Nick O’Donohoe, the chief executive of Big Society Capital, has warned that appetite for social impact bonds will be restricted to charitable organisations unless someone develops a support structure to manage the risks involved in social investment.

The only social impact bond initiative within a government department - the Peterborough prison one - is being funded solely by charitable foundations, who will get a return if the service delivered meets defined outcomes. If the bond reduces the rate of re-offending above that of the Ministry of Justice, investors will get a return on the savings made to government.

Speaking at the Good Deals conference yesterday, O’Donohoe said the recovery in social impact bonds could be zero and warned this meant it could only be attractive to charitable foundations who would look on it as a donation if it went wrong:

“I would support any structures who could manage that risk so we can develop the market outside foundations.”

Earlier in the day, Nick Hurd, minister for civil society, reiterated that government wanted the charitable sector to engage with social investment and move away from dependence on grants.