Social Impact Investing

The Office of Social Innovation prioritized PFS in 2011 by introduce PFS in the FY12
Budget and initiating a series of events designed to educate local, county and state
lawmakers about the opportunity presented by PFS. Since that time, the White House
has hosted numerous workshops, panel discussions, and other events focused on PFS.
The Administration also has prioritized grant programs to pilot the potential of PFS to
tackle various challenges. The Department of Justice announced three awards in
September 2012: an implementation award in Cuyahoga County, Ohio and a planning
award in Lowell, Massachusetts under the Second Chance Act and an additional
contract to develop a blueprint for governments to use Pay for Success to reduce
recidivism.
The Department of Labor announced two awards totaling $24 million in September
2013: one to the New York Department of Labor in the amount of $12,000,000 and the
other to the Massachusetts Executive Office of Labor and Workforce Development in
the amount of $11,670,000. These grants will support programming that aims to
increase employment and reduce recidivism among formerly incarcerated individuals.
One of the key proposals SICP made for FY 2014 was a new $300 million Pay for
Success Incentive Fund at the Department of Treasury. The Fund is designed to help
State and local governments implement Pay for Success programs with financial
partners. It will provide credit enhancements for organizations that seek to introduce
Pay for Success and offer direct grants to fund outcome payments for successful,
money-saving services.
Program Related Investments
The regulations regarding Program Related Investments (PRIs) originally were drafted
in 1972 as part of a broad effort on tax reform. These rules facilitate the ability of
foundations to move beyond conventional grants and use other financial means to
support nonprofits or businesses pursuing charitable purposes. However, PRIs have not
been adopted widely by the nonprofit field because their complexity in part due to the
outdated regulations created higher transactions costs for foundations who wanted to
use them.
In 2012, the Treasury Department updated aspects of the regulations for the first time in
40 years since they were first drafted. By publishing a set of clarifying examples of how
PRIs could be used, the Obama Administration tried to make it easier for foundations to
see how they can adopt flexible approaches to the deployment of capital. The examples
included scenarios including the use of credit enhancements, loan guarantees, lines of
credit, even equity investments to achieve their philanthropic missions.
Impact Investing
The Office of Social Innovation has been responsible for elevating impact investing
inside the Federal government. It has defined impact investing as "the practice of
channeling capital toward businesses that intentionally generate economic return and
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