Investment Bank Launches Social Impact Fund

Global investment banking firm Goldman Sachs has launched a $250 million social impact fund – one of the first US impact investing vehicles to be sponsored by a major financial institution.

The GS Social Impact Fund says it will pursue an investment strategy that addresses social challenges, provides investors with risk-adjusted financial returns, and mobilises new sources of private capital for social impact investing.

To be administered by the firm's Urban Investment Group (UIG), Goldman Sachs says the new fund will be the first to enable wealthy individuals and companies to invest directly in projects that provide affordable housing, healthcare facilities, schools, and retail space; businesses and social enterprises that catalyze job creation and economic growth; and the delivery of social and educational services for low- and moderate-income communities.

“With insufficient public sector and philanthropic resources available to address chronic social challenges, private sector capital is emerging as a powerful tool to create economic opportunities for underserved communities,” the Goldman Sachs website said.

In June 2013, the Benevolent Society launched a $10 million Social Benefit Bond to fund an intensive family support service in the first bank-backed issue of a Social Benefit Bond in Australia.

The Benevolent Society, in partnership with Westpac and the Commonwealth Bank, has launched the $10 million Social Benefit Bond to fund an intensive family support service for up to 400 families over five years.

“We know governments only have so much money to go around, but we also know there are a lot of people out there looking to invest in projects that will change lives – so this Social Benefit Bond is a real win-win,” Hawkins said.

“Essentially, our Social Benefit Bond will provide investment returns based on reducing the cost to government of pressing social issues.

“With foster care costing up to $66,000 a year, when we can show our service is successfully keeping children safe and reducing the number entering foster care, our investors will receive a financial return,” he said.

“This type of financing encourages discipline in the reporting of social outcomes, which means greater transparency for taxpayers, and also creates an asset class which does not require a choice between being a philanthropist or an investor.”

Read the factsheet here.