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Getting Rich Doing Good

by Tom Gallagher

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May 18, 2011

In TIME Magazine's May 23, 2011, issue, there's an interesting story about a new investment vehicle called "social impact bonds."

According to TIME:

"Social-impact bond (SIB), a new investment product created by Social Finance, a London private-equity firm that backs social entrepreneurs. Funded by private investors (including charities), SIBs -- which are also gaining traction among U.S. investors and policymakers -- aim to finance long-term preventive programs run by nonprofit groups to tackle tough social issues that cost taxpayers money. But investors can also gain a financial return. How? Governments pay for a program's success. If an SIB-funded program mitigates a problem by meeting measurable targets, that saves the government money, and a portion of the savings is used to repay the bondholders with interest. But the bonds are not government backed: if the social project fails to meet its targets, investors are out of pocket, and the government doesn't pay a penny."

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