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Chicago's Commission On Social Innovation: Enlisting Impact Entrepreneurs To Boost The Economy

Tuesday, June 21, 2016
by Anne Field

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For social entrepreneurs in Chicagoland, there’s a new resource, one that could be a model for other cities.

It’s an initiative called the Commission on Social Innovation. Recently formed by the Cook County Board, the Commission aims to help meet the needs of the area’s struggling underprivileged population, in part, by encouraging the activities of social enterprises.

The county, of course, is a bit of a basket case. With a population of 5.2 million, it has a poverty rate of 17%. It also had a bigger population decline last year than any other county in the U.S. Then there is a lot of gun violence. The hope is that a creative all-hands-on-deck partnership between government, nonprofits and businesses with a social purpose might boost economic development and opportunities for the area’s many impoverished residents.

“We’re marrying the social mission of a government program with the market-driven approach of business,” says Marc J. Lane, vice chair of the Commission and a Chicago-based lawyer and financial advisor. “It’s all about engaging businesses to pursue market-driven strategies that have a financial and social return.” Lane, by the way, also says he’s well aware of Chicago’s reputation for dysfunction.

The chair of the Commission is Jesus “Chuy” Garcia,  the Chicago politician who ran for mayor of Chicago. He lost to incumbent Rahm Emanuel last year in a highly contested election.

Ultimately, Lane wants the initiative to be a model for other cities and counties.

Specifically, according to Lane, some of the Commission’s plans, which are still in their very early stages, include:

  • Making the most of major place-based institutions. The idea is explore how to  tap the buying power of universities, museums and other place -based anchors, turning them into customers of social enterprises run by the unemployed and underemployed. One example: working with the Illinois Medical District to develop mission-driven healthcare businesses.
  • Addressing food deserts. The plan is to help residents in areas that lack affordable–or any–supermarkets to build neighborhood grocery stores.
  • Revitalizing the crumbling Port of Chicago. The Commission wants to work with such government units as the Illinois International Port District to revitalize the Port, largely through a combination of impact investment and philanthropy.
  • Redeveloping blighted areas. By partnering with the Cook County Land Bank Authority, the goal is to help entrepreneurs redevelop abandoned, vacant or foreclosed properties, rebuilding neighborhoods while creating  opportunities for businesses.

According to Lane, the Commission also can weigh in on any legislation or regulations being considered by the county to ensure officials are making the most of the rules’ potential positive social impact.

“The county has a role as a convener, as a collaborator and as a catalyst for business,” says Lane. “But it’s looking at business through the lens of  solutions that address poverty and the problems that come with poverty.”

Peterborough's problem was daunting: Sixty percent of prisoners serving short-term sentences historically had gone on to re-offend within a year after their release. But policymakers were confident that a solution was within their reach. They attracted private investment to pay experienced social service agencies to provide intensive, multidisciplinary support to short-term prisoners, preparing them to re-enter society and succeed outside the penal system. - See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf

The world's first social impact bond, or SIB, was introduced in 2010 to fund innovative social programs that realistically might reduce recidivism by ex-offenders in Peterborough, England, and, with it, the public costs of housing and feeding repeat offenders. Prudently building on the strengths of that initiative, Illinois Gov. Pat Quinn is rolling out SIBs to help solve some of the state's most vexing social problems.

A SIB isn't a traditional bond where investors are guaranteed a fixed return but a contract among a government agency that agrees to pay for improved social outcomes, a private financing intermediary and private investors. SIBs shift the risk of experimenting with promising but untested intervention strategies from government to private capital markets, with public funds expended only after targeted social benefits have been achieved.

Peterborough's problem was daunting: Sixty percent of prisoners serving short-term sentences historically had gone on to re-offend within a year after their release. But policymakers were confident that a solution was within their reach. They attracted private investment to pay experienced social service agencies to provide intensive, multidisciplinary support to short-term prisoners, preparing them to re-enter society and succeed outside the penal system.

The government decided which goals would be supported, but exactly how those goals would be achieved was left to the private sector. It was the investors, through a bond-issuing organization, who ultimately endorsed the allocation of investment proceeds — how much would be invested in job training, drug rehabilitation and other interventions.

If the Peterborough plan eventually shrinks recidivism rates by 7.5 percent or more, the government will repay the investors' capital and share the taxpayers' savings with them, delivering up to a 13 percent return. If the target isn't hit, the investment will have failed and the government will owe the investors nothing.

Illinois' SIB effort was spearheaded by the state's Task Force on Social Innovation, Entrepreneurship and Enterprise — the governor's think tank on social issues, which I am privileged to chair — with support from Harvard University's John F. Kennedy School of Government, the Rockefeller Foundation and the Aurora-based Dunham Fund. A request for information issued by the Office of Management and Budget on May 13 yielded responses from service providers eager not only to reduce recidivism here but also to create jobs, revitalize communities, improve public health outcomes, curb youth violence, cut high school dropout rates and alleviate poverty.

Now the governor has issued a request for proposals intended to spur better outcomes for Illinois' most at-risk youth — by increasing placement stability and reducing re-arrests for youth in the state's Department of Children and Family Services, and by improving educational achievement and living-wage employment opportunities justice-involved youth most likely to re-offend upon returning to their communities.

Kudos to Mr. Quinn for bringing SIBs to Illinois. May they soon start delivering on their promise.

- See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf
The world's first social impact bond, or SIB, was introduced in 2010 to fund innovative social programs that realistically might reduce recidivism by ex-offenders in Peterborough, England, and, with it, the public costs of housing and feeding repeat offenders. Prudently building on the strengths of that initiative, Illinois Gov. Pat Quinn is rolling out SIBs to help solve some of the state's most vexing social problems. - See more at: http://www.chicagobusiness.com/article/20131007/OPINION/131009850/a-new-kind-of-futures-contract-for-illinois#sthash.ThgxeiFt.dpuf

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Reprinted from Anne Field's June 20, 2016 editorial which appeared on Forbes.com. 2016 Forbes.com LLC™ All Rights Reserved

 

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