As many of you know, I serve on the Board of the Downtown Women’s Center, a wonderful organization committed to ending homelessness for women. At a Board meeting earlier this month, our CEO, Lisa Watson, shared some of the nonprofit trends she has been observing. One trend she noted was that the government is looking at Social Impact Investment and Social Impact Bonds or what has been titled “pay for success.” Lisa has been studying this, as she believes it will be part of the future for funding housing services. To her point, on June 25, the Mayor of Denver announced the nation’s first ever city-led Social Impact Bond, and it is in the area of homeless services.
The Corporation for Supportive Housing (CSH) explains that social impact investment has the potential to meet the “double bottom line” of providing both positive social impact and generating returns on investments, as well focusing on paying for outcomes and not activities.
Impact is measured rigorously and government makes “success payments” based on results. This focus on paying for positive social impact, rather than services performed, helps ensure that incentives are properly aligned to achieve social impact and provides a mechanism for government to fund programs/projects that work. This upfront capital investment can be provided by institutional investors as well as philanthropic sources, which typically receive a modest return on investment and the potential for success payments depending on the intervention’s performance. Overall, the savings generated by executing the successful intervention can be used to repay the investors and/or can be reinvested into the project, allowing further organizational growth.
This is an exciting development, and one to watch closely.