An innovative social finance scheme was launched Monday, aimed at preventing some 2,250 Israelis at risk of type 2 diabetes getting the disease while earning a profit for private investors from the sale of “social impact bonds.”
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Together with the Swiss bank UBS, Social Finance Israel – which funds social causes through private investment – will sell 20-million-shekels worth ($5.15 million) of social impact bonds to foreign and Israeli investors.
The funds will be used by two Israeli health maintenance organizations – Clalit and Leumit – and the government’s National Insurance Institute, to run a program to prevent the onset of diabetes among high-risk Israelis.
If the interventions are successful, the HMOs and NII will repay the investors from savings made by reduced health care and disability costs.
“Innovative thinking of this kind could significantly advance the war on disease and improve the health of thousands by directing new resources toward improving their health,” said Eli Cohen, deputy CEO and head of Clalit’s financial division.
Caroline Anstey, head of UBS and Society – a global initiative launched by the Swiss investment bank in 2014, which covers activities in sustainable investing and philanthropy – said the Israeli bond will serve as a pilot.
Countries such as Mexico and India have expressed interest in similar projects.
Yaron Neudorfer, CEO of Social Finance Israel, said that if the pilot is successful, the Israeli health system will be able to extend diabetes prevention measures to many more people.
Type 2 diabetes – a condition that causes sufferers’ blood sugar levels to become too high – affects 415 million people globally. The International Diabetes Federation predicts the number could grow by 50 percent in the next 25 years, although type 2’s association with factors such as obesity means its onset is often preventable.
In Israel, there are some 500,000 type 2 diabetes sufferers and another 400,000 who are pre-diabetic. The HMOs said the annual cost of treating diabetics runs between 8,000 to 10,000 shekels per person, while NII allowances for them can reach 20,000 shekels annually.
The goal is to prevent 700 of the high-risk Israelis from getting type 2 diabetes, which would yield savings of 50 million shekels for the HMOs and NII.
Pre-diabetics can be identified through blood tests, and introducing exercise and changes in diet can reduce their risks of developing diabetes. The program, which will be launched in July for three cohorts of people identified as having a high diabetes risk, will include exercise, regular meetings with dieticians, and education and counselling on how to maintain a healthy lifestyle.
The first results will be measured three years after the first cohort starts the trial.
Ronald Cohen, chair of a global steering group on social impact investing, said 54 social impact bonds have been issued in 12 countries since the first launch in 2010. Most of the investors are philanthropic organizations and entrepreneurs.
Funders of social impact bonds provide upfront capital to deliver social services, and governmental entities pay only if predefined results are achieved.
Last November, Social Finance Israel launched a social impact bond to finance mentoring and support for computer science students, with the aim of reducing the number who drop out of education.