A New Tool for Scaling Impact: How Social Impact Bonds Can Mobilize Private Capital to Advance Social Good

A New Tool for Scaling Impact: How Social Impact Bonds Can Mobilize Private Capital to Advance Social Good

Raising private investment capital to finance early intervention programs through social impact bonds that would be repaid only if outcomes improve could help effective programs help many more people than currently reached through traditional government contracts and philanthropy, a report from Social Finance, which launched the first SIB in 2010, suggests. According to A New Tool for Scaling Impact: How Social Impact Bonds Can Mobilize Private Capital to Advance Social Good (36 pages, PDF), SIBs align various stakeholders' interests in benefiting vulnerable populations: nonprofits receive long-term growth capital, investors achieve financial returns and social impact, governments spend less money on unsuccessful efforts, and communities gain access to evidence-based social services. At the same time, the report argues, intervention models must be vetted, government credit risk must be considered, and nonprofits must have the necessary managerial, performance, and measurement capacity in place. Funded by the Rockefeller Foundation, the report suggests that dedicated intermediaries — which are needed to originate deals, secure contracts, structure the instrument, and issue the bond — also will help mitigate risk by ensuring access to tools for analyzing, measuring, and pricing risk.