Fresno California looks at reducing healthcare costs via a SIB while investing site the Motley Fool peruses impact investing overall – welcome to today’s SIB News:
To Slow The Relentless Rise In Health Costs, A Small City Tests A New Kind Of Investment
Ben Schiller – Fast Company
As it battles with high asthma rates, Fresno, California will become the first city to try to use SIBs to create better health.
One reason health care costs keep rising is that the system tends to pay for the consequences of ill-health, rather than trying to make people healthier before they get sick. Prevention is frequently effective and often cheaper. And yet the lion’s share of spending still goes to hospitals and ER units.
This situation does create opportunity, though. If someone comes in with money for earlier, preventative interventions, it should be possible to pay for them with the money saved at a later date. That, very roughly, is what a social impact bond tries to do. It’s an investment in prevention that pays for itself in savings.
That’s the theory anyway. Nobody has set up a social impact bond for health yet, though there’s plenty of interest in trying, and social impact bonds are now used in other areas.
Fresno, California, may see the first social impact bond for health. Several groups are now laying the groundwork there for a bond that would seek to cut asthma-related healthcare costs by improving at-home management of the disease. Social Finance, a Massachusetts nonprofit that facilitates impact investing, is now recruiting 200 low-income children for an in-depth trial. If the demonstration reduces ER visits by at least 30% and hospitalizations by 50%, the scheme will launch in mid-2015, assuming they can arrange funding. California Endowment, a health care foundation, is paying $660,000 grant for the pilot.
Impact Investing: A Fast-Growing Asset Class
Mark V. Ewert – The Motley Fool
Impact Investing is creating significant buzz. It falls somewhere between charitable giving and socially responsible investing.
Here are some starting distinctions: Charitable giving can be characterized as investing in social benefits, expecting no direct return; socially responsible investing often expects financial returns while avoiding social or environmental harm; and impact investing is the deploying of capital to produce both social benefits and financial returns.
Unlike charitable donations, impact investments usually go to for-profit companies with businesses that are socially or environmentally driven. Note that although sometimes they’re lumped together, impact investing is considered distinct from microlending.
This asset class is a rapidly becoming a significant part of the investment landscape. Research jointly conducted by J.P. Morgan and the Global Impact Investing Network showed that investor groups — including fund managers, development finance institutions, foundations, and diversified financial institutions — planned to commit $9 billion to impact investing in 2013.