use contract – or to put it in their own words: “This sample agreement offers no guarantee of completeness or legal certainty. Thorough legal investigation of the relevant tax law and public procurement law implications will therefore be required in each specific case. In that context, definitive clarification of the contractual framework may also be required from the responsible tax authority.” Due to the different requirements of each client, our sample agreement is not suitable for adoption as a “model contract”. Instead it should provide a basis for discussion that paves the way for further intermediaries and public sector representatives to come up with a Social Impact Bond tailored to their specific contexts.

Our sample agreement (in German language) can be downloaded as a PDF. If you have any questions or would like some advice or constructive help to introduce further Social Impact Bonds, we are happy to assist you at any time. In any case, the more who copy us the better!