Interesting stories today from Australia and the USA…

Social Impact Bonds: Building A Financial Market For Social Outcomes

In a time when these demands are rising but resources are increasingly constrained, Social Impact Bonds (SIBs) have the potential to create new opportunities.

SIBs are a recent financing innovation in which investment capital is raised to expand effective social interventions like those of the NFP.

The partners in a SIB – government, private investors, social service providers, and an intermediary like Social Finance – come together to generate social and economic value.

Government only pays for successful, measurable outcomes and investors earn a financial return (stemming from public sector savings when fewer mothers have pre-term births). If the programs fail to achieve successful outcomes, government owes nothing.

SIBs are potentially instruments of great power; indeed, the core concept of SIBs – that investors benefit if and only if society benefits – is transformational.

Moreover, SIBs drive government accountability by transferring the risk of failure to investors and by focusing attention on outcomes rather than outputs in public services.

And SIBs are designed to direct resources to social interventions that are aimed at preventing problems from emerging rather than addressing the problems after they have emerged, embodying Benjamin Franklin’s maxim that an ounce of prevention is worth a pound of cure.

SIBs give new meaning to the principle of blended value. When people’s lives improve as a result of SIB-driven social interventions, this creates value for multiple stakeholders including government and investors, as well as society as a whole.

Investing Defined By Impact, Not Risk
Pro Bono Australia

Impact Investments in social causes should not be distinguished from the mainstream by risk, a leading Australian social investor has told a Sydney conference.

Speaking as part of a forum discussion at The Social Marketplace, Danny Almagor, Founder and CEO of social investment business Small Giants, described Impact investing as a lens through which he saw all his company’s investing.

“When we look at risk, we look at it in each area rather than thinking of impact investment as a risk portfolio in itself.”

“It makes no sense trying to say ‘in this asset class what is the risk?’ because you’ve just looked at three different types of investments.”

“I suspect the benefits of investing in social good bring down your risk slightly. More people are batting for you and come and support you as opposed to a business nobody really wanted in the community in the first place.”

Impact investing, where capital is invested with the intent of generating both high financial returns and high social returns, is in its infancy in Australia.

The forum considered two ways investment is currently generating at least some return in both areas – one with high financial return and lower impact (“largely the marketplace today,” Almagor said) and high social and environmental impact with lower financial return, for example, social enterprises.