Entries under “Industry News”

Roca, a 26-year-old Massachusetts organization that aids high-risk young men who are on track for incarceration and early death, has proven its worth with an effective model for keeping its participants out of jail and in steady jobs. Now the organization is getting a big boost from a seven year, $27 million social impact bond–the largest ever in the U.S.

Social impact bonds are a relatively new type of philanthropy where donors put money in social impact programs, which have specific and tangible goals and make money back (paid by the state of Massachusetts, which has received $11.7 million in funding for the project from the U.S. Department of Labor) only if those goals are met. In this case, Roca is participating in a randomized trial to see how its efforts in keeping young men out of prison compare to the norm.
This is a group of young men in the country that we leave on the street.

The funding, which comes from loans and grants provided by organizations including the Goldman Sachs Social Impact Fund, Living Cities, and New Profit, will allow Roca to help 929 at-risk young men between 17 to 23, all of whom are either exiting the juvenile justice system or are in the probation system currently. Nonprofit advisory firm Third Sector Capital Partners organized the effort.

Ten national, regional and local foundations have committed $33.25 million in new funding to continue the work of the New Economy Initiative (NEI). NEI launched in 2008 when ten foundations came together to form a unique $100 million philanthropic initiative to address economic issues in Southeast Michigan. NEI, which is a special project of the Community Foundation for Southeast Michigan (CFSEM), will now have funding to support its efforts over the next three years to not only foster a culture of innovation and entrepreneurship, but also build a network of support for entrepreneurs and small businesses throughout the Detroit region.

Program-related investments (PRIs) hold incredible potential for the social enterprise arena. Rather than giving away money through grants, PRIs allow foundations to make investments as loans or equity stakes in the hopes of regaining their investments plus a reasonable rate of return. This arrangement allows foundations to increase the amount of money available to the social sector, while simultaneously building stronger and more sustainable socially minded entities.

As part of a broader strategy involving impact investing and the market-based solutions of target recipients, PRIs stand to tackle tough social issues on a scale never before seen by moving beyond traditional notions of charity that, in many ways, continue to restrain large-scale progress.

Momentum is picking up for investments that can produce a financial return while improving social conditions, as pressure persists on traditional funding sources and the ranks of social entrepreneurs increase.

Rising interest in so-called impact investing has many foundations either already making investments or considering them as an extension of their traditional philanthropy or grant-making.

Foundations such as Kresge are making program-related investments from their grant budgets for below-market or zero-percent returns. Those can take the form of loans, equity stakes, loan guarantees in which foundations agree to back other loans, and cash investments.