A cracking SIB News today with BlackRock organising their social impact business in a tangible push while HuffPo seeks proof of benefit which is vital for the SIB movement (I retain reservations about the idea of impact equity investing – that is just a cyclical fad, not a genuine change imho – or at least I need some, er, evidence to convince me otherwise…).
Lead story is a very readable missive on the rise of SIBs from a magazine I have never heard of…then again as it’s called “Highbrow” this may permit readers to jump to preconceived notions. Interesting articles one and all, happy scrolling:
The Rise Of Social Impact Bonds
Annie Castellani – Highbrow Magazine
Private investors seeking alternatives to traditional charitable donations might consider social impact investing. This catchy investment philosophy has a dual purpose: make a positive impact on social and environmental issues and reap positive financial returns. Philanthropic foundations like Rockefeller and Robin Hood and global financial institutions like Goldman Sachs and Bank of America Merrill Lynch are already on board. These strange bedfellows are using public-private partnerships to finance efforts targeted at fighting chronic and rampant societal problems such as insufficient access to education, healthcare, affordable housing and employment.
The en vogue vehicle for social impact investing is the social impact bond (SIB). Social impact bonds typically involve an agreement among multiple stakeholders, including government agencies, investors, service provider organizations and an intermediary that brokers the project. Government and investors coalesce around a common social or environmental objective like reduction in recidivism rates among young men. The government identifies a target population and defines expected outcomes, while service providers and the intermediary implement projects focused on achieving these goals.
If the desired outcomes are met, the government or intermediary acting for the government repays the initial capital. There might also be positive returns. If the project fails to meet the agreed upon objective, investors risk losing everything. As summed up by the progressive think tank, the Center for American Progress, “Social impact bonds are new and innovative financing mechanisms for social programs in which government agencies pay only for real, measurable social outcomes—after those results have been achieved.”
BlackRock To Ramp Up Impact Investing
Jessica Toonkel – Reuters
BlackRock is planning an array of new investment products that will allow clients to invest in addressing large societal issues, such as global hunger or poverty, an executive at the New York-based firm said.
BlackRock Impact will bring together its existing offerings that help clients invest in products with environmental and societal goals, as well as introduce new products, Rich Kushel, chief product officer and head of strategic product management group, told Reuters.
BlackRock has tapped Deborah Winshel, the former president and chief operating officer of The Robin Hood Foundation, to oversee the initiative.
Winshel, who begins her new role March 2 and will report to Kushel and BlackRock CEO Larry Fink, will work with BlackRock’s portfolio managers globally to develop portfolios and tools to meet client demand and societal issues.
Impact investing is not a new concept to Wall Street. A number of firms, like Goldman Sachs, and Bank of America’s Merrill Lynch unit are involved with social impact bonds that address a specific need, like reducing recidivism at a state prison, while bringing returns for investors.
BlackRock is looking at ways to make impact investing more scalable to address a range of issues.
Step One In Growing Impact Investing: Prove Social Enterprise Works
Ben Thornley – The Huffington Post
Rigorous evidence of impact is not just about accountability in impact investing. It is an enabler of the field’s growth in its own right.
That holds true across the board. Whether its investments in for-profit or non-profit organizations, with philanthropic or commercial impulses, proof of impact attracts attention and gives new investors confidence that the promise of concurrently delivering financial and social performance is for real.
However evidence plays an especially important role for non-profit social enterprises, at an earlier stage in their development.
This is where venture philanthropy provides a natural complement to impact investing, by readying social enterprises for the returns-seeking capital that is becoming more available, thanks to innovations like social impact bonds.
By venture philanthropy I mean an approach that focuses on providing unrestricted, entity-level grant funding, which is desperately needed in order for social enterprises to scale and become truly investable.
And the key ingredient in venture philanthropy is rigorous evidence of impact. By proving replicability, evidence refocuses the conversation with funders on operational capacity, rather than discrete programmatic expenses, essentially transforming grant capital into growth capital.
As the father of social finance in the UK, Sir Ronald Cohen argues, rigorous proof of impact will unlock the capital markets for social enterprises. Once we know the costs, savings to government, and societal value of a range of preventative interventions, Sir Ronald believes impact investing will come to comprise a few percent of most portfolios.