Congratulations to Dr. Maoz Brown, a former doctoral fellow (2015) at the Center for Social Impact Strategy (CSIS). Dr. Brown has recently published a new piece in the Nonprofit Quarterly titled: The Hidden Costs of Social Impact Bonds. Social Impact Bonds (SIB) operate less like a traditional bond and more as a performance-based contract, helping governments experiment with innovative approaches to social problems. SIBs are investments made by private entities, funding these innovative interventions. If the intervention meets the required performance measures then the investors receive a premium from the government. If the social program does not meet government outcomes the loss is absorbed by the private investors rather than directly by the public or taxpayers. To mitigate the risk to private funders, philanthropic entities — such as foundations — will pay out a percentage of the initial investment or a loan guarantee to investors if the tested social program does not reach designated outcomes.
In his article Dr. Brown argues that, “taxpayers do incur a cost, although not in the form of a specific budgetary outlay. Instead, the public pays indirectly through forfeited tax revenue”. Dr. Brown’s article presents an opportunity to gain further insight on risk SIBs may present to the public, and considers the opportunity cost of philanthropy’s involvement within SIB investments.
