NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, November 6, 2013

When faced with an investment bank saying that it’s going to do something for “social impact,” it’s fair to interrogate its motives. Take Goldman Sachs’s new $250 million “social impact” fund, or the $10 billion that Morgan Stanley hopes to attract to its “investing with impact” platform, for pumping money into projects with some beneficial public outcome. That’s just glorified philanthropy, right? Surely just something to help Goldman burnish its image and brag about at cocktail parties, not much more.

That may be true. But if Goldman CEO Lloyd Blankfein is to be believed, he wouldn’t be doing it if it weren’t also a lucrative enterprise.

Blankfein showed up in Washington Tuesday morning to talk up his new fund at the Center for American Progress (which does receive some funding from the investment bank). First, what it does: Provide up-front capital for priorities that aren’t immediate pressing needs, like early childhood education or energy efficient building retrofits, that would nevertheless result in lower costs down the road. Through the power of data, they’ll find ways to evaluate the economic return generated by that investment, and split the difference between the investor and the government or nonprofit.