Michael Mc Millan
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Michael Mc Millan Michael Mc Millan Presentation Transcript

  • LEVERAGING PARTNERSHIPS: STAKEHOLDERS WORKING TOGETHER 2ND ANNUAL SOCIAL FINANCE FORUM Michael G. McMillan, Ph.D., CPA, CFA Director, Ethics and Professional Standards Twitter: @M_G_McMillan http://blogs.cfainstitute.org/investor/author/michaelmcmillan/
  • 2 “The way we invest creates the world we live in.” Amy Domini , Socially Responsible Investing
  •  Social Finance: The Future of Finance  KeyTrends  Measuring Social Impact  Public Private Partnerships  Social Finance in the United States  Developing a Network of Intermediaries  Moving Forward  Role of Government  Program Characteristics 3
  • To lead the investment profession globally by setting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society. Ethical Decision Making
  • Social Finance Partnerships Financial Tools Innovation Financial Instruments 5
  • Greater Accessibility Increase in Funds and Managers New Metrics to Assess Impact Broader Group of Investors Growth in Investible Capital 6
  • Global Impact Investing Rating System (GIIRS) Impact Reporting and Investment Standards (IRIS) IRIS Data Briefs Global Impact Investing Network (GIIN) 7
  • Governments officials are turning to the private sector to provide services that: • they have not been able to provide; • they can no longer afford to provide; • the private sector can provide more efficiently and effectively. 8
  • • White House: Pay For Success (PFS) Federal Government • Human Capital Performance BondsMinnesota • Social Innovation FinancingTrustMassachusetts • Rikers Island- First US Social Impact BondNewYork City 9
  • 2012 Budget: $100 Million for workforce development, education, juvenile justice, and care of children with disabilities. 2012: Departments of Justice and Labor: launched PFS programs in criminal justice and workforce development. 2013 Budget: $109 million to test PFS in a broader range of program areas including education and homelessness 10
  • Pay for Performance Act – authorized the sale of $10 million of bonds. Proceeds create a pool to pay service providers when they perform. Financial benefits earned by state pay interest, amortize principal, and cover administrative costs.Risk borne by service provider, who can earn higher payouts through better performance. Sold to private investors Population: chronically unemployed. 11
  • Holds outcome payments for the duration of a social impact deal. Funded through annual appropriations. Focus: Homelessness (stable housing) and juvenile justice (reduction in recidivism) State will select service providers and intermediaries. 12
  • Goal: 10% reduction of juvenile recidivism over four years MDRC: will manage 2 service providers. Goldman Sachs: provides $9.6 million in working capital to MDRC as a loan. Bloomberg Philanthropies: guarantees $7.2 million of the loan through a grant to MDRC Goldman can earn a maximum of $2.1 million if recidivism is reduced by more than 10% 13
  •  Facilitate the responsible and effective replication, diversification, and scaling of SIB models  Educate and communicate to all stakeholders what SIBS are and are not.  Develop a cross sector “Community of Practice” to provide: 1. Centralized communication vehicle 2. Comprehensive best practice tool box 3. SIB forums and conferences 14
  • Social Finance Social Enterprises Governments Financial Institutions Consultants Universities Foundations 15
  • Performance Based contracts Measuring Impact Foundational Support Safety Nets 16
  •  Potential for high net benefits  Measurable outcomes  Well defined treatment population  Meets the needs of a sizeable population  Reliable comparison (counterfactual) group  Focuses on prevention  Safeguards against harming the treatment population  Have a multi year track record (at least 5 years)  Have a demonstrated record of rigorous evaluations  Deliver statistically significant results  Be replicable and scalable  Deliver taxpayer benefits in 5 years or less. 17
  • 18 “The gratification of wealth is not found in mere possession or in lavish expenditure, but its wise application.” Miguel Cervantes