I must admit the HuffPo line “It’s now five years since the financial crisis, and still the old financial service providers are letting us down, even the alleged ethical ones” did give me cause to chuckle this morning.
Having been in the vanguard of an ongoing financial revolution since the 1990’s, it seems so obvious to me that the likes of SIBs are a great innovation yet the progress is going to be difficult in this arena as many vested interests will be reluctant to change not just in the banks and financial institutions but government, media, NGOs et al.
The debate continues today with these two pieces:
Across the globe, an unlikely pairing is cropping up. Private investment capital is being tapped by cash-strapped public human services agencies to boost prevention programs. If the prevention programs produce cost-savings, investors get a cut.
This “pay for performance” model, also called social impact bonds, is cutting-edge stuff, still theoretical.
It was pioneered in the U.K. in 2010 to cut criminal recidivism at the Peterborough Prison. Although that data isn’t in yet, it has, as a Los Angeles Times editorial last week described, “become the talk of the financial and nonprofit worlds, and now governments, nonprofits and financiers are clamoring for a piece of the social impact bond action.” SIB News reported the story on January 22nd.
New York is trying it to reduce recidivism for Rikers Island inmates. Massachusetts is trying to save money on emergency care by providing housing for the chronically homeless. Utah and Santa Clara, Calif., also have projects.
It now may be on the way to Washington state.
Impact Investing – Leading By Example
It’s now five years since the financial crisis, and still the old financial service providers are letting us down, even the alleged ethical ones.
We’re also now four years into the age of austerity, and government’s plans for public services reforms are being undermined by a serious fraud office investigation into the use of some outsourcers, and a lingering suspicion that services aren’t being run for public benefit.
If ever there was a time for a new type of investing to be leading the way, bringing forward genuine innovations to address major social needs and growing them with money that is driven by social impact first, financial return second, then surely it is now?
Huge progress has been made with impact investing in the last five years, especially in the UK – public policy has been hugely supportive and institutions like Esmee Fairbairn Foundation, Big Society Capital and Omidyar Network have done great work supporting the development of the infrastructure of an impact investment marketplace.