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Impact Investments

Public and Private and everything in-between (Philanthropy & Nonprofits)
Brian O’Shaughnessy, Founder Community Impact Strategies communityimpactstrategies.com

Why Should You Listen to Me?
Introduction & Background

What is Impact?
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Data and measurement concept Centered on financial efficiency and results Being used by an expanding collection of private sector stakeholders To advocate for new ways to improve population results in a fiscally responsible manner

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Major challenges? 1. 2. Define and Measure Results Capture Data Challenge the Status Quo (public sector) PLUS: Everything cannot be measured . 3.

Why Do We Care So Much Today? .

$ MONEY $ Less Revenues + More need + Increased Fiscal Concern • Government spending 7%-45% of GDP ( Philanthrocapitalists/Tea Party Influence) • .

Preventive Social Services . Philanthropy 4. Impact and Social Investments 3. Social Enterprises 2.Where is Impact Being Created? 1.

introduced in 14 more – including CT) Impact Investments: GIIRS (Global Impact Investment Rating System) 2. and transparency.Social Enterprises/B Lab B Lab and Benefit Corporations B Lab is a 501(c)3 nonprofit that serves a global movement of entrepreneurs using the power of business to solve social and environmental problems. accountability. 3. Three Initiatives 1. . Legal Infrastructure: Passing legislation (passed in 20 states. Good Companies: Certification as a B Corporation B Corps are certified by the nonprofit B Lab to meet rigorous standards of social and environmental performance.

Global Impact Investment Rating System (GIIRS) SROI (developed by REDF) Impact Funds High Net Worth Investors Acumen/Calvert Foundation Impact Assets Root Cause .Impact & Social Investments Evaluation Tools & Frameworks GIIN – Global Impact Investment Network(Developed IRIS) GIIRS.

Large National Philanthropic/Business Organizations • • • • Rockefeller MacArthur Markets for Good (Gates & Hewlett Foundations) Calvert Foundation .Philanthropy Philanthrocapitalists Wealthy and/or business backgrounds eager to measure social returns. Arnold. Buffet. Demographic of philanthropic and nonprofit management is more “business” oriented (Gates. KL Felicitas).

providing a flexible way for users to track performance for a relevant set of metrics from the IRIS catalog.org/ Impact Investment Data Management & Software PULSE PULSE is a data management program developed by Acumen Fund in 2006 to help impact investors collect.siaassociation. manage. and report impact data from their portfolio companies.foundationcenter.New Professions & Tools Social Impact Analyst Social Impact Analysts Association http://www.org Tools and Resources for Assessing Social Impact (TRASI) http://trasi. . IRIS is integrated into PULSE.

Preventive Social Services • • • • Social Impact Bonds/PFS Human Capital Performance Bonds Early Childhood/Reentry/Workforce Development Preventive Healthcare • Collective Health and Fresno Asthma • Return on Taxpayer Investment/WSIPP/Pew Results First .

Impact has profound power as a tool It serves as a bridge for two traditionally partisan perspectives: One “liberal” One “conservative” .

IMPACT combines The liberal belief that we can address root causes to combat social issues + The conservative belief that this is the most fiscally prudent course of action. .

IMPACT Has the ability to create a common language for our hyper partisan world .

” Social Finance Press Release .“The exciting thing about social-impact bonds is that there is a direct linkage between making people’s lives better and financial return. and that’s a powerful concept.

Long Term Trend The revenue/need crisis is a “threat to public order.” State Budget Crisis Task Force NY. CA. NJ. IL. VA & TX “Ravitch Report” .

More Need Population Results are getting worse… • • • • • • National Median Income decreased 5 consecutive years Unemployment & Underemployment Workforce Participation % continues to decline Generational Poverty & Lack of Economic Mobility Health Outcomes and Healthcare Expense Academic Achievement Gap (Domestic/International) .

Government Revenues are Down and National Median Income is Down Less Revenues and More Need .

Question? Are there new ways to improve population results? (With the same or less money) .

With a commitment of government to pay for a specifically defined improved social outcome(s) That results in public sector savings. Because the services are provided prior to any payment.” . A contract with the public sector (government). 2.Social Impact Bonds Also known as a Pay for Success Contracts 1. 3. financing is required and is presently contemplated as being provided by “investors.

so the structure of the deal was very important. special education costs. unemployment. Arnold Foundation . 4.Components of Social Impact Bonds/PFS 1.” Josh McGee. foster care. Measurement (Did 1 cause 2) Financing “Our foundation is looking for investments around evidence-based policymaking. homelessness. juvenile justice) 3. Proven Preventive Service Avoidance of Cost: What is being Prevented (Incarceration. 2.

Reentry New York City Rikers Island-Juvenile Reentry Massachusetts -Juvenile Justice Roca New York State Reentry/Workforce Utah.Early Childhood Special Education Fresno Asthma and Collective Health .Social Impact Bond Programs UK Peterborough Prison.

Connecticut Need v. Revenues Funding of Social Services Quality of Data Preventive Social Services & Social Impact Bonds .

NEED • Poor getting poorer: Connecticut is the only state in which the income of the poorest 20% of families has declined since the 1980s (by 17%. • 45% increase in those approaching poverty over the past 20 years (200% of the FPL). • Poverty increase from approximately 6 to 11% in 10 years. . compared to a national increase of 11%).

i. our economy is getting smaller • Habitual budget deficits • Through 2009..REVENUES • Constricting GDP last 2 years (worst in the nation). worst private sector jobs market for prior 20 years .e.

Funding of Social Services in Connecticut $1.3 billion annually to nonprofits (over 5% of budget). Add agency spending and over 50% of budget is for “Social Services” .

Urban Institute study highlights • 66% of Connecticut nonprofits were operating with salary freezes (worst in the nation) • Percentage with reported deficits (5th worst) • Severe problems with late payments from the state (3rd worst) .

Connecticut Issues With Data CT21 Report /March 2013 “There is no overarching health and human services strategy.” Each agency has different data collection and definitions Population results are “impossible” .

What is Happening in Connecticut? Social Innovation Financing Statute Benefit Corporation RBA Results First .

” Laura Quinn. we may get data that’s worse. what we’ll get is not better data – in fact. founder of Idealware .You Cannot get Blood From A Stone “We all need to understand that if we as a social sector lean on nonprofits to provide data they simply don’t have the infrastructure to provide.

Agreement on a common agenda is illusory without agreement on the ways success will be measured and reported.” John Kania & Mark Kramer. FSG Consultants Stanford Social Innovation Review. Winter 2011 .We Need Shared Data Standards “Shared Measurement Systems: Developing a shared measurement system is essential to collective impact.

Growing dissatisfaction with size of Government Increased Expenditures and Poor Results US Govt. less revenue….Where is this all going? More need. Spending is larger than the GDP of every country in the world other than China .

Total Government Spending – Federal and State – From 1900 through Present .

Analogy to the Great Depression What resulted from a lack of faith in US Capital Markets? Disclosure • Securities Exchange Acts of 1933 and 1934 Common Standards • Adoption of GAAP .