“Pay for success has brought state and local governments into the impact-investing world. It brought in people who run homeless shelters and do job training: ‘If I’m good at what I do, I can access the capital markets.’”
An initiative to house and provide services to up to 250 homeless people in Travis County is set to be among the first in Texas to use an innovative funding model where investors pay upfront costs and are reimbursed by local governments only if goals are met.
The Central Health Board of Managers voted this week to commit $400,000 to participate in a new program expected to reduce the hospital utilization of up to 250 persons experiencing homelessness who are frequent users of the most expensive types of care.
Private foundations have been taking bolder steps toward impact investing in recent years.But with more individuals turning to donor-advised funds (DAFs) to facilitate their giving, how can those funds also be invested today to improve the world? That’s an important and intriguing question I’ve heard from donors and leaders in the philanthropy and impact investing sectors.
On Monday, the city launched a new Pay for Success Project. The English for Advancement program will provide language training and job placement for limited English speakers in Lowell seeking to advance their careers.
Financial innovation is key to impact investing and several organizations have made Austin a base to launch new financial approaches to social issues. For example, Social Finance opened an Austin office a few years ago to explore pay-for-success structures around issues like workforce development and homelessness.
In theory, SIBs are win-win: improved social outcomes save governments money while paying investors for their capital. Moreover, they encourage all sides to pursue interventions that are proven and likely to work, as opposed to interventions that someone hopes will work.
The legislation in the bipartisan budget bill authorizes the US Treasury to award competitive funding to states and local governments for pay-for-success projects and feasibility studies across a range of issues.
So far, private investors have funded 108 projects aimed at saving governments money with innovative projects serving everyone from homeless youths in Australia to parents in need in Germany to blind people in Cameroon.