I had the opportunity to attend a presentation this winter led by Steve Rothschild of Twin Cities Rise! and Invest in Outcomes. The topic was Human Capital Performance Bonds, a private investment vehicle that will raise capital for investment in Minnesota’s top-performing social service programs.
Human Capital Performance Bonds is a new idea that addresses the problem of declining revenue for Minnesota’s celebrated social services. As we know, Minnesota is a leader in social innovation. The idea is grabbing national attention.
No matter how you slice it, Minnesota’s public revenues are challenged. Costs for supporting an aging population are going up. Tax revenue is declining. These bonds will be sold in the private market and raise capital for the highest-performing social service programs.
The idea is based upon the following assumptions:
- Quality nonprofits create real social value
- This social value equates to real economic value
- This economic value translates to cash flow
For example, a nonprofit organization runs a jobs training program and places an individual in a living wage job. This is a benefit to society that can be translated to the economic value of taxes paid and the savings to the state for additional social services not paid. Part of this savings to the state is then returned to the investor as a return on the investment for the purchased bond.
For more information:
Steve Rothschild testifies on March 17, 2011 before the Minnesota Legislature.
A good article that explains the concept.
