Goldman Sachs A: Determining the Potential of Social Impact Bonds

by: Andrew Hoffman

Publication Date: February 14, 2014
Length: 16 pages
Product ID#: 1-429-375

Core Disciplines: Sustainability

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Teaching Note

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Head of Goldman Sachs’ Urban Investment Group Alicia Glen will be making the case for creating a social impact bond (SIB) tomorrow. Proposed by New York Mayor Michael Bloomberg as an investment that will decrease adolescent incarceration rates, the SIB would be the first of its kind in the U.S. Goldman would have a first-mover advantage if it chooses to take part in the project, but it carries significant risk — the bank would be operating in an environment that is traditionally government and non-profit territory. Glen wondered if Goldman should invest only if a philanthropy, such as Bloomberg Philanthropies, would secure a portion of the loan. She also wondered if the transaction costs would be too high or if there were any legal or political hurdles on the horizon to stall implementation. Students are asked to gain an understanding of social investments and construct a 2X2 matrix to assess expectations for returns on social and financial impact.

Teaching Objectives

After reading and discussing the material, students should:

  • Comprehend the history and basic structure of an SIB.
  • Identify with and differentiate among the choices a bank is faced with when exploring social investments.
  • Apply background information to assess if Goldman Sachs should invest in an SIB.
  • Construct a recommended expectation on returns for social and financial impact in a 2x2 matrix.