Social Impact Investing - Fad or the Future?

Social Impact Investing and Pay-For-Performance Funding, such as Social Impact Bonds (SIBs), are getting a lot of attention.  The White House is interested, for-profits and hybrid corporations are interested, and foundations and nonprofits are considering the options.

In addition to a new federal bill, here is a collection of reports, articles, and opinion pieces that might help you think through the potential implications for our communities and your mission.  Thank you to the National Council of Nonprofits for compiling and annotating this list.

• Denver’s New Social Impact Bond Project Announcement. Mayor Michael B. Hancock announced Denver’s plan to connect hundreds of chronically homeless individuals with supportive housing and intensive case management by engaging in one of the first city-led Social Impact Bond programs in the country.
• Social Impact Bond Act (H.R.4885), introduced June 18, Full text, One pager, Press release
• Private Capital, Public Good: How Smart Federal Policy Can Galvanize Impact Investing – and Why It’s Urgent, U.S. National Advisory Board Report
• 5 Steps to Pay for Success, the Urban Institute, June 2014, reviewing the advantages and disadvantages of pay-for-success funding mechanisms in juvenile and criminal justice systems
• Social impact bonds: is the dream over?, The Guardian (UK), May 1, 2014, which asks five experts to discuss the implications of the decision of the British government to reconfigure the funding model for its first social impact bond
• Social Responsibility or Marketing Ploy? The Branding of L3Cs, Rick Cohen, Nonprofit Quarterly, May 27, 2014, providing a critical analysis of low-profit, limited liability corporations
• The Endgame on the Hope and Hype of Hybrids—A System of Balanced Benefit, Paul Hogan, Nonprofit Quarterly, June 4, 2014, making the argument that “the presence or absence of cash—what all this comes down to—is a flawed, inadequate, and outmoded method of valuing the contributions of enterprises.”
• Eight Sobering Thoughts for Social Impact Bond Supporters, Rick Cohen, Nonprofit Quarterly, June 12, 2014, laying out concerns related to SIBs
• Eight States Reduce Recidivism without Social Impact Bonds, Rick Cohen, Nonprofit Quarterly, June 13, 2014, reviewing the efforts of eight states
• Executive Actions to Accelerate Impact Investing to Create Jobs and Strengthen Communities, White House News Release, June 25, 2014
• Background on the White House Roundtable on Impact Investing

The questions for me are:

• What is the role of government vs. that of the private sector to solve our greatest societal issues?
• Who gets to choose where our efforts are focused: private investors or a democratically elected government?
• What is the appropriate balance of government regulation and private initiative?
• Who should bear the risk: investors, the government or nonprofits?

We welcome your comments here!  What are your thoughts and questions on the topic.  Would you seek “Pay For Performance” funding?  Let us know!