Social Finance
Outcomes-Based Investing through Scaling Impact and Getting Smaller
location: USA
This case study examines Social Finance, an organization dedicated to building partnerships and investments to measurably improve lives. Recognizing the increasing interest in impact investing, they developed a model centered on outcomes-based approaches.
Context
Social Finance acknowledges the enthusiasm surrounding impact investing, but recognizes that its practical implementation remains ambiguous for many stakeholders. To address this, they aimed to establish a framework that emphasizes measurable outcomes as a catalyst for investor engagement.
Approach
To create a robust outcomes-based framework, Social Finance sought an alternative to traditional social impact bonds characterized by long-term, complex deals. They opted for shorter-term, high-flow arrangements and prioritized bilateral relationships to streamline operations. Additionally, they acknowledged the challenge of observing long-term outcomes, leading them to explore opportunities in workforce finance.
Partnerships
To broaden their impact, Social Finance formed strategic partnerships with training providers, such as CRF, specializing in clinical trials implementation. By providing financing for individuals' training in this field, the organization aimed to facilitate income increases, enabling participants to transition from lower-paying jobs to higher-wage positions. Recognizing the limitations of relying solely on a single partner, Social Finance actively sought to expand their impact through additional collaborations.
Implementation
Social Finance initiated a workforce finance program, offering financing options for individuals pursuing training programs to enhance their employability and increase their incomes. The program operated on an outcomes-based model, ensuring that individuals only repaid the financing if they achieved higher incomes. To manage their efforts effectively, Social Finance oversaw a portfolio of 345 legal investment vehicles, including a $50 million fund raised from impact investors.
Scaling Impact
Social Finance pursued two distinct approaches to maximize their social impact. Firstly, they aimed to scale up their efforts by partnering with industry leaders such as Google. Leveraging Google's vast data resources, they focused on the Google Career Certificates program. By identifying training providers with expertise in supporting low-income individuals, Social Finance facilitated financing for students pursuing these industry-recognized certifications, enabling them to secure well-paying jobs.
Results and Future Prospects:
Social Finance achieved significant milestones, financing thousands of students and generating substantial wage gains. The Google Career Certificates Fund, projected to finance 20,000 students over five years, aimed to create $1 billion in wage gains. Furthermore, Social Finance explored the potential replication of their model in other industries, such as HVAC and allied health jobs, by establishing industry-recognized standards and connecting training providers to enhance employment opportunities.
Conclusion
Through their outcomes-based approach, strategic partnerships, and commitment to maximizing social impact, Social Finance demonstrated the transformative potential of impact investing.
By adapting their strategy to include both scaling up and grassroots-level initiatives, they aimed to reach a wider audience and effect significant change in the landscape of workforce finance.