Social Impact Bonds, about which I have blogged before, are a small step in the right direction. (I have had no input into their creation, though I have spoken to their lead developer.) Their best feature is that they target outcomes, rather than activities, inputs, or outputs. To my mind they suffer from the deficiency that they are not envisaged as being tradeable. This means they have to focus on narrow and short-term goals, for which the purchasers of the bonds can expect to hold them until redemption. This in turn means that the arrangements for each issue are more along the lines of contracts whose reporting requirements (monitoring progress toward the goal etc) seem quite burdensome in relation to the intended outcome.
Social Policy Bonds, being tradeable, can target broad, long-term goals, such as peace in the Middle East, or the avoidance of any sort of catastrophe, man-made or not. This is a huge advantage. Targeting outcomes, which both SIBs and Social Policy Bonds do, works better than the current, command-and-control system when we do not know in advance how best to achieve our social and environmental goals. If we target broad, long-term goals there is both: (1) less chance that targeted goals will achieved at the expense of goals that are not specifically targeted, and (2) more scope for investors to explore different ways of achieving these goals and follow and refine the best approaches. As well, reporting requirements will be a lesser proportion of the sums at stake.
Social Impact Bonds, though, are already being issued, while Social Policy Bonds, despite being in the public arena since 1989, have not. As well, I will readily concede that "Social Impact Bonds" is the better name. I was originally going to give my bonds the name "Social Objective Bonds" until one of my colleagues, more worldly than me, pointed out the meaning and widespread usage of the acronym.