A New Tool for Scaling Impact: How Social Impact Bonds Can Mobilize Private Capital to Advance Social Good

A New Tool for Scaling Impact: How Social Impact Bonds Can Mobilize Private Capital to Advance Social Good

In September 2010, our sister organization, Social Finance, Ltd., launched the world’s first Social Impact Bond in the United Kingdom. Targeted at reducing prison recidivism, the Peterborough pilot generated world-wide interest in the potential of this innovative financial instrument. We established Social Finance, Inc. in January 2011, to bring the Social Impact Bond to the United States. Since our founding, we have been collaborating with government, investors, nonprofit organizations, and thought leaders on how Social Impact Bonds might realign incentives for delivering social outcomes and augment public funding and philanthropy to support our collective efforts to improve the lives of individuals and communities in need.

At its core, the Social Impact Bond is about partnership. We are grateful to the Rockefeller Foundation and our other founding partners who share our commitment to mobilizing investment capital to drive social change. The momentum that Social Impact Bonds have brought to the larger impact investing industry has been inspiring; yet there is much work to be done. Successful collaboration with a broad range of constituents, thoughtful design of an innovative and complex instrument, and diligent execution of transactions will be critical to realizing the promise of Social Impact Bonds.

The purpose of this publication is to provide an overview for a broad audience of both the promise and challenges of developing and implementing Social Impact Bonds in the United States. Despite the many complexities, multi-stakeholder interactions, and varying dimensions of risks, Social Impact Bonds represent a potentially valuable new tool for scaling social impact.