Social Finance is a nonprofit organization whose mission is to mobilize investment capital to drive social change. Committed to improving the lives of individuals, families, and communities in need, we develop and manage innovative financial instruments that connect the social sector to the capital markets and generate both social benefit and financial return. The Social Impact Bond is currently at the core of our efforts.
The United States is home to almost a million charitable organizations that provide vital services to vulnerable individuals, families, and communities. Though they bring real innovation to bear on intractable social problems, these organizations collectively serve only a small fraction of those in need. Limited funding—especially long-term funding—constrains nonprofits’ growth and contributes to a high degree of fragmentation within the social sector. Even nonprofits with the strongest track records are unable to expand their services. In today’s economic downturn, the consequences of this shortfall are magnified.
At the same time, governments at all levels are struggling in the face of large deficits that reflect not only the lingering effects of the financial crisis, but also long-term structural budget gaps. As a result, governments are trapped in a vicious cycle: Limited resources for prevention programs, such as supportive housing and job training, lead to greater demand for safety-net services, such as shelters and prisons, followed by further reductions in early-intervention programs that could reduce the need for remediation in the future.
Social Finance believes that it is possible to develop financial products that align the interests of nonprofit service providers, governments, and investors, and thereby enable proven social programs to scale and expand their reach. By forging market-based mechanisms that link these diverse stakeholders, we structure instruments that transfer the financial risk of investments from nonprofits and government to investors. Our goal is to provide a critical and sustainable financing alternative for growth-ready nonprofits by tapping into large pools of patient capital provided by investors who embrace the longer time horizon required for successful preventative programs.