Social Impact Bonds (SIBs) are a new form of social-sector financing that have only recently emerged. These arrangements stipulate that private agents offer the principal investment in a social initiative and receive returns related to stated performance benchmarks. This presents an opportunity for the government to avoid footing the bill for expensive programs and for the private sector to support the social sector with the potential to profit.
The idea of modern businesses supporting social causes and giving back to their communities goes as far back as the era of Andrew Carnegie and John D. Rockefeller, wealthy philanthropists who donated more than $500 million to charities in their time. However, it wasn’t until 1953 that Howard Bowen coined the phrase “corporate social responsibility,” encouraging businesses to serve the needs of society.
Companies, investment managers, and nonprofits are under increasing pressure to improve their social & environmental impact. Doing so also means getting better at measuring and reporting their performance in a defensible, rigorous way.
These impact-related ‘pain points’ are strikingly similar across the public and private sectors and civil society but are sometimes expressed in different ways: