Funding Social Change: Get the gist on the future of Social Financing
Drivers
A combination of factors is enabling and influencing the development of Social Finance.
Limited Governmental Resources
In the aftermath of the global financial crises of 2007-2008, many countries slashed funding across the board. This means fewer resources were made available to fund social services. Making use of private funds through Social Financing could be key in bridging funding gaps for important social programs.
- GDP growth in East Asia and the Pacific is projected to recover slowly as global recovery takes time. East Asia and Pacific Update
- A "lost decade" for the world economy would risk the development gains achieved during the recent years. On the brink: Fiscal Austerity Threatens a Global Recession
- America's and Europe's local economies will need to adjust to new investment partners as well as to compete effectively for investment with established partners who may have greater choice and less capital to invest. Recession, Recovery and Reinvestment: The Role of Local Economic Leadership in a Global Crisis
- Recovering from a balance sheet recession will take a long time in a democracy. The World in Balance Sheet Recession: Causes, Cure, and Politics
Growing Demand for Social Services
According to the U.S. Bureau of Labor Statistics, increased demand for health care and social services will lead to a 19% increase in employment for social workers by 2022 (Bureau of Labour Statistics: Occupational Handbook Outlook: Social Workers). In Latin America, slow economic growth is driving the demand for social services such as improved schooling and cheaper public transportation (Slow Latin America Growth Won’t Meet Social Demand, IDB Says). In Asia, as citizens become more affluent, they are demanding more social programs, from unemployment benefits to public pensions (Rethinking the welfare state: Asia’s Next Revolution).
- One in three people in the world will live in a migrant ‘slum’ (low-income urban neighbourhood). Breaking the Binary: Policy Guide to Scaling Social Innovation
- An ageing European population will have direct consequences for the working population and social welfare systems, health services and pensions in terms of demand and expenditure. Social Innovation: A Decade of Changes
- The amount of money invested in training and certifying workers will need to rise as the growing Latin American middle class places more and more strain on health care systems in the region. Latin America: Rising Incomes, Rising Demand for Health Care
- There is a risk of lifetime earning losses for the generation of graduates joining the labour market in the recession. The situation may be worsened by the increased supply of graduates and lower returns to a degree for some graduates. Recession Britain Findings from economic and social research
- Urban investment gaps remain and are at risk of remaining for the medium term in the face of the global economic downturn. Recession, Recovery and Reinvestment : The Role of Local Economic Leadership in a Global Crisis
- The impact of the recession on children will be felt long after the recession itself is declared to be over. Children of the Recession The Impact of the Economic Crisis on Child Well-Being in Rich Countries
- High unemployment and fiscal restraint will remain the norm for the foreseeable future in many countries. Children of the Recession The Impact of the Economic Crisis on Child Well-Being in Rich Countries
- There will probably be increasing need and demand for social service support such as community health programs and property tax relief programs for seniors. Staying on Track: Sustaining Toronto’s Momentum After the Global Recession
Increased Societal Engagement and Awareness
Today, people are more aware of social issues than ever before because of the internet and other communication technologies. Furthermore, the Millennial Generation, those born from roughly 1980 to 2000, highly value giving back to the global community by working for socially responsible organizations, volunteering, protesting for change, etc. Over the last decade, a series of protests from the Occupy Movement to the more recent protests in Hong Kong, demonstrate that people, especially the young, are willing to take action to create positive social change (Young People and the Power of Protest).
- With the appropriate leader created context and culture, sustainability will move from theory to common action, owned by the employees and not directed from above. Corporate Social Responsibility and Sustainable Business
- Significant capital could potentially be available to finance social innovation given the current and anticipated influx of new wealth donors and socially motivated investors. The Social Purpose Capital Marketplace: An Opportunity for the Canadian Charitable Sector
- Experiments in social innovation are expected to provide collective solutions to pressing needs (including policy needs) through new uses of ICT connectivity by and for smart citizens. Social Innovation: A Decade of Changes
- People will have the technology to communicate anytime and anywhere. Investing in Social Innovation: Harnessing the Potential of Partnership Between Corporations and Social Entrepreneurs
- One can expect more investors to take an active interest in the companies in which they are invested. 2012 Global Sustainable Investment Review
Focus on Outcomes and Results
As stated in a 2014 report by The Beeck Center for Social Impact and Innovation, “governments at every level increasingly see an urgent need to identify and pay for desired outcomes, and not to pay for effort only. Across the nation and globally, effective ’outcomes-based‘ grant and contract models are now emerging,” compared to the typical government programs whose oversight primarily concerns meeting compliance standards (Funding For Results: A Review of Government Outcomes-Based Agreements).
- Initial pilots will probably focus on countries and/or sectors where either reliable data already exists. Investing in Social Outcomes: Development Impact Bonds
- The alignment of investors' financial returns to the achievement of social outcomes means that there is a strong incentive for investors to manage their investment risk by bringing discipline and rigor to performance management and outcome measurement. Investing in Social Outcomes: Development Impact Bonds
- Non-profits and social enterprises may need to upgrade their financial reporting and monitoring strategies so as to generate the type of comparative information potential investors expect to see in for-profit companies. REDEFINING RETURNS: Social Finance Awareness and Opportunities in the Canadian Financial Sector
- Renegotiating outcomes requires new information and potentially new data or measurement techniques and creates an opportunity to apply lessons learned. Funding For Results: A Review of Government Outcomes-Based Agreements
- Clarity of policy goals and desired social outcomes will maximize the potential for success of any agreement. Funding For Results: A Review of Government Outcomes-Based Agreements
- Investors expect intermediaries to provide ongoing performance management and implement midcourse corrections as needed. Foundations for Social Impact Bonds: How and Why Philanthropy Is Catalyzing the Development of a New Market
- In Europe by 2020, social impact measurement and comparison (covering economic, environmental and social issues) will become mainstream in the social economy. Social Innovation: A Decade of Changes
- For most enterprises in which philanthropists have invests, managers will face decisions in which they have to make trade-offs between financial returns and social impact. Social Entrepreneurship: Shifting Power Dynamics
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