New & Next: Denver's Social Impact Bond Makes Impact Investing Mainstream (Confluence Denver)


Impact investing, social venture philanthropy, triple-bottom-line companies -- the idea of doing well by doing good has permeated the private and charitable sectors. 

And now, for the first time, through The Denver Foundation, individual philanthropists can contribute to a Social Impact Bond (SIB) to address homelessness in Denver.

Denver City Council recently approved two contracts that set a social impact bond for homelessness in motion. The SIB, also know as a pay-for-success contract, is a partnership between Denver nonprofit homelessness providers and intermediaries and the City and County of Denver that will fund housing and services for 250 of our community's most vulnerable, and at the same time, create significant savings for the city.

Private and philanthropic investors, including The Denver Foundation, are taking on the risk, providing the upfront capital and betting that the project will attain significant program outcomes and government savings.

Unlike a traditional grant, investors can expect an average annual financial return of just over 3 percent, but only if the project is successful in keeping people in housing and out of jail.

The idea of taking on risk to make social change -- investing in projects where the public sector can't or won't -- is at the heart of philanthropy. Examples include Bill and Melinda Gates Foundation contributing more to health issues than the World Health Organization. And Mark Zuckerberg and Priscilla Chan's recent pledge to contribute 99 percent of their Facebook stock to a new nonprofit deploying impact investing strategies to make change is unprecedented.

Of course, Denver's project to provide homes, isn't on the scale of the philanthropy of Mark Zuckerberg or Bill and Melinda. It's an $8 million-plus investment from seven foundations and a trust bank, who care about helping those most in need and perhaps proving that investing in services can save us all some tax dollars. And because just about anyone can contribute to the Social Impact Bond, impact investing is available to all instead of a select few "philanthrocapitalists" with concentrated wealth.

The Denver Foundation is investing in the project for a few reasons: the belief that everyone deserves a safe place to call home, the idea that investments like these are a responsible way to leverage grant dollars and potentially have money returned to the Foundation to be redeployed in the community and because our donors and fundholders care about homelessness.

The Denver Foundation is a community foundation. Unlike a private foundation with one benefactor calling the shots, The Denver Foundation was created by hundreds of Denver philanthropists and their charge to us is to respond to the changing needs of the metro area. Our endowment was created by small and large gifts alike, from people like Emily Griffith in the 1920s to gifts from dance teachers, bankers, secretaries and doctors in recent years.

We also work with hundreds of individuals, families and businesses who create their own donor-directed funds at the Foundation. We steward, invest and administer their charitable funds, and they choose where those funds go. Many of these generous donors are using their own funds to invest in the SIB with the help of The Denver Foundation.

The SIB is collaboration in every sense. In how many other instances do we see multiple nonprofits collaborating with one another and with their local government? In a project where foundations and banks are covering the costs upfront? And through The Denver Foundation, individual and everyday philanthropists are able to contribute to this remarkable partnership, through charitable grants or their own philanthropic investments with the hope of recycling their gifts.

Research tells us that Denver's social impact bond for homelessness will be successful. But even if it misses its mark in any way, there's no way it could ever fail. New housing units, people in homes and the city, nonprofits, a bank, foundations and individual philanthropists coming together to address a dire need in a financially smart way -- I can't think of a better success story than that.

Kate Krebs Lyda is a Denver native and philanthropic services director and impact investing specialist at The Denver Foundation. She helps individuals and businesses achieve their philanthropic strategies and helps the Foundation invest funds for impact. To learn more about contributing to Denver's Social Impact Bond, or establishing your own charitable fund, email Kate.