I just wanted some space to write out some thoughts I had leftover from today’s class, so I figured I’d share them with everyone and maybe spark a conversation.
Our conservations in class today were definitely eye-opening for me – especially the closing but about Social Impact Bonds – and it’s completely changed the way I think about philanthropy. I’m still trying to wrap my head around these bonds because they completely changed the way that I think about philanthropy and how it operates. Now, I’m certainly no expert in philanthropy or finance or the gray areas in between. I had always envisioned philanthropy in basic terms: people would donate various sums of money to various causes as they saw fit…sometimes it would be a one time donation, sometimes it would be a monthly or yearly contribution, whatever it may be.
But the beauty of the SIB’s, in my eyes, is that they enable philanthropists to make a contribution (perhaps an unconventional contribution in today’s terms), earn a return, and then turn around and make ANOTHER contribution, and another, and another, and so on and so forth. With SIB’s, the contributions of a philanthropist don’t need to fund one single endeavor by one organization; they can be reinvested over and over again.
Philanthropy in this sense is not reaching for one’s checkbooks; it’s making smart investments that earn social and financial returns, by distributing cost-savings to investors and the other parties involved. Not only that, but philanthropy in the SIB framework (at least as I understand it) essentially reallocates investment and funding in a socially and financially optimal way. The way I see it, this is about as close as it gets to a free lunch in terms of establishing a more socially just equilibrium.