Major financial companies remain interested in backing social-impact bonds, despite the plug being pulled on the first such effort in the United States, Reuters writes. Wall Street firms such as Deutsche Bank, Santander Bank, and Bank of America say they will continue to explore so-called "pay for performance" efforts to test new social programs.
Social-impact bonds funnel private capital into pilot projects in areas such as poverty and crime reduction, with investors eligible to earn returns if the programs meet preset goals. A nonprofit-run program that Goldman Sachs financed to reduce recidivism among teenage inmates at New York's Rikers Island prison is being shut down a year short of its scheduled end because it did not hit its goals, but officials hailed the effort because it tested new approaches to the problem at no cost to taxpayers.
"We are certainly not going to distance ourselves from our explorations into doing social-impact bonds because of what happened" at Rikers, said Gary Hattem of Deutsche Bank. "This is the frontier of something." New York Times economic columnist Eduardo Porter wrote of the Rikers experiment that despite its having failed, it "offers a glimpse of a potential future for delivering government services."