Here's how social impact bonds work — in GIF form - Generocity Philly

Funding

Dec. 17, 2015 3:22 pm

Here’s how social impact bonds work — in GIF form

We made this neat thing.

Simple, right?

(Created using Venngagement)

Social impact bonds (or “pay-for-success”) can be an incredibly useful tool for funding change.

They can be good for social enterprises and nonprofits in need of capital to scale, for the investors looking to fund those organizations and for governments looking for results.

As popular as these types of investments are getting in the United States, there’s still some serious confusion surrounding exactly how they work. So, we made a GIF.

A social impact bond is a way for government to, yes, “pay-for-success.” Here’s how the whole thing works, in five steps:

  • A government entity picks a public sector issue like homelessness or recidivism, then chooses an intermediary partner to broker a deal.
  • The intermediary, often a nonprofit advisory firm, is charged with raising funds from investors and finding a nonprofit/social enterprise that directly combats the public sector issue with a proven, scalable program or service.
  • The investors — often large financial institutions such as Goldman Sachs or Merrill Lynch — fund the program or service.
  • The program or service must deliver the desired results set in the initial contract.
  • Once those results are evaluated and deemed successful, the government repays the investors.

Here’s the rub — they don’t always work, because of the subjective, sometimes murky nature of social impact metrics. What looks like sturdy, successful metrics to Goldman Sachs might seem fragile or miscalculated to parties evaluating those metrics. As measurement tools become more precise and efficient, it could very well become much easier to navigate public-private-partnerships like social impact bonds.

This type of partnership is still really green — the concept was introduced for the first time just over five years ago in London, and didn’t make its way across the pond until it was tested in New York City in early 2012 with Goldman Sachs and then later that year by New York state.

From our Partners

-30-
LEAVE A COMMENT

From our Partners

A Generocity update, and our 2023 editorial calendar

Stop the philanthropic PR bullshit

Youth-led Solutions for a More Just Society

SPONSORED

Generocity Philly

Meet Kim Andrews, new executive director for The Fund for Women and Girls

Philadelphia

Youth Sentencing & Reentry Project (YSRP)

Mitigation Specialist

Apply Now
Philadelphia

Youth Sentencing & Reentry Project (YSRP)

Director of Development and Communications

Apply Now
915 Spring Garden Street, Ste 103, Philadelphia, PA 19123

Vetri Community Partnership

Chief Operating Officer

Apply Now

Going Beyond the Dollar: Strengthening the Support System of Grandfamilies

Creating a Prosocial Emergency Shelter Culture

How to support ‘newcomer immigrant youth’ in Philadelphia

SPONSORED

Generocity Philly

Be the leader to bring a 26-year mission into the future in Chester County

Philadelphia, PA

Philadelphia Yearly Meeting

Deputy General Secretary (DGS)

Apply Now
Philadelphia

Fairmount Ventures Inc

Associate

Apply Now
Philadelphia

The Village of Arts and Humanities

Executive Director

Apply Now

Sign-up for daily news updates from Generocity