Social impact bond

From Wikipedia, the free encyclopedia
https://en.wikipedia.org/wiki/Social_impact_bond

SIB functioning process diagram

A social impact bond (SIB), also known as pay-for-success financing, pay-for-success bond (US), social benefit bond (Australia), pay-for-benefit bond (Australia), social outcomes contract (UK), social impact partnership (Europe), social impact contract (Europe), or simply a social bond, is a form of outcomes-based contracting. Although there is no single agreed definition of social impact bonds, most definitions understand them as a partnership aimed at improving the social outcomes for a specific group of citizens. The term was originally coined by Geoff Mulgan, chief executive of the Young Foundation. The first SIB was launched by UK-based Social Finance Ltd. in September 2010.

By July 2019, 132 SIBs had been launched in 25 countries, and they were worth more than $420m. As of May 2023, 23 countries use SIBs, with (as of 2022) 276 projects in place and capital raised to the value of $745m.

History

The social impact bond is a non-tradeable version of social policy bonds, first conceived by Ronnie Horesh, a New Zealand economist, in 1988. Since then, the idea of the social impact bond has been promoted and developed by a number of agencies and individuals in an attempt to address the paradox that investing in prevention of social and health problems saves the public sector money, but that it is currently difficult for public bodies to find the funds and incentives to do so.

The first social impact bond was announced in the UK on 18 March 2010 by then Justice Secretary Jack Straw, to finance a prisoner rehabilitation program. In the UK, the Prime Minister's Council on Social Action (a group of ‘innovators from every sector’ brought together to ‘generate ideas and initiatives through which Government and other key stakeholders can catalyse, celebrate and develop social action’) was asked in 2007 to explore alternative models for financing social action. The group began to develop the idea of a social impact bond, and the work is being taken forward by a number of organisations including Social Finance, an organisation committed to increasing investment in the third sector, the Young Foundation, the Center for Social Impact in Australia, and other NGOs and private firms. In the UK, the Government Outcomes Lab was set up through a partnership between the UK government and the University of Oxford to investigate evidence around the use of social impact bonds and outcomes-based contracting approaches more broadly.

The idea of a social impact bond has generated significant interest from across the political spectrum in multiple countries, including US, UK, and Australia. Social impact bonds have generated a particularly large amount of interest in the United States. In February 2011, Barack Obama’s proposed 2012 budget stated that up to $100m would be freed up to run social impact bond pilot schemes. In August, 2012, Massachusetts became the first US state to create a policy which encourages the creation of Social impact bonds, called "Social innovation financing". The state legislature authorised spending up to $50 million on the initiatives. In Australia, the intention to trial social impact bonds was announced in New South Wales in November 2010 by Premier Kristina Keneally of the Australian Labor Party. The policy direction was continued by the Coalition after a change in Government in 2011.

In November 2012, Essex County Council became the first local authority in the UK to commission a social impact bond in Children's Services, with the aim of providing therapeutic support and improving outcomes for adolescents at risk of going into care. Nick Hurd, the minister for civil society, commented: "Social impact bonds are opening up serious resources to tackle social problems in new and innovative ways. This is about communities, businesses and charities all working together to change people's lives, whilst at the same time making savings for the taxpayer."

In February 2013 Allia, a charitable social investment organisation, announced the first public opportunity in the UK to invest in a social impact bond. Although the product was later withdrawn from sale due to lack of investors, the Future for Children Bond combined a relatively low-risk ethical investment into affordable housing to provide the funds to repay capital to investors, with a higher risk investment into a social impact bond with the aim of delivering a high social impact and providing an additional variable return. It would have invested into the social impact bond for Essex County Council to ‘improve the life outcomes’ of children aged 11–16 at risk of going into care.

In July 2016, the Social Finance Global Network launched a white paper on the state of the SIB market, "Social Impact Bonds: The Early Years". Social Finance also released a live global database of SIBs. The database can be sorted by country, issue area, investor, payor and service provider, providing a comprehensive overview of SIBs launched to date and a snapshot of the many in development.

Definitions

SIBs as partnerships: partners and responsibilities

There are a range of interpretations of what the term ‘social impact bond’ means. Broadly speaking, social impact bonds are a type of bond, but not the most common type. While they operate over a fixed period of time, they do not offer a fixed rate of return. Repayment to investors is contingent upon specified social outcomes being achieved. Therefore, in terms of investment risk, social impact bonds are more similar to that of a structured product or an equity investment. Third Sector Capital Partners describes social impact bonds as “a potential financing option available to support pay-for-success programs. Social impact bonds bring together government, service providers and investors/funders to implement existing and proven programs designed to accomplish clearly defined outcomes. Investors/funders provide the initial capital support and the government agrees to make payments to the program only when outcomes are achieved. So government pays for success.”

Social Finance UK describes social impact bonds as: “a social impact bond is a public-private partnership which funds effective social services through a performance-based contract.” Social Finance, therefore, specifies that the investment is from non-government bodies.

The Young Foundation describes social impact bonds as: “a range of financial assets that entail raising money from third parties and making repayments according to the social impacts achieved.” The Young Foundation envisages that public bodies could be potential investors.

The Non-Profit Finance Fund describes social impact bonds as: “PFS financing agreements, in which private investors provide upfront capital for the delivery of services and are repaid by a back-end, or outcomes payor (usually a government), if contractually agreed-upon outcomes are achieved, are often referred to as ‘Social Impact Bonds’ ... Social Impact Bonds (SIBs) are a mechanism by which to shift financial risk from service providers to investors, with investors underwriting service providers’ based on their ability to deliver on positive social outcomes.”

The Government Outcomes Lab identifies four main dimensions along which SIBs might vary: “the nature and outcome of payment outcomes”, “the nature of capital used to fund services”, “the strength of performance management”, and “the social intent of service providers”. According to the GO Lab, a 'core' SIB is therefore defined by “100% payment on outcomes”, “independent and at-risk capital”, “a high degree of performance management”, and “a strong social intent of service providers”.

In developing countries, a development impact bond (DIB) is a variation of the SIB model. DIBs are outcomes-based funding structures for the delivery of public services in low- and middle-income countries. As with SIBs, investors would provide external financing and only receive a return if pre-agreed outcomes are achieved. Funds to remunerate investors come from donors, the budget of the host country, or a combination of the two. Financial returns to investors are intended to be commensurate with the level of success. DIBs have the potential to improve aid efficiency and cost-effectiveness by shifting the focus onto implementation quality and the delivery of successful results. In October 2013, Social Finance Ltd. and the Center for Global Development released a report outlining the findings of a high level working group set up to explore the potential of this new mechanism.

Arguments in favour

Social impact bonds being a new program, the hypothetical benefits projected by its advocates have not been measured or verified yet. Advocates of these performance-based investments claim that they encourage innovation and tackle difficult social problems, asserting that new and innovative programs have potential for success, but often have trouble securing government funding because it can be hard to rigorously prove their effectiveness. This form of financing allows the government to partner with private service providers and, if necessary, private foundations or other investors willing to cover the upfront costs and assume performance risk to expand promising programs, while assuring that taxpayers will not pay for the programs unless they demonstrate success in achieving the desired outcomes. The expected public sector savings are used as a basis for raising investment for prevention and early intervention services that improve social outcomes. Advocated also believe that SIB programs can achieve positive social outcomes, may create fiscal savings for government, but also involve changes in funding arrangements that bring risks to service agencies.

The benefits of social impact bonds depends on the definition being used, but the broad benefits (though not measured and verified yet) are:

• Prevention — more funds are available for prevention and early upstream intervention services.
• Risk transfer — the public sector only has to pay for effective services; the third party investor bears all the risk of services being potentially ineffective.
• Innovation — risk transfer enables innovation since investors and service providers have an incentive to be as effective as possible, because the larger impact they have on the outcome, the larger the repayment they will receive.
• Performance management — the SIB approach imbeds vigorous ongoing evaluation of program impacts into program operations, accelerating the rate of learning about which approaches work and which do not. Governments will therefore fund "what works"; repositioning government spending to cost-effective preventive programs. Additionally, independent evaluation creates transparency for all parties.
• Collaboration — enable collaboration across multiple commissioners and within service provider networks and attract new forms of capital to the social, educational and healthcare sectors.

Criticism

Critics note that because the outcomes-based payments are dependent on governmental funds which must be budgeted, social impact bonds do not actually raise additional capital for social programs, but instead displace funding for other programs. Given the need to budget for a return on investment, a program evaluation, middle managers, and the expenses of designing the complex financial and contractual mechanisms, social impact bonds, according to critics, may be an expensive method of operating social programs. Other criticisms include:

• Criteria for success — donors will seek to fund that which can be observed and measured, the outcomes (not just the outputs). This will leave agencies addressing the huge structural problems in society unable to access these funds. This is going to be particularly true for advocacy, arts and alternative organizations. It will be difficult for social coalitions to get funding as their contributions are dispersed through member organizations and the effect they have on government policies, for example. The terms of these instruments may be set to overpay for more readily achievable goals. Doing so would increase long term government spending and divorce such spending from direct deliverables.
• More donor influence — donors, or now investors, will want to make sure their money is being used according to contract, and will therefore want to be more involved in the delivery of social services. They may want NGOs to adopt a style of delivery used in for profit business.
• Unfair competition — among NGOs will emerge. Agencies that secure funds will be able to operate in areas where NGOs now operate, but they will have greater resources, more narrowly defined goals (and therefore successes to publicize) and will set the standard for government funded agencies and their actions.
• Reduces public responsibility — by reducing the government's responsibilities and accountability for delivering services. Though governments may not genuinely represent their societies, they are still the best representatives of the public will and governments play an important role in maintaining a civil society sector. Devolving Social services to businesses risks this social contract when other tax and program options can be made available.
• Non-tradability — New Zealand economist Ronnie Horesh argues that because SIBs are not tradable, SIBs favour existing institutions, are inherently narrow and short-term in scope, and impose relatively high monitoring costs.
• Not required — Social Programs targeted to be transferred into social impact bonds are targeted because they are compatible with the SIB structure, not because of the merits of SIB or out of dire need.
• Financialization of public services — social impact bonds require a clear measurement of the costs and outcomes of the programs, which encourages SIB projects to "focus on financial targets rather than eliminating the underlying cause of the social problem at hand".

Existing SIB initiatives

Governments across the world are currently piloting SIB initiatives. Below are a few examples of these initiatives.

Public safety and recidivism

United Kingdom

On 18 March 2010, Secretary of State for Justice Jack Straw announced a six-year Social Impact Bond (SIB) pilot scheme run by Social Finance that will see around 3,000 short term prisoners from Peterborough prison, serving less than 12 months, receiving intensive interventions both in prison and in the community. Funding from investors outside government will be initially used to pay for the services, which will be delivered by Third Sector providers with a proven track record of working with offenders. If reoffending is not reduced by at least 7.5% the investors will receive no recompense. The Social Impact Bond in Peterborough was launched by Secretary of State for Justice Kenneth Clarke MP and Prisons Minister Crispin Blunt on 10 September 2010.

United States

New York City: In February 2012, the City of New York issued a $9.6 million social bond for prisoner rehabilitation to be run by The Osborne Association with support from Friends of Island Academy. Goldman Sachs bought the bond and will profit if recidivism decreases. While the City of New York did not actually issue bonds or put up-front capital for MDRC to run the program (this was done by Goldman Sachs directly with MDRC), the City may be liable for some amount if the program is successful. An independent evaluation, performed by the Vera Institute of Justice, found the goal of reducing teenage recidivism by ten percent had not been met, at all, and the city paid nothing to Goldman Sachs.

New York State: In mid-2012, the New York State Department of Labor (DOL) selected Social Finance US as its intermediary partner in structuring an application for federal funding for a Social Impact Bond. In 2013, New York approved $30 million in its budget to support social impact bonds over the subsequent five years. In September 2013, New York State received a $12 million grant from the United States Department of Labor (USDOL) to fund a Pay for Success project designed to increase employment and reduce recidivism among 2,000 formerly incarcerated individuals in partnership with Social Finance US and the Center for Employment Opportunities. This was the largest grant awarded by USDOL for Pay for Success projects. Initial outcomes indicate that, at least in the first phase of these PFS projects, the interventions did not produce the desired impacts on reducing recidivism and improving employment among the target populations.

Massachusetts: On 1 August 2012, the Commonwealth of Massachusetts announced that Third Sector Capital Partners will serve as lead intermediary, in partnership with New Profit Inc., for the youth recidivism initiative. Roca, United Way of Massachusetts Bay and Merrimack Valley, and Youth Options Unlimited will also participate in the youth recidivism project.The program, called Social Innovation Financing, operates on a simple "pay for success" model, in which nonprofits must demonstrate that by keeping youth from being reincarcerated. According to the state's press release, the juvenile justice contract "will be designed with the specific goal of reducing recidivism and improving education and employment outcomes over several years for a significant segment of the more than 750 youth who exit the juvenile justice system, and the several thousand who exit the probation system annually."

Federal: The U.S. Department of Justice gave "Priority Consideration" to Fiscal Year 2012 Second Chance Act grant applications that include a Pay for Success component. The Second Chance Act (P.L. 110-199) authorizes federal grants to support services that help reduce recidivism. In 2013, the U.S. Department of Labor awarded nearly $24 million in grants for Pay for Success projects that provide employment services to formerly-incarcerated individuals in order to increase employment and reduce recidivism.

Australia

The Government of New South Wales, Australia, announced on 20 March 2012 that it will develop a pilot to reduce adult recidivism with Social Ventures Australia and Mission Australia. Several States in Australia have now launched social impact bonds - the latest of which is Victoria which, on 21 December 2017, announced the conclusion of a SIB deal with Sacred Heart Mission. Key external advisers to Sacred Heart Mission were Latitude Network. Also in 2017, Social Ventures Australia funded the Aspire Social Impact Bond, marking the first SIB in South Australia.

Rough sleeping and chronic homelessness

United Kingdom

Housing Minister Grant Shapps and London Mayor Boris Johnson announced in March 2012 that a Social Impact Bond would be launched to help London's persistent rough sleepers off the streets and into secure homes. The two bonds issued under this programme were launched in December 2012.

One successful SIB in the UK is the GM Homes Partnership in Manchester which took on 356 long-term rough sleepers. According to The Guardian, three years on, in 2021, 79% of those are still accommodated with several having started employment or training and other receiving help for their mental health.

United States

Massachusetts: In the second of two pilots launched by Massachusetts in 2012, Third Sector Capital Partners joined with the Massachusetts Housing and Shelter Alliance (MHSA), lead intermediary for a chronic homelessness project, as well as the Corporation for Supportive Housing and United Way. The Massachusetts Housing and Shelter Alliance represents nonprofit housing organizations that provide housing and support services, such as medical care and vocational training. The consortium' goal was to raise the number of housing units it provides to around 600 from 220.

Australia

Australia's second Social Impact Bond focused on chronic homelessness was launched on 21 December 2017 by the Victorian Minister for Housing, Disability and Ageing. The SIB will be focused on three cohorts of 60 individuals, providing rapid housing and wrap-around, individualised, case-management support for three years each. The SIB provides expansion capital for Sacred Heart Mission's 'Journey to Social Inclusion' program which had previously been through pilot testing. Lead external advisors for this SIB deal were Latitude Network.

Health

United States

Fresno, CA: In April 2013 Social Finance US and Collective Health launched an asthma management demonstration project in Fresno, California. Fresno is one of the nation's asthma hot spots; around 20 percent of its children have been diagnosed with the disease, which takes an especially heavy toll among poor communities. Two service providers, Central California Asthma Collaborative and Clinica Sierra Vista, will work with the families of 200 low-income children with asthma to provide home care, education, and support in reducing environmental triggers ranging from cigarette smoke to dust mites.

Communities

United Kingdom

The chief secretary to the Treasury, Liam Byrne, announced that Social Impact Bond trials could be expanded across government departments. "The Department for Children, Schools and Families have pledged to explore the potential of SIBs to lever in additional resources to support early intervention approaches with children and young people", he said in Parliament. "Communities and Local Government are also working with Leeds City Council and NHS Leeds to enable them to use a SIB approach to reduce health and social care costs among older people. Similarly Bradford Metropolitan District Council are considering applying this model as part of their involvement in the government's Total Place programme."

United States

Federal: The U.S. Department of Housing and Urban Development (HUD) announced in 2013 it will provide $5 billion in grant dollars to assist in the rebuilding and strengthening effort following Hurricane Sandy and encouraged the five states impacted by the storm to make use of Pay for Success strategies where appropriate. In 2013, the Department of the Treasury issued a Request for Information (RFI) that will help design a proposed $300 million Incentive Fund to further expand Pay for Success. The Fund is intended to encourage cities, states and nonprofits to test new Pay for Success models. This same Fund was also part of the President's commitment of nearly $500 million in the 2013 Budget to expand Pay for Success strategies.

Children and families

United Kingdom

Social Finance worked with UK local authorities to assess the potential for social impact bonds to improve family support services. These studies assessed the potential of social impact bonds to fund preventive and early intervention services which improve outcomes for children and generate cost savings for Local Authorities.

In March 2012 Manchester City Council announced a social impact bond to fund multi-dimensional treatment foster care.

Australia

New South Wales: The Government of New South Wales, Australia, announced on 20 March 2012 that it will develop three pilots in the area of child protection, foster care and juvenile justice. One of the child protection pilots is with a consortium involving the Benevolent Society, Westpac Bank and the Commonwealth Bank of Australia. The other child protection pilot is led by UnitingCare Burnside, a division of UnitingCare Australia. The juvenile justice pilot to be delivered by Mission Australia did not go ahead.

United States

Utah: In August 2013, the Goldman Sachs Urban Investment Group (UIG) together with the United Way of Salt Lake and J.B. Pritzker formed a partnership to create the first ever Social Impact Bond designed to finance early childhood. Goldman Sachs and Pritzker jointly committed up to $7 million to finance The Utah High Quality Preschool Program, a high impact and targeted curriculum focused on increasing school readiness and academic performance among at-risk 3 and 4 year olds in Utah.

Illinois: On 5 May 2014, the State of Illinois announced the state's first Pay for Success (PFS) contract will increase support for at-risk youth who are involved in both the child welfare and juvenile justice systems in Illinois. The first contract awarded under this innovative initiative will go to One Hope United, in partnership with the Conscience Community Network (CCN).

Canada

Saskatchewan:

"[In 2014], Saskatchewan announced its first SIB, a $1 million project to provide assisted living to young single mothers at risk in Saskatoon, designed to reduce the number of children taken into care. [...] This is a five year project which will return the original investment and a 5% return to the funders if 22 children remain with their mothers for six months after leaving the Sweet Dreams assisted living home. The return will be pro-rated if 17 to 21 children stay with their mothers and nothing, neither the original investment nor the return, will be paid if fewer than 17 children remain with their mothers."

Early stage exploration

United States

States across the country are currently exploring opportunities to use social impact bonds to achieve their social goals, including:

• California: In August 2013, Santa Barbara County released a Request for Information on social impact bonds and approved a feasibility study to explore the potential use of pay for success financing in reducing prisoner recidivism; additionally, Santa Clara agreed to fund a pilot project exploring SIB feasibility. By 2015, Santa Clara County had implemented an SIB known as Project Welcome Home, administered by a local non-profit and focused on housing the highest-need homeless people over six years.
• Colorado: In June 2013, Colorado and Denver were selected to receive support from a Harvard Kennedy School SIB Technical Assistance Lab (SIB Lab) fellow. Both jurisdictions have released a "Request for Information" (RFI) on SIBS. Denver's was implemented by February 2016. This, like Santa Clara's, focused on reducing chronic homelessness and the negative social phenomena associated therewith.
• Connecticut: In 2013, the Department of Children and Families released a Request for Information to explore how social impact bonds might be used to address substance abuse among families involved in the child welfare system.
• Illinois: In April 2013, Governor Quinn announced that the State would pursue a Social Impact Bond program with technical support from the Harvard SIB Lab. In September, Illinois issued a "Request for Proposal" (RFP), focused on youth engaged in the juvenile justice and/or foster care systems.
• Maryland: In 2013, Social Impact Bond legislation was introduced to the Committee on Appropriations in the Maryland House of Delegates.
• Michigan: In September 2013, Michigan was selected to receive support from the SIB Lab to develop pay for success programs funded by social impact bonds. The state initiated an RFI to obtain initial input about potential projects.
• New Jersey: In December 2012, the State Assembly Commerce and Economic Development Committee approved the New Jersey Social Innovation Act, which would establish a five-year pilot program to attract private funding to finance social services. The target areas are prevention and early intervention health care for low-income and uninsured people, in order to reduce government health care spending.
• North Carolina: In 2013, the Center for Child and Family Policy at Duke University began exploratory work around using SIBS for dissemination of a universal home visiting program known as Durham Connects found to reduce emergency care in infants.
• Ohio: In November 2012, Cuyahoga County released an RFP on funding social service programs through pay-for-success contracts. In the summer of 2013, the state of Ohio was selected to receive assistance from the SIB Lab.
• Oregon: The Governor's 2013-2015 budget proposal included $800,000 for the Early Learning Division. The funds are intended to cover start-up costs for a "Pilot Prevention Health and Wellness Demonstration Project for Social Impact Financing."
• South Carolina: In June 2013, South Carolina was selected to receive assistance from the SIB Lab and looks to use the support to develop a home-visiting program. In September 2012, the state issued an RFI related to Social impact bonds.
• Washington, D.C.: The District of Columbia initiated a Request for Qualifications in September 2013 for a feasibility study of DC Social impact bonds.

Canada

• In 2014, the government of Alberta created the Social Innovation Endowment Account to "fund the promotion and development of social impact bonds in Alberta".
• The government of Ontario included Social Impact Bonds in the list of innovative social financial tools to be explored as of 2016.

Mexico

• "El Futuro en Mis Manos" was piloted in 2016 in the Guadalajara metropolitan area and, over 30 months, provided support to more than 1300 female-headed households.

Education

Russia

• Yakutia: During the St. Petersburg International Economic Forum in June 2019, VEB.RF, the Far East Development Fund, Higher School of Economics and the Government of the Sakha (Yakutia) Republic formally agreed to carry out the first pilot SIB in the Republic of Sakha (Yakutia). The project is scheduled for implementation in 2019–2022 and designed to improve schoolchildren's academic performance. The project aims to improve the quality of general education, make human resources more competitive and transform the management mechanism of general education. About 5,000 children from 28 schools (including eight underfilled and three small-scale establishments) in the Khangalassky Municipal District are involved in the project. The project's social outcomes are measured using an educational performance index calculated as a weighted total of grades in the State Final Examinations (Basic State Examination and Unified State Examination) and academic competitions. Higher School of Economics was selected to implement the project. During three years, HSE leading experts will give the schoolchildren additional lessons (including under a distance learning programme), assist the schools in preparing personal education plans, train project managers and teachers, help the schools to organise professional communities, partnerships and educational networks, act as mentors for teachers and principals, and engage parents, the local community and businesses. The project should have a sustainable model, enabling local teachers and managers to develop their own education systems on completion of the project. The project should be able to be extended to other Russian regions. “The Far East and Baikal Region Development Fund is the project’s investor. This project is important to us, because if we achieve positive social outcomes, the project’s approaches and methods can be implemented across the Republic of Sakha (Yakutia) and in other Far Eastern regions,” CEO of the Far East and Baikal Region Development Fund Alexei Chekunkov said. The Russian Ministry of Finance drafted a Government resolution with guidelines for the regions on the implementation of pilot social impact projects in 2019–2024 in order to promote pay-for-success financing for social outcomes.

International Development Assistance

United Nations Development Programme and EBRD pilot social impact bond in Armenia with the focus on improving the lives of smallholder farmers in the Shirak region, Slovak Republic (Ministry of finance) provided funding for the donor study.

Intermediaries and technical assistance providers

A list of over 20 intermediaries and providers of technical assistance in the UK is maintained as part of the Big Lottery Fund's Commissioning Better Outcomes programme.

Publications

Social Finance UK (2009) Social Impact Bonds: Rethinking finance for social outcomes

Social Finance UK (2010) Towards a New Social Economy: Blended value creation through Social Impacts Bonds

Young Foundation (2010) Social Impact Investment: the challenge and opportunity of Social Impact Bonds

Social Finance UK (2011) A Technical Guide to Developing Social Impact Bonds

Centre for American Progress (2011) Social Impact Bonds

Impact Economy (2011) Four Revolutions in Global Philanthropy

Social Finance (2011) Technical Guide to Commissioning Social Impact Bonds

Social Finance (2011) Social Impact Bonds: The One Service, One Year On

Rand Corporation (2011) Lessons learned from the planning and early implementation of the Social Impact Bond at HMP Peterborough, RAND Europe, 2011

Social Finance US (2012) A New Tool for Scaling Impact: How Social Impact Bonds Can Mobilize Private Capital to Advance Social Good

Benjamin R. Cox (2012) Financing Homelessness Prevention Programs with Social Impact Bonds

Maryland Department of Legislative Services (2013) Evaluating Social Impact Bonds as a New Reentry Financing Mechanism: A Case Study on Reentry Programming in Maryland. 

Third Sector Capital Partners (2013) Case Study: Preparing for a Pay for Success Opportunity

Social Market Foundation (2013) Risky Business: Social Impact Bonds and public services

The New Zealand Initiative (2015) Investing for Success: Social Impact Bonds and the future of public services

Government Outcomes Lab (2018) Building the tools for public services to secure better outcomes: Collaboration, Prevention, Innovation.

Government Outcomes Lab (2018) Are we rallying together? Collaboration and public sector reform.

Green bond

From Wikipedia, the free encyclopedia

A Green bond (also known as climate bond) is a fixed-income financial instruments (bond) which is used to fund projects that have positive environmental and/or climate benefits. They follow the Green Bond Principles stated by the International Capital Market Association (ICMA), and the proceeds from the issuance of which are to be used for the pre-specified types of projects.

Like normal bonds, climate bonds can be issued by governments, multi-national banks or corporations and the issuing organization repays the bond and any interest. The main difference is that the funds will be used only for positive climate change or environmental projects. This allows investors to target their environmental, social, and corporate governance (ESG) goals by investing in them. They are similar to Sustainability Bonds but sustainability bonds also need to have a positive social outcome.

History

Climate bonds were first proposed in the 2000s, and have grown rapidly since then. As of 2016, the total volume of climate bonds was estimated at 160 billions of dollars; of which 70 billions were issued in 2016. The labelled volume of bonds issued in 2019 was US$255 billion. Climate and green bonds have now been issued by thousands of issuers around the world, including sovereigns, banks and companies of all sizes, and local governments.

Voters in the City of San Francisco approved a revenue bond authority in 2001, in the form of a city charter amendment (Section 9.107.8) known as the "solar bonds," to finance renewable energy and energy conservation measures on homes, businesses and government buildings. The campaign for solar bonds, Proposition H, was motivated by the need for the city to take meaningful action on climate change. The solar bond authority was being used as part of the city's renewable energy program, administered by the San Francisco Public Utilities Commission, CleanPowerSF.

The European Investment Bank issued an equity index-linked bond in 2007, which became the first fixed income product among socially responsible investments. This "Climate Awareness Bond" structure was used to fund renewable energy and energy efficiency projects. Afterwards, The World Bank became first in the world to issue a labelled "green bond" in 2008, which followed a conventional "plain vanilla" bond structure, contrary to the European Investment Bank's equity-linked Climate Awareness Bond.

The green bond market has subsequently increased rapidly in issuance. From 2015 to 2016, the Climate Bonds Initiative reports that there was a 92% increase in green bonds issuance to $92 billion, with different types of issuers starting to issue green bonds. Apple, for example, became the first tech company to issue a green bond in 2016, and Poland became the first sovereign country to issue a green bond at the end of 2016. In 2021, the European Investment Bank was the leading issuer of green and sustainability bonds among multilateral development banks, with sustainability funding reaching €11.5 billion equivalent.

As of at least 2017, China held the largest share (23%) of the green bond market.

In 2020, the UK's first ever local government green bond, for West Berkshire Council, closed after reaching its £1mn target five days early. Announced on Wednesday 14 October 2020, 22% of the funds raised came from West Berkshire residents, who invested an average of £3,500. The Community Municipal Investment attracted 640 investors in total. In September 2021, the UK's inaugural "green gilt" sale drew over £100bn from investors, making it the highest ever for a UK government bond sale.

In Canada, The Community Bond, an innovation in social finance that allows benevolent organizations to issues bonds outside of traditional regulatory oversight, is being used as a "Green Bond" by environmental groups like Solarshare to build community owned solar farms, ZooShare to finance a biogas plant, and Hallbar.org as means to finance energy saving home upgrades and LEED certified building construction.

In 2022, the European Investment Bank issued EUR 19.9 billion in Climate and Sustainability Awareness Bonds, and increased its climate and sustainability funding portion of overall investment from 21% in 2021 to 45% in 2022. On 21 December 2024, the European Union Green Bonds Regulation comes into force, allowing the issue of "European Green Bond" (or "EuGB") by companies, regional or local authorities and EEA supra-nationals.

Description

Climate bonds are issued in order to raise finance for climate change solutions: climate change mitigation or adaptation related projects or programs. These might be greenhouse gas emission reduction projects ranging from clean energy to energy efficiency, or climate change adaptation projects ranging from building Nile delta flood defences or helping the Great Barrier Reef adapt to warming waters.

Like normal bonds, climate bonds can be issued by governments, multi-national banks or corporations. The issuing entity guarantees to repay the bond over a certain period of time, plus either a fixed or variable rate of return.

Most climate bonds are asset-backed, or ringfenced, with investors being promised that all funds raised will only go to specified climate-related programs or assets, such as renewable energy plants or climate mitigation focused funding programs.

In their UNEP paper on investors and climate change, Mackenzie and Ascui differentiate a climate bond from a green bond: "(A climate bond is) an extension of the green bond concept. Green bonds are issued [...] in order to raise the finance for an environmental project. Climate bonds [are] issued [...] to raise finance for investments in emission reduction or climate change adaptation."

The London-based Climate Bonds Initiative provides the world's first Certification program for climate bonds. This has been used as a model for various countries to set up their own green bond listing guidelines.

Climate bonds are theme bonds, similar in principle to a railway bond of the 19th century, the war bonds of the early 20th century or the highway bond of the 1960s. Theme bonds are designed to:

• Allow institutional capital - pension, government, insurance and sovereign wealth funds - to invest in areas seen as politically important to their stakeholders that have the same credit risk and returns profile as standards bonds.
• Provide a means for governments to direct funding to climate change mitigation. For example, this might be done by choosing to privilege qualifying bonds with preferential tax treatments.
• Send a political signal to other stakeholders.

Otherwise, for operational purposes, theme bonds largely function as conventional debt instruments. They are risk-weighted and credit rated in the usual way based on the creditworthiness of the issuer, and tradable, market conditions permitting, in international secondary bond markets. These instruments can theoretically be issued at all levels of the fixed income market, from sovereigns to corporate.

Benefits of green bonds

The growth of bond markets provides increasing opportunities to finance the implementation of the Sustainable Development Goals, Nationally Determined Contributions and other green growth projects. A UN conference held on the Sustainable Development Goals in 2021 emphasized the importance of sustainable bonds, and stated that of the approximately €300 trillion of financial assets on the markets, only 1% would be needed to achieve the SDGs. Green bonds are becoming an increasingly prevalent form of green finance, particularly for clean and sustainable infrastructure development and their large funding needs. They offer a vehicle to both access finance from the capital markets and deliver green impacts that can be verified against standards. In developing countries, green bonds are already financing critical projects, including renewable energy, urban mass transit systems and water distribution.

Green bonds mobilised over $93 billion in 2016 to projects and assets with positive environmental impacts.

Of total global bond issuance, however, this is still around just 1%.

According to a report by the Climate and Development Knowledge Network and PricewaterhouseCoopers, a green bond market has three key benefits to a country and its environmental goals and commitments.

• It increases the finance available for green projects, therefore incentivising an increase in their number. Today, green bonds mainly finance projects within renewable energy, energy efficiency, low-carbon transport, sustainable water, and waste and pollution.
• It is a viable vehicle for enabling the increasing pool of sustainable investors to access environmental projects. Bonds are an instrument and an approach with which foreign investors are familiar, so these institutions need little new understanding or capacity. Investors are also interested in placing money where the environmental impact achieved is highest per unit of currency, and emerging and developing economies have the potential to offer this where lower project costs exist.
• It can be a catalyst for further development of the domestic capital market and financial system more broadly beyond environmentally related projects.

Demand for green bonds

The Business and Sustainable Development Commission describes at least US$12 trillion in market opportunities for business from sustainable business models.

The United Nations estimates an annual funding gap of $2.5 trillion is needed for the achievement of the Sustainable Development Goals (SDGs), and of this, US$1 trillion is needed annually for clean energy alone. A large number and broad range of projects and assets that contribute to achieving the 17 SDGs need this funding for their development and operations.

One of the SDGs where 'green finance' has been successfully mobilised is on clean energy and climate action. The Paris Agreement on climate change entered into force in November 2016, after 196 countries committed to reducing greenhouse gas emissions. Significant quantities of finance are now needed to convert country commitments (Nationally Determined Contributions, NDCs) to implementation and a low-carbon, climate-resilient economy.

Despite recent increases in volumes of climate finance, a significant funding gap will arise unless new sources and channels of finance are mobilised.

Existing international public finance dedicated to climate change is unable to achieve the rapid change required in meeting the finance gap alone. Furthermore, public sector balance sheets do not have the capacity to fund the amounts needed, and so an estimated 80–90% of funding will need to come from the private sector.

Bank balance sheets can take only a proportion of the private finance needed so the capital markets have to be leveraged, along with other sources such as insurance and peer-to-peer.

According to Guide: New markets for green bonds, the demand for green bonds has grown quickly on the investor side, with asset owners and managers diversifying their investment portfolios and seeking positive impact beyond financial return. In the light of the global commitment to shift to a green and low-carbon economy, the green bond market has the potential to grow substantially, while attracting more diverse issuers and investors. The number of green bonds continue growing daily.

Emerging and frontier markets are building the markets, financing facilities, and investment-grade debt and equity products for climate bonds and green investments more aggressively than most Western, developed economies.

Green bond reporting

The issuance of green bonds has led to considerable debate due to the lack of uniform rules governing them. Two primary voluntary regulatory standards govern the issuance of green bonds: the privately established Green Bond Principles (GBP) by the International Capital Market Association (ICMA) and the publicly organized Green Bond Standard (GBS) by the European Union. Both frameworks aim to achieve standardization within the green bond market, providing a uniform standard for varying stakeholder groups.

Despite the increased push for standardization, disparities persist in the issuance of green bonds, their post-reporting practices, and their alignment with issuer climate targets. Many issuers fall short in establishing long-term climate goals, frequently limiting their targets to a 10-year horizon. As a result, one key study found that green bonds predominantly serve short-term objectives, offering limited support for achieving long-term climate goals. Additionally, there is a lack of detailed breakdowns regarding how the capital raised through green bonds is allocated to specific projects, highlighting the need for enhanced transparency and reporting practices.

Criticism and controversies

The green bond market has attracted international criticism with some questioning the green credentials of certain bonds. This criticism pertains both to the projects that are funded, as well as the sustainability credentials of the issuers. In May 2017, the Climate Bonds Initiative refused to list a "green" bond issued by Repsol. The bonds proceeds would be allocated to initiatives meant to improve the efficiency of the company's oil and gas production operations. The non-governmental organization argued that even though the projects would reduce CO₂ emissions, the company's sustainability strategy did not go far enough from an environmental perspective to classify it as green. This criticism was extended to Vigeo Eiris, the company that reviewed the Repsol bond's green credentials. In 2016, Vigeo Eiris was involved in another green bond controversy. They were targeted by Western Sahara Resource Watch, a non-governmental organization backed by a Norwegian trade union, after it reviewed a green bond that would fund the production of solar projects by a Moroccan government agency in the illegally occupied territory of Western Sahara.

More generally, the academic community and market participants have identified the susceptibility of voluntary green-labelling to greenwashing and adverse selection as a function of the perceived lack of regulatory oversight and the inherent, albeit anecdotal, capital arbitrage opportunity presented to some issuers through the green pricing premium, or "greenium". In the primary market, this premium can exhibit varying spreads, ranging from -85 to +213 basis points, while the secondary market typically observes a more conservative average "greenium" of -1 to -9 basis points.

Enemy of the people

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Enemy_of_the_people

Hostis publicus: In the year 49 BCE, the Roman Senate declared Julius Caesar the enemy of the people of Rome

The terms enemy of the people and enemy of the nation are designations for the political opponents and for the social-class opponents of the power group within a larger social unit, who, thus identified, can be subjected to political repression. In political praxis, the term enemy of the people implies that political opposition to the ruling power group renders the people in opposition into enemies acting against the interests of the greater social unit, e.g. the political party, society, the nation, etc.

In the 20th century, the politics of the Soviet Union (1922–1991) much featured the term enemy of the people to discredit any opposition, especially during the régime of Stalin (r. 1924–1953), when it was often applied to Trotsky. In the 21st century, the former U.S. president Donald Trump (r. 2017–2021) regularly used the enemy of the people term against critical politicians and journalists.

Like the term enemy of the state, the term enemy of the people originated and derives from the Latin: hostis publicus, a public enemy of the Roman Empire. In literature, the term enemy of the people features in the title of the stageplay An Enemy of the People (1882), by Henrik Ibsen, and is a theme in the stageplay Coriolanus (1605), by William Shakespeare.

Origins

Rome: the Republic and the Empire

The expression enemy of the people dates to Imperial Rome. The Senate declared Emperor Nero a hostis publicus in 68 CE. Its direct translation is "public enemy". Whereas "public" is currently used in English to describe something related to collectivity at large, with an implication towards government or the State, the Latin word "publicus" could, in addition to that meaning, also refer directly to people, making it the equivalent of the genitive of populus ("people"), populi ("popular" or "of the people"). Thus, "public enemy" and "enemy of the people" are, etymologically, near synonyms.

French Revolution

The words ennemi du peuple were used extensively during the French Revolution. On 25 December 1793 Robespierre stated: "The revolutionary government owes to the good citizen all the protection of the nation; it owes nothing to the Enemies of the People but death". The Law of 22 Prairial in 1794 extended the remit of the Revolutionary Tribunal to punish "enemies of the people", with some political crimes punishable by death, including "spreading false news to divide or trouble the people".

Marxist–Leninist states

Soviet Union

The Soviet Union made extensive use of the term vrag naroda (Russian: враг народа), literally meaning enemy of the people. The term was first used in a speech by Felix Dzerzhinsky, the first chairman of the Cheka, after the October Revolution. The Petrograd Military Revolutionary Committee printed lists of "enemies of the people", and Vladimir Lenin invoked it in his decree of 28 November 1917:

...all leaders of the Constitutional Democratic Party, a party filled with enemies of the people, are hereby to be considered outlaws, and are to be arrested immediately and brought before the revolutionary court.

Other similar terms were in use as well:

• enemy of the labourers (враг трудящихся, vrag trudyashchikhsya)
• enemy of the proletariat (враг пролетариата, vrag proletariata)
• class enemy (классовый враг, klassovyi vrag), etc.

The term "enemy of the people" was used in the 1936 Constitution of the Soviet Union, in Article 131 about public property: "Persons who encroach on public, socialist property are enemies of the people."

The term "enemy of the workers" was formalized in the Article 58 (RSFSR Penal Code), and similar articles in the codes of the other Soviet Republics.

At various times these terms were applied, in particular, to Tsar Nicholas II and the Imperial family, aristocrats, the bourgeoisie, clerics, business entrepreneurs, anarchists, kulaks, monarchists, Mensheviks, Esers, Bundists, Trotskyists, Bukharinists, the "old Bolsheviks", the army and police, emigrants, saboteurs, wreckers (вредители, "vrediteli"), "social parasites" (тунеядцы, "tuneyadtsy"), Kavezhedists (people who administered and serviced the Chinese Eastern Railway, abbreviated KVZhD, particularly the Russian population of Harbin, China), and those considered bourgeois nationalists (notably Russian, Ukrainian, Belarusian, Armenian, Lithuanian, Latvian, and Estonian nationalists, as well as Zionists and the Basmachi movement).

After 1927, Article 20 of the Common Part of the penal code that listed possible "measures of social defence" had the following item 20a: "declaration to be an enemy of the workers with deprivation of the union republic citizenship and hence of the USSR citizenship, with obligatory expulsion from its territory". Nevertheless, most "enemies of the people" suffered labor camps, rather than expulsion.

Rejection of the phrase

On 25 February 1956, Nikita Khrushchev delivered a speech to the Communist Party in which he identified Stalin as the author of the phrase and distanced himself from it, saying that it made debate impossible. "This term automatically made it unnecessary that the ideological errors of a man or men engaged in a controversy be proven," Khrushchev said. "It made possible the use of the cruelest repression, violating all norms of [...] legality, against anyone who in any way disagreed with Stalin, against those who were only suspected of hostile intent, against those who had bad reputations ... The formula ‘enemy of the people’ was specifically introduced for the purpose of physically annihilating such individuals."

Resurgence

For decades afterwards, the phrase "was so omnipresent, freighted and devastating in its use under Stalin that nobody [in Russia] wanted to touch it. ... except in reference to history and in jokes", according to William Taubman in his biography of Khrushchev.

However, the term returned to Russian public discourse in the late 2000s with a number of nationalist and pro-government politicians (most notably Ramzan Kadyrov) calling for restoration of the Soviet approach to the "enemies of the people" defined as all non-system opposition.

On 28 December 2022, Dmitry Medvedev, Deputy Secretary of the Security Council of Russia, said that Russians who fled Russia after the invasion of Ukraine and are opposed to the war should be labeled "enemies of society" and barred from returning to Russia.

Cambodia and China

According to Philip Short, an author of biographies of Mao Zedong and Cambodia's Khmer Rouge leader Pol Pot, in domestic political struggles Chinese and Cambodian communists rarely if ever used the phrase "enemy of the people" as they were very nationalistic and saw it as an alien import.

In 1957, in the speech and in the essay On the Correct Handling of Contradictions Among the People, Mao said that: "At the present stage, the period of building socialism, the classes, strata and social groups which favour, support and work for the cause of socialist construction all come within the category of the people, while the social forces and groups which resist the socialist revolution and are hostile to or sabotage socialist construction are all enemies of the people."

Albania

Enemy of the people (Alb: Armiku i popullit) in Albania were the enemy typology of the Communist Albanian government used to denounce political or class opponents. The term is today considered totalitarian, derogatory and hostile. There are still some politicians who use the term on political opponents with the intention of dehumanization.

After the communist takeover, many who were labeled with this term were executed or imprisoned. Enver Hoxha declared religious leaders, landowners, disloyal party officials, clerics and clan leaders as "enemies of the people". This is said to have led to the death of 6,000 people. Thousands were sentenced to death. From 1945 to 1992, around 5,000 men and women were executed and close to 100,000 were sent to prison as they were labeled enemies of the people. Many who were targeted held important leadership positions in the party and state structures of the regime. Hoxha also used the term against the Soviet Union and the US when he spoke: "as to ’Albania being only one mouthful’, watch out, gentlemen, for socialist Albania is a hard bone that will stick in your throat and choke you!". On 1 June 1945, The Albanian Central Commission for the Discovery of Crimes, of War Criminals and Enemies of the People requested the International Commission for the Discovery of Crimes and War Criminals to hand over a number of Albanian war criminals found in concentration camps in Italy such as Bari, Lecce, Salerno and others. In 1954, Hoxha condemned the American and British liberation of Albania calling them "enemies of the people". In the 1960s, many Albanian migrants returned from Austria and Italy after having fled in the 1940s, and despite having been promised not to be punished, were immediately arrested as "enemies of the people". In 1990, Ismail Kadare applied for political asylum in France, which was granted, resulting in him being condemned by Albanian officials as an "enemy of the people".

Nazi Germany

Regarding the Nazi plan to relocate all Jews to Madagascar, the Nazi tabloid Der Stürmer wrote that "The Jews don't want to go to Madagascar – They cannot bear the climate. Jews are pests and disseminators of diseases. In whatever country they settle and spread themselves out, they produce the same effects as are produced in the human body by germs. ... In former times sane people and sane leaders of the peoples made short shrift of enemies of the people. They had them either expelled or killed."

United States in the 1960s

In the United States during the 1960s, organizations such as the Black Panther Party and Students for a Democratic Society were known to use the term. In one inter-party dispute in February 1971, for example, Black Panther leader Huey P. Newton denounced two other Panthers as "enemies of the people" for allegedly putting party leaders and members in jeopardy.

Usage in the 2010s

United Kingdom

Main article: Enemies of the People (headline)

During the aftermath of the referendum on membership of the European Union, the Daily Mail was criticized for a headline describing judges (in the Miller case) as "Enemies of the People" for ruling that the process for leaving the European Union (i.e. the triggering of Article 50) would require the consent of the British Parliament. The May administration had hoped to use the powers of the royal prerogative to bypass parliamentary approval. The paper issued character assassinations of all the judges involved in the ruling (Lord Chief Justice Lord Thomas, Sir Terence Etherton, and Lord Justice Sales), and received more than 1,000 complaints to the Independent Press Standards Organisation. The Secretary of State for Justice, Liz Truss, issued a three-line statement defending the independence and impartiality of the judiciary, which some saw as inadequate due to the delayed response and failure to condemn the attacks.

Donald Trump

See also: 2018 threats against the Boston Globe and List of nicknames used by Donald Trump

Donald J. Trump
@realDonaldTrump

The FAKE NEWS media (failing @nytimes, @NBCNews, @ABC, @CBS, @CNN) is not my enemy, it is the enemy of the American People!

18 February 2017

Donald Trump at the Conservative Political Action Conference in 2017

In 2012, longtime Democratic pollster Patrick Caddell gave a speech at a conference sponsored by Accuracy in Media, a conservative watchdog group, in which he called the media “the enemy of the American people.” In 2013, Caddell signed on as a contractor for Robert Mercer. On 17 February 2017, hours after meeting Caddell while touring a Boeing aircraft plant in North Charleston, South Carolina, President of the United States Donald Trump declared on Twitter that The New York Times, NBC News, ABC, CBS, and CNN were "fake news" and "the enemy of the American People". Trump repeated the assertion on 24 February at the Conservative Political Action Conference, saying, "A few days ago I called the fake news the enemy of the people and they are. They are the enemy of the people." At a 25 June 2018 rally in South Carolina, Trump singled out journalists as "fake newsers" and again called them "the enemy of the people". Some commentators tried to link these comments to a mass shooting at the offices of a newspaper publisher in Annapolis, Maryland, that took place only days later, on 28 June, but the incident turned out not to be related. During his term, Trump prevented two CNN White House correspondents, Kaitlan Collins and Jim Acosta, from attending certain events.

On 19 July 2018, following the critical reaction to his meeting with Russian President Vladimir Putin on 15 July 2018 in Helsinki, Finland, Trump tweeted "The Summit with Russia was a great success, except with the real enemy of the people, the Fake News Media." The New York Times noted Trump's use of this phrase during his "moments of peak criticism" and use of the term by Nazi and Soviet propaganda.

On 2 August 2018, after Trump tweeted "FAKE NEWS media... is the enemy of the American People", multiple international institutions such as the United Nations and the Inter-American Commission on Human Rights criticized Trump for his attacks on the free press. On 16 August 2018, the United States Senate, in a symbolic rebuke to Trump, passed by unanimous consent a resolution affirming that the media is not "the enemy of the people" and reaffirming "the vital and indispensable role the free press serves."

From his inauguration on 20 January 2017 through 15 October 2019, Trump used Twitter to call the news media the "enemy of the people" 36 times. In August 2019, when journalist Jonathan Karl asked him if he feared that his supporters would interpret this as a justification for violence, Trump replied: "I hope they take my words to heart. I believe the press is the enemy of the people." In response to the recount process of the 2020 United States presidential election in Georgia, which certified Joe Biden as the winner of the state, Trump called Georgia Secretary of State Brad Raffensperger an "enemy of the people".

Redemption movement

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Redemption_movement

The redemption movement is an element of the pseudolaw movement, mainly active in the United States and Canada, that promotes fraudulent debt and tax payment schemes. The movement is also called redemptionism. Redemption promoters allege that a secret fund is created for every citizen at birth and that a procedure exists to "redeem" or reclaim this fund to pay bills. Common redemption schemes include acceptance for value (A4V), Treasury Direct Accounts (TDA) and secured party creditor "kits," collections of pseudolegal tactics sold to participants despite a complete lack of any actual legal basis. Such tactics are sometimes called "money for nothing" schemes, as they propose to extract money from the government by using secret methods. The name of the A4V scheme in particular has become synonymous with the movement as a whole.

Although the movement has maintained a following since the 1990s, its theories are false and meritless. Those who participate in redemption schemes, and especially those who promote them to other people, can face criminal charges and imprisonment. Several government institutions, including the FBI, have issued warnings about the fraudulent character of redemption schemes.

The ideas of the redemption movement should not be confused with the actual legal right of redemption, under which a debtor may buy back property that has been levied or foreclosed, either by paying the balance of the debt or by matching the price at which the property sells.

The redemption movement overlaps with the sovereign citizen movement, with several influential sovereign citizens promoting redemption schemes and ideas. Part of its concepts were also adopted by the Canadian-born freeman on the land movement and by various other pseudolaw "gurus", movements and litigants.

History

See also: Sovereign citizen movement, Radical right (United States), Pseudolaw, and Tax protester history in the United States

The redemption movement is an offshoot of the Posse Comitatus, an American far right organization which was established in 1969 by leaders of the white supremacist Christian Identity sect. The Posse's beliefs were rooted in antisemitism and they saw income tax, debt-based currency and debt collection as tools of Jewish control of the United States. It found an audience among farmers who were hit by an agricultural recession during the 1970s and 1980s.

One such supporter was Roger Elvick, a former North Dakota farmer who had lost his farm in a business deal. He became the national spokesman for the Committee of States, a Posse successor organization that engaged in open rebellion against tax authorities. According to the Anti-Defamation League, Elvick was associated with the Aryan Nations during the 1980s. Elvick sold a book, The Redemption Package, that encouraged people to claim large refunds and information rewards from the Internal Revenue Service (IRS) and then pay their debts with "sight drafts" (worthless checks) issued by his own company, Common Title Bond & Trust. Elvick was convicted and imprisoned for his activities, as were several of his accomplices.

Debt cancellation schemes and prosecutions which were similar to Elvick's continued through the 1990s, including Family Farm Preservation and the Montana Freemen. Elvick resumed his activities after his release in 1997, giving seminars around the country, and the use of redemption schemes surged.

By the late 1990s, the belief in the existence of a secret bank account, attached to each individual and containing large sums of money, had become a fixture of redemption schemes. The origin of this idea is not clear, but elements of it appeared in Lodi v. Lodi (1981, Shasta County, California). In that case, plaintiff Oreste Lodi sued "Oreste Lodi, Beneficiary", produced a birth certificate as evidence that the defendant controlled his estate, and served his complaint upon the IRS. The Shasta County Superior Court dismissed plaintiff Lodi's case for failure to state a claim. An appeals court upheld the dismissal, agreeing that "Plaintiff's birth certificate did not create a charitable trust" and that the case was a "slam-dunk frivolous complaint".

Around 1999, Elvick conceived the strawman theory, which states that legal and financial claims brought against an individual are really claims against a fictitious legal person or "strawman". The theory builds on and ties together several pseudolegal concepts alleging that government authority is illegitimate, as well as monetary and banking conspiracy theories, and also incorporates the belief in a secret government-controlled bank account. The strawman, Elvick alleged, was in possession of the secret account, but the individual was its rightful owner and could petition for access.

The theory also gives a specific role to the Uniform Commercial Code, which provides an interstate standard for documents such as driver's licenses or for bank accounts. As sovereign citizens believe the UCC to be a codification of the illegitimate commercial law ruling the United States, adherents to the strawman theory see this as evidence that the associated laws and financial obligations do not apply to them, but instead to the "strawman".

The state of Ohio charged Elvick with corrupt business activity in 2003, and he returned to prison after being sentenced to four years.

Elvick's concepts and schemes and variations thereof have since remained a mainstay of the pseudolaw environment. They have been used and adapted in the United States, Canada and other English-speaking countries, by many tax protesters or conspiracy theorists, and more broadly by people seeking a remedy for their financial stresses or willing to fight what they perceive as government oppression. In some variations of the strawman theory, one's alleged secret fund is called a "Cestui Que Vie Trust".

Purported redemption methods

See also: Strawman theory and Tax protester conspiracy arguments

The details of redemption schemes vary, but they typically rest on the same assumptions: (1) a distinction between a living individual and a corresponding legal person or "strawman", (2) valuable property associated with the legal person, but rightfully belonging to the individual, and (3) a supposed procedure by which the individual can claim the property to pay debts. Promoters justify these assumptions with elaborate historical tales. The most common explanation claims that the United States went bankrupt when it abandoned the gold standard in 1933 and started using its citizens as collateral so that it could borrow money.

Supposed procedures for using the nonexistent "strawman" funds include:

• Filing a UCC-1 financing statement or UCC-3 amended statement against the strawman
• Passing a birth certificate or other official document as if it were a bond
• Submitting documents to the Secretary of the Treasury
• Asserting copyright on a name
• Paying bills with self-printed or promoter-printed checks known as bills of exchange or sight drafts
• Charging bills to a "Treasury Direct Account" identified by a Social Security number
• Returning bills, collection letters and court notices with "Accepted for Value" or "Taken for Value" and other language stamped or written across them
• Reporting the funds as tax withheld via Form 1099-OID to offset tax liability
• Corresponding with red ink

Promoters may suggest that others have had great success in eliminating their debts through these methods, and put the blame on participants when they do not get the same results.

Official responses

The United States government has successfully prosecuted and convicted a number of redemption scheme participants. The convictions include forgery, providing false information, passing fictitious financial instruments, defrauding the United States, counterfeiting, impeding administration, filing false tax returns, money laundering and wire fraud.

Aside from the risk of criminal charges, redemption processes also fail to discharge debts. In a frequently cited 2007 foreclosure case, a debtor attempted to pay her home mortgage with a redemption "bill of exchange" at the suggestion of promoter Barton Buhtz. A United States District Court concluded that "the legal authorities Plaintiff cites and the facts she alleges suggest that she did not tender payment, but rather a worthless piece of paper. Other courts addressing claims nearly identical to Plaintiff's have found likewise."

To caution people away from redemption schemes, several U.S. agencies have issued warnings against them. Both the Federal Bureau of Investigation (FBI) and the TreasuryDirect web site have posted statements that redemption schemes are fraudulent. The Inspector General of the Treasury, the Federal Trade Commission, and various Federal Reserve Banks have warned that the Treasury and the Federal Reserve Banks do not maintain draft accounts for individuals and will not honor any individual drafts.

The IRS has announced that attributing tax liability to a "strawman" is a frivolous position that can result in a $5,000 administrative penalty. It included the Form 1099-OID variation of the redemption scheme in its "Dirty Dozen" list of prominent tax scams every year from 2009 to 2019. The Comptroller of the Currency has noted that, in addition to being fraudulent and ineffective, redemption schemes can be used for identity theft. Outside the United States, the Reserve Bank of New Zealand responded to a 2017 information request by stating that birth certificates are not investment securities and that redemption processes are scams.

Promoters

Roger Elvick

The originator of the movement, Roger Elvick was found guilty in June 1991 by a federal jury in Hawaii of conspiracy to impede justice in connection with federal tax filings under 18 U.S.C. § 371. He was fined $100,000, and was sentenced to five years in federal prison and three years of supervised release. While incarcerated he was further convicted in another conspiracy. He served his time and was released from the federal prison system on December 8, 1997.

Upon release from prison, Elvick restarted the scheme and resumed holding Redemption seminars. In August 2003, he was indicted in Ohio on multiple felony counts. During preliminary hearings, Elvick denied his identity and argued that the court had no jurisdiction over him or his strawman. The court ruled him mentally unfit to stand trial and committed him to a correctional psychiatric facility. There, he was diagnosed with an "unclassified mental disorder" and underwent nine months of treatment before facing trial. Elvick eventually pleaded guilty; in April 2005, he was convicted of forgery, extortion and corrupt business activity and sentenced to four years.

Eldon Warman

In the late 1990s, several concepts of the movement, as well as sovereign citizen ideology, were introduced into Canada by Eldon Warman, a follower of Elvick who adapted the theories to better suit a Canadian context and promoted through seminars and his Detax Canada website. However, he did not use the "redemption" and "A4V" concepts themselves. Warman, who died in 2017, was emulated by several other Canadian "gurus" within the so-called "Detaxer" movement. Though the Detaxer movement eventually went into decline, it influenced the freeman on the land movement, which made little conceptual innovation but found success through the use of social media, also reframing Detaxer ideas for a more left-leaning audience. The freeman on the land movement later expanded to other Commonwealth countries.

Barton Buhtz

During the early 2000s redemption promoter Barton Buhtz, a former radio broadcaster who had previously worked for Family Radio and for KDNO, distributed bills of exchange to clients, telling them they could be used for debt payments. In October 2007 he was convicted on multiple counts of conspiring, aiding, and personally passing fictitious financial instruments, and sentenced to three years in prison. He was released in November 2012.

Sam Kennedy (Glenn Unger)

One key figure of the redemption movement has been Glenn Richard Unger, best known under the alias Sam Kennedy, who hosted the Take No Prisoners program on Republic Broadcasting Network in Round Rock, Texas. He was a founding member of the Guardians of the Free Republics. In a mass e-mail early in 2010, Unger vowed to use his show to present a "final remedy to the enslavement at the hands of corporations posing as legitimate government." He pointed to a plan to "end economic warfare and political terror by March 31, 2010." In two months, he said, "we can and WILL, BE FREE with your assistance."

In 2013, Unger was tried in the United States District Court for the Northern District of New York, in Albany, New York, on one count of attempting to interfere with the administration of the U.S. internal revenue laws, four counts of filing false claims for over $36 million in tax refunds, one count of tax evasion, and one count of uttering a fictitious obligation. Unger was convicted of multiple counts of tax fraud and served approximately five years of an eight-year prison sentence.

Winston Shrout

Winston Shrout, a former construction worker and prominent sovereign citizen and tax protester from Oregon, started practicing redemption schemes in 2000. By 2004, he was marketing the schemes under the name "Solutions in Commerce". Shrout built a following on social media to become a leading redemption promoter, holding seminars in the United Kingdom, Australia and New Zealand. During the same period he also attempted to pass billion and trillion-dollar "bills of exchange" on the IRS and various financial companies. Shrout supplemented his pseudolegal and pseudofinancial theories with claims about UFOs and paranormal issues. He created another website, "Exo-Commerce", which blended sovereign citizen and New Age concepts. At one point, he claimed to be an "Earth delegate to the interdimensional Galactic Round Table" and a "sixth-dimensional interplanetary diplomat" and to have disrupted international transactions by relocating the prime meridian with the assistance of the "Queen of the Fairies".

Shrout was indicted on 19 charges of passing fictitious instruments and failure to file federal income tax returns. He was convicted on all charges in April 2017, and was sentenced to ten years in prison. Shrout failed to surrender to authorities at the Federal Bureau of Prisons to begin his sentence and remained a fugitive until November 2019, when he was arrested in Arizona.

Heather Ann Tucci-Jarraf

Heather Ann Tucci-Jarraf, a licensed lawyer and former state prosecutor, became a member of the sovereign citizen movement. With several associates, she created a group called the One People’s Public Trust (OPPT) that claimed around 2012 to have "foreclosed" governments, corporations, and banks through US Uniform Commercial Code filings. She also said that the OPPT's subscribers would receive $10 billion in gold and could pay their debts by using "Courtesy Notice" documents. When the money was not delivered to their followers, the OPPT claimed that it was being held by aliens. After the failure of that original scheme, Tucci-Jarraf maintained an online following as a sovereign citizen "guru". She asserted that people could reclaim the funds from their alleged "secret savings account" by taking money from the Federal Reserve. The OPPT was also involved in developing "free energy technologies" in Morocco.

One of Tucci-Jarraf's followers, Randall Beane, devised an Internet fraud scheme aimed at extracting from the banking system tens of millions of dollars he believed were part of his secret account. Tucci-Jarraf was aware of Beane's fraud and gave him legal advice throughout. Beane managed to embezzle two million dollars from a bank before he and Tucci-Jarraf were arrested in July 2017. Upon arrest, Beane named Tucci-Jarraf as his lawyer before police determined that she was an accomplice. Tucci-Jarraf was arrested days later in Washington, D.C., after arriving unannounced at the White House's gate to demand a meeting with then-President Donald Trump. In January 2018, Beane was found guilty of wire fraud and bank fraud; together with Tucci-Jarraf, he was also found guilty of conspiracy to launder money. Beane was sentenced to 155 months in prison and Tucci-Jarraf to 57 months. Despite her imprisonment, Tucci-Jarraf's methodology was emulated by multiple people and she received many Internet donations. The OPPT is still active as of 2019: some of its ideology and methods have influenced the German Reichsbürger movement, as well as Italian sovereign citizens.