Hedge fund mogul John Arnold subsidising standards initiative for the USA while Canada considers the best use of SIB structures too.
Private Money And Public Good
Matthew Little – Epoch Times
Trust but verify. It was U.S. President Ronald Reagan’s creed in dealing with the Soviet Union, but is oddly similar to how Canadians treat their charities and non-profits.
Canada relies on these non-governmental organizations to provide everything from music festivals to job training and food banks. But the country is changing and the models NGOs have used for decades are starting to break down.
People are not content to just give anymore. They want proven, long-term results. So do funding partners. Meanwhile, more charities are asking for donations and creating an epidemic of donor fatigue. Austerity measures also means less money comes from the government.
“In simple terms, the challenges we face as a society need a new approach,” Tim Jackson an executive VP with MaRS Discovery District, told the human resources and social development committee in February.
The committee is studying “social financing” and how Canada could get some of the millions or billions of dollars currently invested in stock markets to be put towards social programs.
It’s an effort well underway in the United Kingdom, and could work here if NGOs can better measure their impacts and existing laws weren’t quite so restrictive, say experts. Parliament is looking at what needs to be done to make it all possible.
New models are emerging and Britain is testing them out, with the U.S. close behind. One of the more interesting and controversial is the social impact bond (SIB).
These bonds are bought by private funders like banks and pay for an NGO to do something the government wants done, like increase youth employment.
If the charity can do that job better and more cheaply than existing programs and meet a specific outcome set by the government, then the government pays the charity for the work it did. That money goes to the social impact bondholders, who then make a profit on their investment.
If the NGO doesn’t meet the criteria, the government doesn’t pay and the bondholders lose money.
The first SIB was issued in the U.K. in 2010 and will pay out depending on how well an organization can keep inmates from re-offending. Early results were good but not good enough for a first payout.
The benefit of SIBs is they make it possible for private dollars to fund social programs with measurable outcomes. But there are some sharp criticisms of the model, and some significant challenges, including setting realistic outcomes and finding ways to measure them.’
Urban Institute Announces Initiative To Help Guide, Design, & Assess “Pay for Success” Projects Across The Country
Bond Case Briefs
The Urban Institute launched an initiative to ensure “Pay for Success” (PFS) transactions are well-designed, informed by rigorous research, and deliver outcomes as intended.
The Laura and John Arnold Foundation (LJAF) will commit $8.4 million over three years for the Urban Institute, a nonprofit research organization, to establish a broad Pay for Success Initiative at Urban and ensure current and future PFS transactions are evidence-based and effective.
Pay for Success is an innovative funding approach that aims to drive government resources toward proven social programs to deliver better results to those in need. The model provides a way for state and local governments to tackle social problems by tapping private investors to cover the up-front costs of the programs. If the programs are successful, governments pay the investors back. If they are not, the investors absorb the cost and the governments pay nothing.
Currently there is only a handful of Pay for Success deals operating nationwide; however, with rapid growth expected, Urban’s scholars will bring a research perspective to assess and advise both existing and future PFS projects, at little to no cost to the field.