During the Peterborough Prison pilot, experienced social sector organisations, such as St Giles Trust, will provide intensive support to 3,000 short-term prisoners over a six year period, both inside prison and after release, to help them resettle into the community. If this initiative reduces re-offending by 7.5%, or more, investors will receive from Government a share of the long term savings. If the SiB delivers a drop in re-offending beyond the threshold, investors will receive an increasing return the greater the success at achieving the social outcome, up to a maximum of 13%.

A colleague told me about these bonds (pdf) this afternoon. They are designed by Social Finance. Bonds with coupons linked to policy outcomes appear to be experiencing a surge in interest at the moment – note also the World Bank’s 2009 Green Bonds and US’s Qualified Green Building and Sustainable Design Project Bonds.

I like the idea of green financial products, but why stop at bonds? Going further in this direction could get us all the way to a Hansonian Policy Analysis Market.