Another variation on the Social Stock Exchange model sees the light of day…
Plan To Finance Philanthropy Shows The Power Of A Simple Question
That’s the way Lindsay Beck, a two-time cancer survivor and the founder of a successful charity, started thinking about how the world of finance and Wall Street could revolutionize the staid nonprofit industry.
Ms. Beck was a graduate student at the Wharton School of the University of Pennsylvania when she blurted out a question that had been consuming her: “Could there be a Nasdaq for not-for-profits?”
The idea — creating the equivalent of a profit-driven stock market for nonprofits — might seem counterintuitive at first. It was a “radical idea, and maybe I was naïve,” she acknowledged.
But for the last year, she has pursued the concept. It has gained enough traction that it has won her meetings with executives at Goldman Sachs, Deutsche Bank and members of the Obama administration. A team of lawyers at Morrison Foerster has been working to understand the tax implications and how to comply with Securities and Exchange Commission rules.
Ms. Beck’s idea is just an idea, a germ of a concept that could go nowhere. And it is early, very early. But it has the potential to upend an entire part of the global economy if it succeeds. By some estimates, if just 1 percent of the money in the portfolios of wealthy individuals in the United States was directed to nonprofits through new financial instruments like social impact bonds or Ms. Beck’s exchange, the nonprofit world would be sitting on $1 trillion.
Wall Street is littered with clever plans to use financial instruments to change behavior — carbon trading, for example. Some have changed the world, and others failed miserably. As Douglas Horton said: “Good ideas are a dime a dozen. Bad ones are free.”
Several ideas about using financial instruments and a for-profit approach in the world of nonprofits are now taking hold. This month, Goldman Sachs announced a $250 million social impact fund. Morgan Stanley plans to raise $10 billion over the next five years for what it calls its “investing with impact platform.”
In September, JPMorgan Chase teamed up with the Bill and Melinda Gates Foundation to start a $94 million investment fund to finance late-stage drugs, vaccines and tools to fight diseases like malaria, tuberculosis and H.I.V./AIDS.
Considering the black eye that Wall Street has suffered in the public consciousness, some of these efforts will probably be greeted with cynicism. That may very well be part of Wall Street’s motivation, but that hasn’t stopped the nonprofit sector from jumping at the chance to explore how to use these funds to raise money.