Jonathan Greenblatt, director of the White House Social Innovation and Civic Participation Office, said they are exploring options on how private sector investments be tapped for social projects at Government Executive Media Group’s Excellence in Government conference last Tuesday, reports Joseph Marks for NextGov.
The solution which he referred to is “pay-for-success bonds”. Private companies which allocated investments for social projects can earn from the capital they shared through gradually reducing program costs, if the program they fund succeeds.
Greenblatt explained that the strategy will only be effective if the federal government can present adequate metrics and research that the programs will pay off.
$100 million from the 2012 fiscal budget is allocated for successful programs under the various federal agencies including Labor and Justice.
Currently, the administration is observing the development of pay-for-success initiatives in the state and local levels.
For example: New York and Goldman Sachs has collaborated for a program aiming to lessen recidivism with first time criminals. Goldman Sachs invested $10 million under a promise of 20 percent return on investment, if the project succeeds. The revenue will come from savings generated from not detaining the repeat offenders.
Greenblatt strongly argues that finding new financiers is the key for reviving social projects. He adds that the a venture capital approach in investments must be adopted in this kind of condition.