Our Mission

Founded in January 2011, Social Finance US is a 501(c)(3) nonprofit organization that is dedicated to mobilizing investment capital to drive social progress.  We believe that everyone deserves the opportunity to thrive, and that social impact financing can play a catalytic role in creating these opportunities.

We are dedicated to designing public-private-nonprofit partnerships that tackle complex social challenges such as poverty, crime, education, health, and workforce success. As market intermediaries, we structure these partnerships by aligning the unique interest of all stakeholders – service recipients and providers, government and investors – to create innovative social financing solutions. This work reflects our commitment to driving social progress through a market-based approach, as well as our deep experience in the governmental, capital markets, social services, and philanthropy sectors.

Core to our work is the development of Social Impact Bonds (SIBs), which draw upon private capital to fund effective interventions designed to address the needs of the underserved. Social Impact Bonds have the potential to unlock a new and vast pool of investment capital to finance the expansion of effective, prevention-based projects, while focusing on measurable outcomes and generating social and financial returns for investors.

Funding for Prevention…

Many communities face a daunting array of complex social problems, such as high rates of crime, homelessness, and chronic disease. In many cases, social service providers in these communities have proven skills and programs to provide high-quality, highly effective support to those in need – but these providers lack the funding they need to grow, and are often overmatched by the size and complexity of the problems.

Aligning the interest of governments, investors, and service providers, social impact financing is designed to improve the lives of underserved people and communities, while also generating value for both investors and taxpayers. Central to the mechanism is linking the investor repayment to the success of preventative social service programs. In a SIB, the performance risk is shifted to the investor, ensuring that government only pays for positive results.

We at Social Finance are uniquely positioned, as market intermediaries, to mitigate the risk shouldered by investors through optimizing the financial structure and ongoing management of the programs. We work collaboratively with our partners – social service providers, government, and private investors – to expand proven programs that include two key elements:

  • Focus on prevention rather than remediation
  • Focus on measuring outcomes rather than outputs

By focusing on prevention, we can tackle the root cause of the problem and save on remediation costs down the road, such as ER visits or homeless shelters. The fact that preventative programs offer substantial long-term benefits is not new; as Frederick Douglass noted, “It is easier to build strong children than to repair broken men.” However, the social service providers in many communities often lack the resources required to meet high levels of demand.  SIBs offer the potential to unlock a vast pool of capital to fund preventive programs, bringing to life Ben Franklin’s maxim that an ounce of prevention is worth a pound of cure.

…And Effectiveness…

SIBs are built upon a foundation of data. The use of data empowers us to focus on not just outputs – how many people took part in a program, for example -- but to use hard data to shift the focus to the actual outcome of a social service program. Instead of just assessing the program by counting heads, we can take a more holistic approach and measure the program’s actual impact on people’s lives. For example, we go beyond counting the number of formerly homeless individuals enrolled in a comprehensive program. We can take it one step further and assess the program’s performance with regard to successfully rehousing people over a significant period of time – measuring the actual impact of the program on people and communities.

Historically, payment to service providers has been based on outputs rather than outcomes. This implies a focus on head count, like the number of people enrolled in a program or the number of families served. Outcomes measurement, by contrast, focuses on the impact of the service with regard to achieving desired benefits, such as the reduction in prison recidivism or the number of people who gain long-term employment as a result of the program.

…Equals Pay for Success

SIBs are designed to pay for success – investors are repaid only if measurable positive outcomes are achieved. By quantifying and assessing the performance of social programs, we can establish the value that these programs offer our communities. This ensures that government dollars only pay for results.

The terms “Pay for Success” (PFS) and Social Impact Bonds are often used interchangeably, but this is not always accurate -- although SIBs do fall under the PFS umbrella. SIBs are a method of financing a pay for success contract, which is a performance-based contract for social outcomes.  In a PFS contract, a Payor (typically the government) contracts with an Intermediary and/or Social Service Provider to deliver specific social outcomes, such as reduced homelessness or increased high school graduation rates.  The Payor only pays if those social outcomes are achieved. SIBs are a method of bridging the financing gap between the initial need to pay for service provision and eventual outcome payments from the Payor.

 

To learn more about Social Finance US and Social Impact Bonds, check out our Fact Sheet.