Before we get reading, let’s exercize our senses here with this splendid infographic produced by Eileen Neely and Nadia Owusu of Living Cities to help guide anybody through the SIB world to appreciate the Mass. juvenile justice PFS initiative. Their article is below but meanwhile, I couldn’t resist pinning it on my “Capital Market Revolution!”* board above – hopefully lots more great infographics to come – great work Eileen and Nadia.

(*”Capital Market Revolution!” was my first book published by FT Prentice Hall 1999 discussing the future of online finance and how it would change the world).

Inspired by that great graphic, I’ll refrain from further comment as there is lots to read today:

Mass. Should Pay For Success, But Judging Success Is Tricky
Boston Globe

Lisa Sanbonmatsu has a tough job ahead of her. The Cambridge policy analyst will be the judge of whether a new effort by the Patrick administration succeeds in cutting recidivism rates among former juvenile offenders and young men on probation. More than pride rides on her verdict: If Sanbonmatsu declares that the program has met or exceeded its goals, the state has agreed to award up to $27 million to the group of investors that are paying for it. If she determines the effort has failed, though, those investors — which include charitable foundations and the main funder, investment bank Goldman Sachs — could lose money.

Targeted at men age 18 to 23 who are at a high risk of reoffending, the recidivism project represents the state’s first experiment with “pay-for-success” contracts, a model for financing government services with private-sector funds that holds enormous potential to extend the reach and accountability of social programs. The Patrick administration has devoted significant effort to crafting the plan and deserves a lot of credit for trying a new approach. The payoff to investors, if any, will be based on how much the state projects it will save from reduced prison costs.

The Massachusetts Juvenile Justice Pay For Success Initiative
Eileen Neely & Nadia Owusu – Living Cities

In January 2014, Living Cities joined with the Commonwealth of Massachusetts, Third Sector Capital Partners, Goldman Sachs, Kresge, New Profit Foundation, and other local and national private and philanthropic funders to launch the nation’s largest financial investment in a Pay For Success (PFS) initiative.

Pay For Success is an innovative financing structure that redirects public spending by encouraging innovation and rewarding initiatives that work.

The Massachusetts Juvenile Justice Social Innovation Financing (SIF) Project, with Roca Inc, a Chelsea nonprofit, is designed to improve outcomes for hundreds of at-risk young men in the probation system or leaving the juvenile justice system.

Massachusett’s Governor Deval Patrick is optimistic that this initiative will allow the state to “marry smart financial solutions with programs proven successful in helping high-risk youth become employed, stay employed, and break the cycle of violence.”

Almost 1,000 young men from Boston, Chelsea, and Springfield will be offered counseling, life skills, vocational training, and transactional employment to change their behavior and avoid violence. The infographic below illustrates the tremendous potential of the SIF Project.

Check infographic here.

Success In Impact Investing Through Policy Symbiosis
Ben Thornley (Director, Pacific Community Ventures) – Huffington Post

Some may be surprised to hear it, but impact investing would barely exist – certainly not at its current, modest scale — but for the support and partnership of government. Government is ubiquitous in all economies, to be sure. But in the types of underserved markets in which impact investors operate, the role of public policy is profound.

Consider the Community Reinvestment Act in the U.S., which underpins a $60 billion community finance sector, or the Small Business Investment Companies (SBIC) program at the U.S. Small Business Administration (SBA), which invests $8.8 billion and leverages another $9.4 billion in private capital into over 300 funds. Consider also Big Society Capital, which with nearly a billion dollars in anchor funding from the U.K. government will invest in a variety of social ventures across the country, or the $333 million set aside for impact investing from the U.S. government’s Overseas Private Investment Corporation (OPIC).

These are big numbers, with big impacts. Among the companies initially supported by the SBIC program over the years — since 1958 — are Apple, Fedex and Costco. And yet the importance of government is often underestimated once we become distracted by the thrust and parry of the investment process.

Impact Investing: Should We Take A Risk With Other People’s Lives?
Joe Ludlow (Nesta Impact Investments) – Huffington Post

The UK Government has announced some very public failures in new models of public services this week, and this begs some questions about failure for all of us investing in social innovation.

First, we heard of the Department of Education’s decision to kick academy school chain E-Act out of 10 of the schools it is running. Academies are state funded schools given considerable autonomy by government to innovate and develop their own distinct approach to delivering high quality education. Over 50% of all secondary schools in England are now academies.

Also this week, following the scandal of patient neglect and deaths at Stafford Hospital between 2005 and 2008, Mid-Staffordshire NHS Foundation Trust is to be wound-up with its services transferred to other NHS operators. Foundations trusts are also semi-independent “public benefit corporations” given autonomy by government to innovate and develop their own distinct approach to delivering high quality healthcare.

Both “failures” have focussed attention on the consequences for real people of experimentation and failure in life-critical areas like health or education. Undoubtedly, the consequences are desperately sad for the families of those who died, or for children who don’t get the educational opportunities they deserve.

But isn’t the acceptance of failure necessary if we are to invest in risky, but potentially life-improving innovations?

I run an impact investment fund, Nesta Impact Investments. We aim to invest in organisations run by exceptional entrepreneurs who have potentially life-changing innovations like: Oomph – improving social care for older people, Patchwork – preventing abuse of vulnerable children, or Ffrees – improving access to financial services for the poorest in society.

We invest in innovations with very high potential for a positive impact, but where investment is needed to fund the next round of development, experimentation and testing. This is risky, so we have to accept there will be failure of some of the innovations and organisations in our portfolio.