March 30, 2015

London Theater Pioneering Social-Impact Bonds for Culture

Shakespeare's Globe in London is preparing a $7.5 million social-impact bond, introducing this growing form of nonprofit financing to the realm of the arts, according to the Thomson Reuters Foundation. The stage complex on the banks of the River Thames, modeled on the original Globe Theatre that burned down in the early 17th century, hopes to secure investment to pay for a new library, archive, and research center.

Social-impact bonds, also known as "pay for success," aim to raise money for social programs from private investors rather than rely on government funding. Investors stand to reap financial returns if projects meet performance goals. The instrument was pioneered in Britain, which now how has more than 30 bonds under way covering areas like homelessness, foster care, youth unemployment, and prison recidivism.

Social-impact bonds are "growing really rapidly in a variety of areas, some in the more classic social sector, among charity and social enterprise, but it's becoming more diverse than that," said Kieron Boyle, head of social investment at the British government's Cabinet Office.

Read a Chronicle of Philanthropy column on the risk of relying on "pay for success" to tackle complex social problems.