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This article analyses Social Impact Bonds with a focus on their adverse effects. They explore the context of Brazil and discuss how legal frameworks are being changed to allow for this kind of PPP/investment. However, such changes do not tackle the perverse incentives, adverse effects of SIBs and risks they pose to the right to education, but instead are focused on promoting an “ecosystem of impact investing” that is crafted to recruit investors and allow for profit.
The movement for experimentation and dissemination of
Social Impact Bonds (SIB) in Brazil is recent and has been gain-
ing increased support among some of the largest local public
budgets, in addition to the Federal Government. To date, three
SIBs have been attempted in Brazil: the first aimed at reducing
public school dropout of vulnerable adolescents in the State
of São Paulo (Cássio et al., 2018); the second focused on in-
creasing the scale of a preventive medicine program to reduce
hospitalization rates in the State of Ceará; and the third aimed
at qualifying young people for the job market, the first of the
type launched by the Federal Government. None of the case
of local initiatives has been eectively implemented, and the
federal proposal is in the process of public call for hiring the
responsible company. Furthermore, there are other six pro-
posals under development, which were selected by a public
call announced by the organization SITAWI Finanças do Bem
(or SITAWI Good Finances, responsible for the SIB in the State
of Ceará), in partnership with the Rio de Janeiro Research
Foundation (Faperj). Amongst the six selected proposals, the
state governments of Rio de Janeiro and São Paulo propose
SIBs in popular housing and socio-educational reintegra-
tion of young oenders. Municipalities in these states and in
Pernambuco, in turn, propose projects focused on increasing
employability and reducing alcoholism. The city of São Paulo,
the largest in the country, is among the proponents.
Nonetheless, unlike other Latin American countries1, there are
still no structured and operating SIBs in Brazil. A group of ad-
vocates for SIBs describes three “challenges” that explain why
this is the case in this country, which need to “be overcome”:
(1) the lack of a legal figure, that is, of a regulatory framework
for SIBs in Brazil, and of a legal authorization for the distribu-
tion of the profits obtained from such contracts; (2) the non-
dissemination of SIBs among Brazilian public managers and
authorities; (3) the low incentive for innovation in the public
sector in Brazil (Adib et al., 2019). In this short article, we will
analyze some actions that have been taken to promote SIBs
in Brazil, specially concerning the creation of policies and a
regulatory framework that is conducive to “impact invest-
ing”. We also discuss the issues that are not being – and that
probably will not be – addressed if this type of public-private
This article analyses Social Impact Bonds with
a focus on their adverse eects. They explore
the context of Brazil and discuss how legal
frameworks are being changed to allow for
this kind of PPP/investment. However, such
changes do not tackle the perverse incentives,
adverse eects of SIBs and risks they pose to
the right to education, but instead are focused
on promoting an “ecosystem of impact
investing” that is craed to recruit investors
and allow for profit.
Social Impact bonds
Adverse eects
Right to education
The Advance of Social Impact Bonds
in Brazil
Fernando Cássio, Professor, Federal University of ABC, Brazil
Salomão Ximenes, Professor, Federal University of ABC, Brazil
partnership comes to expand in the country, namely, ethical
concerns and issues related to the violation of the right to
education. To illustrate that, we draw from one specific case:
the SIB attempt in São Paulo’s State public school system.
The Creation of A Brazilian Social Finance
The background for the advancement of SIBs in Brazil is the
broader eort to create a social finance “ecosystem” in the
country. The Social Finance Task Force (FTFS) was one of the
most relevant movements in this regard, created in 2014 and
directed by the Institute for Corporate Citizenship (ICE) and
SITAWI. It is financed by the Inter-American Development
Bank (IADB), Fomin (the Multilateral Investment Fund of the
IADB Group), Banco Itaú, ICE, Telefonica Foundation and
Lew’Lara. Like its British analogue (Social Finance Taskforce),
created in 2000, the Brazilian Taskforce produced a manual
that provides a kind of roadmap for the implementation of
SIBs in the country. In 2018, FTFS changed its name to Alli-
ance for Impact Investing & Business, expanding the scope of
“social finance” to impact business. The initiative maps, con-
nects and supports organizations and strategic agendas to
strengthen investments and businesses that combine social
or environmental impact with financial return. The reposi-
tioning of FTFS has to do with the greater appeal of “impact
investing and business” to Brazilian investors, whose vora-
cious appetite for high and short-term rates of return makes
them less likely to accept the ethical and moral claims of
“good finances”.
Moving from the private sector into policy, aer the ques-
tionable impeachment that removed Dilma Rousse from
the presidency, in 2016, the Brazilian government has been
carrying out a National Strategy for Business and Impact
Investing (Enimpacto). Its main purpose is to create regula-
tory frameworks and a business environment that will allow
the transformation of social policies – in the Brazilian case,
the constitutional obligations of the State – into “impact busi-
nesses” that can be profitably exploited by private agents. In
this context, President Michel Temer, Rousse’s successor,
published the Decree No. 9244, in December 2017, formalizing
Enimpacto and establishing its central concepts and objec-
tives. It designated a 10-year Business and Impact Investing
Committee, responsible for the implementation of Enimpacto
and composed by 16 public bodies, entities and banks, to-
gether with ten representatives from the private sector and
civil society organizations2. Enimpacto has been working on a
number of fronts:
1) regulate SIBs within the legal framework of public-private
partnerships in Brazil (Senate Bill No. 338/2018, not yet
2) regulate the constitution of private equity funds (endow-
ments) for actions of public interest (Bill No. 13800/2019);
3) institute a regulatory environment that allows philan-
thropic organizations to also make money from social
Enimpacto was supported as much by the government of
Temer as it is by the government of Jair Bolsonaro, initiated
in 2019, which assigned the presidency of Enimpacto to the
Ministry of Economy3. In 2020, Enimpacto intends to create a
Parliamentary Front for Business and Impact Investing, with
the priority of accelerating the process of Senate Bill No. 338
and other changes in Brazilian commercial and tax legisla-
The Senate Bill No. 338/2018 comes to attend to one of the
biggest requests of the advocates for SIBs: to give legal cer-
tainty to this public-private contracting model, dispelling
uncertainties about its legal security in the Brazilian legal
context, which, according to its defenders, have discouraged
potential investors. It addresses one of the greatest legal
obstacles to SIBs: the restriction of the eligible civil society
organizations to establish partnerships with the State to the
non-profit field (Bill No. 13019/2014). This arrangement is
considered as “if does not exclude SIB completely, certainly
restricts its application substantially. The use of the capital
market to finance SIBs, for example, could be read as a fraud
against the prohibition of profitable purposes provided by
law” (Brasil & Senado Federal, 2019, p. 5).
In this sense, the Senate Bill opens the possibility of creat-
ing a specific commercial company for the execution of SIBs,
with the co-participation of investors and contractors; in
addition to the express provision regarding the possibility of
subcontracting services and issuing bonds to be traded on
the capital market by the contracted entity. It also allows for a
series of tax benefits related to the fundraising for SIBs and to
the financial distribution of its results. Besides that, the text
of the Senate Bill No. 338/2018 makes explicit that financial,
labor and other risks are exclusive to the contracted entity
and its eventual external financiers, exempting the public au-
thority from any obligation other than payment for the results
achieved, according to the contract.
The SIB in São Paulo’s State Public School
System: Problems Not Addressed
The attempt to implement a SIB in the São Paulo’s State
public school system, in 2017, was marked by a top-down
implementation and a purpose of social experimentation
without major ethical and democratic concerns. Isabel Opice,
an economist who served in the São Paulo State Government
Department until May 2017, confirms the project’s intentions
by stating that the “main innovation of a SIB is to create
space for experimentation within the public sector, running
on the opposite way of the model of implementing large scale
standardized public policies”, and that, “aligned with the
experimental character of a SIB, this first experience in Brazil
tries a new contracting mechanism by results” (Opice, 2017).
In this first Brazilian SIB experience, a pilot project, 122
schools in the Metropolitan Region of São Paulo would be
selected in areas of social vulnerability. These would be
divided in two groups: 61 schools would receive the contrac-
tor’s resources and interventions, the so-called “treatment
group”; and 61 others would compose the “control group.
The existence of the latter, according to the technical guide-
lines of the project, was “an essential condition to verify the
eect of the interventions, as it allows to know what would
have happened without its implementation in the schools of
the treatment group” (São Paulo & Department of Education,
2017, p. 107).
The schools were chosen in the selection contest of the part-
ner responsible for the SIB, but, before the publication of the
Contracting Notice, the experiment failed. The deliberative
councils of the schools discovered that they had been de-
ceived to approve their participation in the SIB, as they did so
without knowledge of the nature and the ethical and politi-
cal-pedagogical implications of this new form of contracting.
Therefore, aer a more informed round of debates, dozens
of schools decided to withdraw from the proposal, making it
unfeasible from the beginning. The ethical problems in that
SIB revolved around, at least, two aspects: (1) the careless
data collection and use of sensitive information related to
children and adolescents; and (2) the perverse eects of the
method imposed onto the control group, which deliberately
prevented schools to receive other public interventions, in
spite of these schools being equally underprivileged, thus
contradicting the expectations of school communities that
decided to join a “project” that promised to (desirably) re-
duce school dropout rates.
Thus, despite their needs and rights, the schools had to com-
mit to not having any other interventions from other pro-
grams with similar aims to reduce dropout rates, even those
that were already underway in schools. The rationale was to
“isolate” the causal eect of the SIB interventions in treat-
ment schools (Cássio et al., 2018). Indeed, in a Dra Notice
prepared for the São Paulo SIB, we could identify that among
the contractor’s (the State Government) responsibilities was
to “ensure that no relevant initiatives are implemented during
the SIB period that might dierentially aect control groups
and treatment groups or the eicacy of the interventions de-
fined to the SIB” (São Paulo; Department of Education, 2017,
pp. 252–253). There was, however, no guarantee that the pro-
posed initiative would be capable to solve the problem of the
“statistical strength” of the method. Additionally,
the private agent is not embarrassed to suggest that the
State signs a contract and commits to not implement
any relevant programs in the schools managed by it,
something that runs against [the Brazilian] constitutional
obligation to ensure the social right to education with a
quality standard. In fact, the strictest way of isolating the
eects of interventions in the treatment group would be
the cancellation of any other State program in control
schools. Nonetheless, this would probably be the least
ethical way of conceiving the design of public education
policies. (Cássio et al., 2018, p. 12)
Despite the aggravating ethical implications of adopting SIBs
to address social issues in areas of great need and vulnerabil-
ity, the debates about the implications of adopting control
groups are typically underestimated among SIB enthusiasts4.
A gray paper published by the Organization for Economic
Cooperation and Development (OECD), for example, states
that the control group methodology is a “more challenging”
measurement process (Galitopoulou; Noya, 2016, p. 17).
Along the same lines, a UK investment fund points out that
randomized controlled trials (RCT) are generally considered
as the “gold standard”, although not always feasible, for rea-
sons of cost and “practicality” (Bridges Ventures LLP; Bank
of America, 2014, p. 17). The OECD also welcomes the use of
control groups, but points out its disadvantages: (1) technical
complexity; (2) identification of an appropriate control group;
and (3) diiculty in knowing whether the control group is
receiving other services (OECD, 2015, p. 11).
However, such problems are not mere “side eects” of SIBs,
but inherent to any form of social vulnerability commodifica-
tion. Despite this, under the primacy of eicacy in the provi-
sion of public services, a much larger number of authors have
preferred to celebrate SIBs as unquestionably innovative
mechanisms to finance social policies than to problematize its
potentially perverse eects, especially from concrete cases.5
A Brief Conclusion
The failure of the controversial SIB in São Paulo’s State public
school system does not prevent enthusiasts from using this
experience as a successful case and omitting, in the legisla-
tive debate of Senate Bill No. 338/2018, the resistance the
project faced during its implementation and other several
unanswered questions. In the enchanted world of SIBs ad-
vocates, the model is an undoubted “win-win game”, that, in
Brazil, advances by the hands of decision-makers without any
critical voices being heard (Brasil; Senado Federal, 2019). The
stakes are high. While they mobilize potential SIBs’ entrepre-
neurs across the country, disseminate the idea and diversify
the social finance “ecosystem”, they expect legal barriers
to be removed in order to ensure both the predictability of
investments and the formal possibility of profiting from the
commodification of social vulnerability.
In this context, influential senators of the Brazilian Social
Democracy Party (PSDB) – whose most illustrious member is
the former Brazilian president Fernando Henrique Cardoso
–, like the former governors of the states of Ceará and Minas
Gerais, are, respectively, the proponent and the rapporteur
of the Senate Bill No. 338/2018, and its greatest enthusiasts
in the National Congress. There is, ergo, a dramatically fa-
vorable confluence for SIBs in Brazil. On the one hand, the
interests of the financial market in expanding the modalities
of privatization and commodification of public services, now
coupled with venture philanthropy that sees in such services
an opportunity to achieve high profit rates betting against
State-funded public policies. On the other hand, supporting
the advancement of this model, we have seen, since 2016, the
progressive emptying of the Brazilian democratic space and,
with the current government of Bolsonaro, a deliberate inten-
tion of institutional degradation of the State and of the public
policies that it is obligated to implement.
1. There are currently three SIBs in development in Latin America: one in
Argentina, focused on the employability of vulnerable young people; one in
Colombia, also involving vulnerable unemployed populations; and one in
Peru, aimed at supporting sustainable production and international trade
of cocoa and coee by the Asháninka indigenous people, from the Peruvian
Amazon. Data from the Impact Bond Global Database. https://sibdatabase.
2. The Committee comprised the following private institutions: Group of
Institutes, Foundations and Enterprises (GIFE); Brazilian Association of
Science Parks and Business Incubators (Anprotec); Brazilian Private Equity
and Venture Capital Association (ABVCAP); United Nations Development
Programme (UNDP); Inter-American Development Bank (IDB); Instituto Anjos
do Brasil [Brazilian Angels’ Institute]; National Confederation of Industry
(CNI); Social Finance Task Force (FTFS); System B; and Pipe Social.
3. The Decree No. 9977/2019, signed by Jair Bolsonaro at the time of the
ministerial reform carried out at the beginning of his government, kept the
Business and Impact Investing Committee with the same structure.
4. Although Friedman (2011), in an online publication of the World Bank,
already drew attention to the need to develop specific ethical guidelines for
social impact assessments.
5. Some critical works: Roy et al. (2017), Maier and Meyer (2017), Saltman
(2017), Cássio et al. (2018), and Morley (2019).
Adib, L. A., Freitas, B. B., Letelier, L., Mitidieri, M., & Schiefler,
G. (2019, 03 Sep.). Contratos de Impacto Social no Brasil:
inovação na gestão pública. Jota.
Brasil, & Senado Federal. (2019). Report by the Constitution,
Justice and Citizenship Commission, in final decision, on
Senate Bill No. 338, 2018, by Senator Tasso Jereissati, which
provides for the Social Impact Bond. Rapporteur Sen. Antonio
Bridges Ventures LLP, & Bank of America. (2014). Choosing
Social Impact Bonds: A Practitioner’s Guide. Bridges Ven-
Cássio, F. L., Goulart, D. C., & Ximenes, S. B. (2018). Social
Impact Bonds in São Paulo’s state public school system:
New modality of public-private partnership in Brazil.
Education Policy Analysis Archives, 26(130). https://doi.
Friedman, J. (2011, 07 Jun.). The ethics of a control group
in randomized impact evaluations: The start of an ongoing
discussion. Development Impact (The World Bank). https://
Galitopoulou, S., & Noya, A. (2016). Understanding Social Im-
pact Bonds [working paper]. OECD Publications. www.oecd.
Maier, F., & Meyer, M. (2017). Social Impact Bonds and the
Perils of Aligned Interests [Commentary]. Administrative Sci-
ences, 7(3), 24.
Morley, J. (2019). The ethical status of social impact bonds.
Journal of Economic Policy Reform.
Opice, I. (2017, 01 Dec.). Pagamentos por Desempenho no
Governo: Contratos de Impacto Social. Estadão [Blog do
Organization for Economic Cooperation and Development
[OECD]. (2015, Apr. 15). Social Impact Bonds: Promises &
Pitfalls [Summary Report].
Roy, M. J., McHugh, N., & Sinclair, S. (2017). Social Impact
Bonds: Evidence-based policy or Ideology? in Greve, B. (ed.)
Handbook of Social Policy Evaluation (pp. 263–276). Edward
Elgar Publishing.
Saltman, K. J. (2017). The Promise and Realities of Pay for
Success/Social Impact Bonds. Education Policy Analysis
Archives, 25(59).
São Paulo (State), & Department of Education. (2017).
Administrative procedure SE No. 1967/2017: “Social Impact
Bond” Project [obtained from São Paulo’ State Department
of Education through Bill No. 12527/2011, the Brazilian Law
on the Right to Information].
ResearchGate has not been able to resolve any citations for this publication.
Full-text available
This article analyzes the development of a new modality of public-private partnership in Brazilian education, the so-called Social Impact Bond (SIB), known in Brazil as “Contrato de Impacto Social”, whose pilot project, sponsored by the Inter-American Development Bank (IDB), is in its initial stage of implementation in the State of São Paulo. Unlike traditional philanthropy, which legitimizes itself in the alleged non-profit nature of its actions, SIB assumes the possibility of obtaining return rates with “social investments,” leading to the creation of a new ecosystem of social finances, which, into this context of privatization of education, incorporates agents interested in capitalizing on the provision of public services to vulnerable populations, in this case, to secondary students from public schools in the State of São Paulo. This kind of contract, or bond—paid by means of “delivery” of results—raises a series of ethical, legal, and political-pedagogical issues related to the accomplishment of “social experiments” with students in a vulnerable condition. From the analysis of internal documents of the Department of Education in the State of São Paulo, in comparison with documentary sources from public schools, we conclude that, from the very beginning of its implementation, the SIB of São Paulo education not only breaks with standards of scientific ethics, but also violates the principle of democratic school management included in the Brazilian constitution.
Full-text available
Social impact bonds (SIBs) have been welcomed enthusiastically as a new funding tool for social innovation, yet also condemned as an instrument that neglects beneficiaries' and taxpayers' interests, opening profit opportunities in the field of social politics for smart private investors. We will shed a more analytical light on SIBs, assuming that, like any contract, SIBs try to align interests between partners with partly converging, partly diverging goals. Thus, it remains mainly a matter of negation, and non-profit social service providers as well as public agencies should avoid particular perils and pitfalls.
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This article considers proponents’ arguments for Pay for Success also known as Social Impact Bonds. Pay for Success allows banks to finance public services with potential profits tied to metrics. Pay for Success has received federal support through the Every Student Succeeds Act of 2016 and is predicted by 2020 to expand in the US to a trillion dollars. As school districts, cities, and states face debt and budget crises, Pay for Success has been advocated by philanthropists, corporate consulting firms, politicians, and investment banks on the grounds of improving accountability, cost savings, risk transfer, and market discipline. With its trailblazing history in neoliberal education, Chicago did an early experiment in Pay for Success. This article provides a conceptual analysis of the key underlying assumptions and ideologies of Pay for Success. It examines the claims of proponents and critics and sheds light on the financial and ideological motivations animating Pay for Success. The article contends that Pay for Success primarily financially benefits banks without providing the benefits that proponents promise. It concludes by considering Pay for Success in relation to broader structural economic considerations and the recent uses of public schooling to produce short-term profit for capitalists.
I develop a framework for assessing the ethical status of social impact bonds (SIBs), drawing on evidence from UK and US SIBs that address recidivism, education, homelessness and healthcare. I extend work on the ethics of markets by Debra Satz to render it suitable for application to SIBs, highlighting informational weaknesses, power imbalances and the generation of harm. Ethical issues observed include the lack of informed consent, denial of care, prioritisation of profit over therapeutic effectiveness and unfair contracting. I find that SIBs are morally permissible in principle but are at great risk of becoming unethical in practice.
Contratos de Impacto Social no Brasil: inovação na gestão pública
  • L A Adib
  • B B Freitas
  • L Letelier
  • M Mitidieri
  • G Schiefler
Adib, L. A., Freitas, B. B., Letelier, L., Mitidieri, M., & Schiefler, G. (2019, 03 Sep.). Contratos de Impacto Social no Brasil: inovação na gestão pública. Jota.
Choosing Social Impact Bonds: A Practitioner's Guide. Bridges Ventures
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Bridges Ventures LLP, & Bank of America. (2014). Choosing Social Impact Bonds: A Practitioner's Guide. Bridges Ventures. uploads/2017/08/Bridges-Choosing-Social-Impact-Bonds-A-Practitioner's-Guide.pdf.
The ethics of a control group in randomized impact evaluations: The start of an ongoing discussion. Development Impact (The World Bank
  • J Friedman
Friedman, J. (2011, 07 Jun.). The ethics of a control group in randomized impact evaluations: The start of an ongoing discussion. Development Impact (The World Bank). https://
Understanding Social Impact Bonds
  • S Galitopoulou
  • A Noya
Galitopoulou, S., & Noya, A. (2016). Understanding Social Impact Bonds [working paper]. OECD Publications. www.oecd. org/cfe/leed/UnderstandingSIBsLux-WorkingPaper.pdf.
Pagamentos por Desempenho no Governo: Contratos de Impacto Social
  • I Opice
Opice, I. (2017, 01 Dec.). Pagamentos por Desempenho no Governo: Contratos de Impacto Social. Estadão [Blog do MLG]. pagamentos-por-desempenho-no-governo-contratos-de--impacto-social.