An Intern’s Perspective: My Summer at Social Finance

This summer, I had the privilege of serving as the first [Harvard University Institute of Politics] Director’s Intern at Social Finance (SF), a Boston-based nonprofit organization dedicated to mobilizing investment capital to drive social progress.

Central to SF’s work is an innovative financing tool called the Social Impact Bond (SIB), a public-private-nonprofit partnership that has the potential to scale evidence-based social interventions, create taxpayer efficiencies, and generate financial returns for investors. SF structures and manages SIB transactions, and also helps governments and service providers develop the capacity to become stakeholders in these initiatives.

Today, there are four SIBs operating in the United States—directing $50 million in capital to the social sector—and over two dozen additional states and counties actively pursuing SIBs in their respective jurisdictions. These projects are aimed at addressing a diverse array of issues in areas such as health, education, homelessness, criminal justice, and workforce development.

The work I was assigned at SF was engaging and informative, providing me the opportunity to gain real insight into the emerging field of Pay for Success and Social Innovation Financing. In my role as a communications intern, I updated SF’s social networking outlets, marketing materials, and website on a regular basis and took on ad hoc responsibilities as they materialized. The most challenging and rewarding projects I worked on this summer involved constructing a comprehensive database of SIBs in operation and development around the world and writing a post for the SF blog that was later picked up and circulated by the global daily SIB Newsletter.

When I first walked into the office, I was surprised (as most visitors are) by the conspicuous absence of cubicles or partitions. Everyone—from Associates to the Vice President, Managing Director, and CEO— sits side by side at adjoining desks. As I bounced between temporarily available seats over the course of the summer, developing a deeper understanding of different projects and closer relationships with my fellow coworkers, I quickly realized the value of the open floor plan. This unique layout facilitates a collaborative work environment and speaks to the firm’s people-centric culture.

Throughout the summer, I received constant guidance and support from my supervisors, who were just as willing to answer questions in my seventh week as they had been on my first day. The team members, universally inspiring in their knowledge and passion, were always open to sharing their experiences and offering advice. Bonding occasions ranging from impromptu coffee breaks to newly instituted “Food Truck Fridays” were highlights of the internship.

I am incredibly grateful to the SF staff for taking a genuine interest in my development and making me feel like part of the team. I would also like to thank the IOP for coordinating what was truly a fantastic internship experience.

This summer marked a particularly exciting period of growth for this nascent sector with the introduction of bipartisan federal Pay for Success legislation in Congress (the Social Impact Bond Act in the House of Representatives and the Pay-For-Performance Act in the Senate), the publication of the United States National Advisory Board on Impact Investing’s recommendations for supercharging the industry, and the launch of the Social Innovation Fund’s $11.2 million Pay for Success grants competition.

Though I will no longer be held accountable for remaining informed of such advances in the field, I fully anticipate following the evolution of this exciting space to a mature and established industry trusted to tackle society’s most complex challenges.

Entry by Maddie Sewani, Harvard University ’16

This post was also published by Harvard University Institute of Politics here.

Guest Blog from SFUK Director of Peterborough Project: The One Service Delivers Results for Peterborough Prisoners

Finally we can answer the question about how things are going in Peterborough. All the indicators so far had been positive but it’s great to hear that reconvictions are down by over 8%. If we keep up our hard work, our investors look likely to make a return in 2016.

This project oozes innovation and it has been so exciting to be part of it. The team of staff and volunteers are incredible, as are our local partners, so it is no surprise to find that we have had a positive impact. You often hear people talk about multi agency working but I’ve never experienced it quite like this before. The fact that we had seven years, a flexible budget and one outcome, to reduce crime, resonates with agencies across the spectrum and their buy-in has been fantastic.

It’s been hard to get an accurate sense of performance up until now as the control group hadn’t been created. We do know that clients and stakeholders have been reporting that crime is down and people are changing habits of a lifetime but it is so good to see it in black and white. (It’s official!)

Our clients face multiple barriers and often have entrenched behaviour patterns so this journey hasn’t been an easy one. I am so proud of the way they have embraced the opportunities and made efforts to change their lives. It has been really exciting to see them open up and engage with the service. Some take time to build trust, and progress has been slow and steady over the last three years. This reinforces my view that projects like this need to be long term, so we can establish meaningful relationships and integrate fully into the local landscape. It’s been really hard work and at times immensely frustrating but it’s great to know that it is working.

The One Service was set up to be a seven year project and that is what we all signed up for, so it could evolve and improve further over time. It is a big personal disappointment that it was brought to a close two years early and it is a decision that clients and stakeholders are also struggling to accept. The team will however do our best for the remainder of Cohort 2 and use the learning to date to continue to improve. Thanks for everyone’s support!!

Entry by Janette Powell, Social Finance UK Director of the One Service and the Peterborough Social Impact Bond

Thoughts on the Future of the SIB Market: A Summary of SSIR Webinar, “Social Impact Bonds: From Concept to Reality”

The Social Impact Bond (SIB) market has recently gained tremendous momentum. Today, there are four SIBs operating in the United States—channeling $50 million in capital to the social sector—and at least two dozen additional states and counties actively pursuing SIBs in their respective jurisdictions. SIBs are also garnering significant attention in the international arena. However, despite the progress achieved to date and media buzz generated by this innovative financing mechanism—there is even a daily global online SIB newsletter—SIBs have yet to achieve proof of concept.

On June 4, the Stanford Social Innovation Review hosted a webinar titled “Social Impact Bonds: From Concept to Reality” to identify what steps will likely need to be taken in order for SIBs to become a well-established, widely-accepted option for funding social interventions at scale. The session featured Social Finance CEO Tracy Palandjian and Sam Schaeffer, the CEO and Executive Director of the Center for Employment Opportunities (CEO).

Tracy delivered an overview regarding the state of the domestic SIB marketplace, focusing particularly on the nation’s first state-payor SIB, a transaction focusing on reducing recidivism and increasing employment in New York. However, she warned that this is not the only appropriate SIB model because at this still-nascent market stage, each deal is unique. “If you’ve seen one SIB,” she said, “you’ve only seen one SIB.”

Sam then shared CEO’s firsthand experience partnering with Social Finance on the New York State SIB. He also presented a framework in order to assist providers in assessing risks and opportunities across six major components of SIB transactions: capital source, investment stake, payment type, performance threshold, geography, and evaluation measures. He explained that in CEO’s first SIB transaction, his team believed it was important to: unlock new private capital without diverting a high proportion of existing philanthropy to the SIB; have zero skin in the game so CEO’s staff could concentrate on executing well; receive unrestricted, upfront funding so they could pay for service delivery as it happened; commit to a performance threshold within the confines of results CEO had previously produced; scale the program in jurisdictions where CEO had proven impact; and focus on measures for reducing recidivism for which CEO had demonstrated effectiveness.

Below are a few key takeaways from Tracy’s and Sam’s presentations regarding the transformative potential of SIBs and the future of this young market:

  • SIBs have the potential to fill a critical gap in the broader continuum of capital available to providers: Tracy explained that foundations in their capacity as grant-makers are in the business of “incubating great social innovations.” In an ideal world, government—as the largest funder of social services—would eventually “take out” philanthropy and “use its strong policy lever to allocate funds” for proven programs run by high performing organizations. The current state of affairs doesn’t reflect this “nirvana,” however. SIBs can fill this critical gap in the continuum by increasing the flow of “1) upfront, 2) multi-year, 3) highly flexible” capital to evidence-based providers in order to “accelerate that link to government uptake.”
  • SIBs represent a model for provider-friendly, performance-based contracting: Sam commented that if all government contracts could be structured like SIBs, “where the marginal costs are paid for, where the full overhead rate is paid for, we would be a much different organization vis-à-vis scaling. This is a great model for how I think performance-based contracting can work for providers.”
  • More experimentation must be done: Tracy stated that more deals need to be launched in order for the industry to fully take flight. “There’s got to be a great degree of experimentation still, because we want to continue to learn…. Standardizing too early could threaten the market if we’re not standardizing the right thing.”
  • SIBs promote much-needed sustained engagement by all parties: Tracy emphasized that “True societal change at scale requires [a] sustained effort over long periods of time.” SIBs are meant to address “gnarly, multidimensional, complex problems that can’t be solved overnight.” The hope is that SIBs “can promote sustained engagement by all parties—the provider, the clients on the ground, [and the] government.”

Both Sam and Tracy remarked on the collaborative nature of the industry. Sam conceded that entering into the transaction was a risk, but explained that the risk was mitigated by the SIB partnership structure. “Based on the commitment we saw from Social Finance, the commitment we saw from New York State—[CEO] knew this was a very good road to pursue.”

All stakeholder groups have contributed to the development of the market so far—“government in catalyzing the space, foundations in providing technical support, and providers in executing the work that improves people’s lives,” according to Tracy. This collaboration must continue. Tracy asserted that whether we can realize “the promise of [SIBs] being a multibillion dollar market to finance significant social change at scale” will be up to all players in the market and whether they can collectively continue doing the on-the-ground work that generates results in the coming years.

Entry by Maddie Sewani, Harvard Director’s Intern