The social impact bond wars

Monday, February 24, 2014

It’s too early to say whether the cognitive behavior therapy program at Rikers Island, which Making Sense profiled last spring (watch below), has reduced recidivism in New York City. That’s the outcome required for the city to repay Goldman Sachs’ investment. But fights among young offenders at Rikers are down since implementation of the Osborne Association’s cognitive behavior therapy program last year.

The problem, social impact bond skeptic Mark Rosenman argues, is not that these programs don’t help young offenders, it’s that banks like Goldman Sachs are also benefiting from these bonds — at the expense of taxpayers. If Goldman paid more taxes, he says, there wouldn’t be a need for private financing in the first place.

And when nonprofit foundations are the primary investors, the efficacy of social impact bonds can really only be assessed on a case-by-case basis, according to a 2013 National Bureau of Economic Research paper. The hypothesized benefit, the paper explains, is that investors will have more agency and more stake in achieving the social goal. But, it cautions, altruistic and financial goals can always conflict.

Source: PBS (link opens in a new window)

Impact Assessment
governance, impact investing