A perfect way to kick off the UN General Assembly week which brings New York to a halt on several days – with The Banker to the Poor Muhammad Yunus discussing SIBs amongst other ways to make the world a better place while enabling profit mechanisms to deliver that improvement.
Save The World, Turn A Profit
Muhammad A. Yunus & Judith Rodin – Bloomberg View
At next week’s General Assembly meetings, the United Nations will formally announce 17 ambitious new sustainable development goals. The 15-year program will tackle vital issues ranging from global poverty to women’s rights to sustainable energy. The first question the world will ask is: “How do you expect to pay for them?”
The U.N. has put a price tag of accomplishing these goals into the trillions. Meanwhile, donor governments and philanthropies only have in the billions to spend. There is no question, then, that we’ll need to tap into the estimated $210 trillion now invested in global financial markets. Unfortunately, the world’s “social businesses” — companies that exist to solve humanitarian problems and reinvest all profits to remain financially self-sustainable — remain shut off from these commercial investors.
Over the years, innovative finance mechanisms — including microfinance, impact investing and results-based financing (in which organizations must reach established goals in order to receive funding from development banks or other sources) — have helped channel some of this capital toward social good. One successful example is social impact bonds, which get commercial financing for social programs with a promise for a “bond-like” return on capital, paid by a government if the ventures achieve their desired outcomes. Examples been launched in countries, states and cities around the world, including New York City (prisoner rehabilitation), Massachusetts (at-risk youths), the U.K. (homelessness) and Australia (child protection).