I am a little confused.I have been hearing about these social impact bonds for a while now but I am very skeptical as to their financial viability. Why would an investor(leaving those with only social motivations) invest in such kind of instruments where their entire capital is at risk(as you said their is no capital protection)?
In the Peterborough social impact bonds, the payoff is dependent on reductions in the the rate of recidivism which is based on something which cannot be quantified easily as human behavior is irrational.
I feel an investment like this is highly risky and very few investors would like to buy these social impact bonds.