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Philanthropist and bank lend $7m to social impact bond

Philanthropist and bank lend $7m to social impact bond

News (International)

Chicago-based philanthropist J.B. Pritzker and global investment bank, Goldman Sachs have joined forces to lend $7m (£4.48m) to a pre-school education programme in Salt Lake City, USA.

Goldman Sachs is lending $4.6m (£2.9m) and J.B. Pritzker is lending up to $2.4m (£1.5m). The money will be invested in a social impact bond, so they risk losing if the programme fails to deliver results but could see a financial as well as social return if it succeeds. The investment’s success will be measured by the level of cost savings if children do not need to use special education services. If the programme is successful, the loans will be paid back with a five per cent interest payment.

J.B. Pritzker, president of the J.B. and M.K. Pritzker Family Foundation says: “Investing early and intelligently in the development of infants, toddlers and preschoolers significantly improves educational outcomes. Early learning reduces social and economic inequality and builds a better workforce and a stronger nation.” Among the initiatives supported by the Foundation are the Pritzker Consortium on Early Childhood Development, a research collaborative led by Nobel Laureate economist James Heckman of the University of Chicago and the First Five Years Fund, a national early childhood advocacy project.

This is the second social impact bond investment Goldman Sachs has made. The bank has already invested nearly $10m in a New York prison programme to reduce recidivism by delivering education, training and intensive counselling to young offenders.

“We realised that an investment that offers returns while delivering crucial social services was a potential game changer,” says Andrea Phillips of Goldman Sachs Urban Investment Group.

Goldman Sachs video discussing social impact bonds

http://www.goldmansachs.com/s/2012annual/client-stories/innovation/

Case study

http://www.goldmansachs.com/what-we-do/investing-and-lending/urban-investments/case-studies/salt-lake-social-impact-bond.html

  • Business/corporate philanthropy
  • Social investment
  • International