U.K. Prime Minister David Cameron said his government will give tax breaks to investments that qualify as having a “social impact” and set up an exchange to allow such instruments to be traded.
Social-impact bonds see investors put money into projects that could save the government money. The state or local government pays out only if they succeed.
Cameron told a conference at Bloomberg LP’s European headquarters in London today he wants suggestions for how such tax relief could be structured to help encourage as much as 500 million pounds ($770 million) of extra investment. He also said the London Stock Exchange will support an online exchange.
“For years the London Stock Exchange has made London the home for private finance, today London can cement its place as the home for social finance too,” Cameron told investors. “The world’s first social stock exchange is an online portal that will become the first information platform on the planet to showcase publicly listed social impact businesses.”
Cameron has put social impact investment on the agenda for the Group of Eight summit, being hosted by the U.K. in Northern Ireland later this month, and said he wants Britain to be a beacon for the benefits of social investment.
Bonds have already been issued in Britain to fund work such as cutting reoffending by former prisoners and improving child care.
The G-8 “is an opportunity for Britain to showcase this issue and say to other countries this is what we’re achieving here,” Cameron said. “We’ve got the opportunity to bore for Britain about this on many platforms and we’re not going to waste any of them.”
Billionaire investor George Soros sounded a note of caution over the bonds, while saying that he and his charity are using the model to develop philanthropic work in the developing world.
“I want to remind you that social impact bonds are synthetic financial instruments, and we all know what happens when synthetic financial instruments are over exploited,” he told the conference. “We are very far from the point where social impact bonds are over exploited, on the contrary we are only at the beginning of exploring how they can be utilized.”