A pleasantly informative article today which includes the delightful phrase “incongruous pairing” referring to Goldman Sachs and this arm of their organisation devoted to, er, “God’s work,” I guess.
No news of a conscious uncoupling from GS but here is today’s SIB News…
SIB Spells A Way For Financiers To Do Social Good
Mark Garrison – Marketplace
Governments and non-profits struggle with shrinking tax revenues and donations, and the lack of funding puts social programs in jeopardy. A new movement tries to fill that gap with money from banks.
The twist? The people providing this money aren’t donors; they’re investors, and they stand to make a profit on social services. That’s why the first attempt at what’s called a social impact bond in America is being closely watched by scholars, bankers, and politicians alike.
The bond involves the incongruous pairing of one of the world’s best-known banks with one of New York’s most notorious prisons. Goldman Sachs is lending $9.6 million to fund an educational program on Rikers Island for 16-18 year old offenders.
The program aims to change the young inmates’ way of thinking, with the goal of enabling them to make the choices that will ensure they don’t get locked up again. But they face grim statistics — About half are likely to be back in prison within a year after getting out.
This high recidivism rate carries high costs for the young offenders, their families, and their communities. It’s also alarmingly expensive for New York City to keep them in prison. That’s where the social impact bond comes in, becoming profitable only if the city saves substantial money through a reduction in re-incarceration attributable to the education program.
If the program leads to a 10% reduction in recidivism, Goldman recoups its investment. If the reduction in recidivism is greater than 10%, Goldman profits.