PERSPECTIVE3-5 min to read

Social outcome contracts: what are they and how can you invest in them?

This nascent asset class allows investors to participate in high impact social projects, while also generating a financial return.



Nick Paisner
Head of Editorial

Coronavirus is thankfully becoming less of an acute threat to the UK healthcare system. But the true cost of the disease is still emerging, as we face up to long-standing health and social challenges that have been exacerbated by the pandemic. This comes at a time when the government is dealing with an unprecedented debt burden and has already announced tax increases to fund existing welfare commitments.

“Social outcome contracts” could play a significant role in helping address many of these challenges in a cost-effective manner. The idea behind them is relatively straightforward. A commissioning body – typically local government – agrees to pay one or more specialist providers for the successful delivery of agreed outcomes. Private investors provide some or all of the capital required to get the project up and running and earn a return based on its success. Contracts have focused on a wide range of areas of need, including children’s services, youth employment and homelessness. The approach offers many advantages compared to more traditional models of delivering social services, which are often poorly designed to help people with more complex needs.

Key advantages of Social Outcome Contracts

High impact — projects are undertaken by local, specialist organisations who really understand the needs of those they are trying to help. They are far better equipped to help people dealing with multiple vulnerabilities, such as homelessness and mental health problems. Traditional approaches tend to adopt a very siloed approach and are less well-suited to dealing with these cases. 

Flexibility and accountability — the contracts allow for a high degree of flexibility, allowing organisations to adopt tailored and often personalised approaches. At the same time, providers are required to track agreed metrics and provide detailed reporting on outcomes.

Efficiency — the government only pays for successful outcomes, avoiding the misallocation of resources that is often associated with large-scale interventions.

Potential for attractive returns — a portfolio of social outcome contracts could generate annualised returns of 4 – 6% over the long-term with minimal correlation to equity or bond markets. This is a target return and is not guaranteed.

Social outcome contracts were pioneered in the UK just over a decade ago and have now been used in many other countries. To date, some 80 projects have been successfully launched in the UK, involving over £500 million of central and local government funding. There is now growing evidence that social outcomes contracts can lead to better outcomes - and at lower cost to the government.

It’s fair to say the approach has not yet achieved the scale that many hoped for, despite some real successes. However, this may be an inevitable consequence of the features that make social outcome contracts so successful in the first place: they work best when delivering tailored solutions to clearly defined, often local, challenges. This makes scaling up harder. Contracts are complex, involving local government bodies, service providers and private investors. Agreeing on the outcomes to target, and the metrics to track, takes time. However, as the sector matures, expertise and experience will build up. There may also be more scope to standardise certain contract features.

Though the asset class remains relatively small, it is investible. Schroder BSC Social Impact Trust, the UK’s first listed impact fund, provides exposure to the sector through an £8m commitment to Bridges Social Outcomes Fund II, a private investment fund.   

Lyn Tomlinson, Head of Impact at Cazenove Capital, said. “I have been hugely encouraged by the positive impact we are seeing from the Social Outcome Contracts in which we have invested. I am excited about the much larger role outcomes financing can play in helping investors use their capital to solve some of the biggest environmental and social challenges we face. I am hopeful that we will see more opportunities to invest in the asset class in future.”

Below we look at two case studies where social outcome contracts are helping to achieve better outcomes for those in need across the UK.

West London Zone: supporting disadvantaged children in West London

The challenge: Despite being home to many of London’s wealthiest residents, there are parts of West London where many families live in poverty. Research shows that there are 12,000 children and young people currently living in the area that need additional support. Without it, they are more likely to face challenges in later life, including unemployment, social isolation, and poor mental health. Existing support systems are not easily able to flex to the needs of individual children, with organisations often working in isolation and failing to reach those who could benefit from their help the most.

The response: West London Zone is a charity created to improve life chances for the 20% of children most at risk of poor outcomes in this geographical area, by enabling local community resources to work with local schools, and bringing together funding from local authorities, philanthropists, central government and schools themselves. The programme is a two-year, personalised and intensive package of support tailored to each child’s unique needs. The aim is for them to progress in all aspects of life – particularly wellbeing, confidence, relationships and academic achievement. The programme has supported nearly 3,000 children so far, with a target to support over 8,000 by 2026.

Kirklees Better Outcomes Partnership: alleviating homelessness in Yorkshire

The challenge:  Kirklees in West Yorkshire remains one of the most disadvantaged areas of the UK, with 30% of neighbourhoods in the “most deprived” category according to 2021 research from The Institute for Community Studies. Homelessness is a significant problem, exacerbated by other complex needs such as addiction, poor physical and mental health and domestic violence. Kirklees Council has been working with a number of service providers to alleviate these challenges, but wanted to change the way it worked with them to drive better outcomes and ensure value for money.

The response: Kirklees Better Outcomes Partnership is a partnership of eight social sector organisations commissioned by Kirklees Council to support people at increased risk of homelessness. Delivery organisations are held to account against clearly defined targets, focused on long-term independence. The partnership launched in  2019 with a 4.5 year contract. With specialisms across a wide range of social needs, it provides one-to-one support designed to help people live independently in their own homes. It is the UK’s largest social outcome contract to date (£22.5 million) and has already helped 1,100 people stay in accommodation for at least 3 months and 100 people into employment.  

This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

All data contained within this document is sourced from Cazenove Capital unless otherwise stated.


Nick Paisner
Head of Editorial


The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested.