Social Finance, Inc.

I am applying to The Elevate Prize to advance the Career Impact Bond (CIB) as a game-changing tool at the intersection of economic mobility and racial justice. CIBs are a unique impact investing strategy that can dismantle longstanding barriers to good jobs and bring talent off the sidelines to access training that leads to financial security.

The Elevate Prize would be extraordinarily meaningful in helping us expand our work. We have already achieved social impact through CIBs. Now, we are looking to adapt the CIB as a public policy tool by launching self-sustaining Pay-it-Forward funds (PIFFs) – build around CIBs – to address states’ urgent labor market needs. We see tremendous potential in the power of this approach to help people who were displaced by COVID-19. The Prize funding would support us in developing these funds with states.

The Prize would also allow us to push the boundaries of our work. We would appreciate the opportunity to strengthen our organization as well as amplify our work to create new connections and reach a broader audience. We hope our model – which rewires the incentives in our workforce system – inspires others to consider innovative ways to invest in human potential.

In 2011, I co-founded Social Finance with David Blood (Generation Investment Management) and Sir Ronald Cohen (Global Steering Group for Impact Investment) to challenge the status quo in how we finance social change. I saw our founding concept as an idea with huge potential: to enlist private capital for public good and align cross-sector stakeholders to move the needle on intractable challenges.

My upbringing in Hong Kong, a strongly capitalist society, has motivated my passion for this multi-disciplinary work. I have always believed that business can be a force for good, markets can drive shared prosperity, and capitalism remains the best economic system. It has helped lift billions out of poverty and driven innovations that have raised living standards everywhere.

Yet, capitalism has many flaws and challenging consequences. Wealth and economic growth have not been broadly shared; inequality by every measure has significantly widened.

How do we harness the best of capitalism – the discipline and rigor of markets – in service of the public good? I believe impact investing is a key part of the solution.

While Social Finance has made much progress in charting a new path, I remain restless. Our work is only just beginning.

Financial insecurity is a reality for far too many Americans. Even before the COVID-19 pandemic, over 40 million Americans struggled with all, or nearly all, aspects of their financial lives, according to the U.S. Financial Health Pulse report. In the wake of the pandemic, the challenges have only increased, with a disproportionate impact on people of lower income, of color, and with lower educational attainment. 

Pathways to economic mobility are not always accessible, especially for those with the least opportunity. Postsecondary education and training programs tend to be expensive and can lock out people who lack the means to pay for them outright. Where loans are an option, students accept the risk that their programs may fail to help them find well-paying jobs. While the public and private sectors can help, they have reduced their investments in workforce training in recent years.

Social Finance is addressing this problem through a new type of self-sustaining funding vehicle, called Pay-It-Forward funds, built upon our successful Career Impact Bond approach. PIFFs allow low-income individuals to enter high-quality job training programs at no upfront cost and repay only if they secure well-paying jobs, with all repayments recycled to support future students.

Our Pay-it-Forward funds are innovative in that they are:

• Cross-sector. We are bringing governments, employers, training providers, and philanthropy together to collectively pursue solutions to the most urgent labor market needs. Often working in siloes, these partners collaborate through PIFFs to effect significant impact.
• Sustainable. PIFFs foster a revolving, virtuous cycle of workforce training: As students graduate and make payments back into the fund, they “pay it forward” so future students can access training. The evergreen structure allows government and philanthropic dollars to be extended beyond one-time expenditures to funds that can be used again and again to support economic opportunity.
• Data-driven. We have partnered with Burning Glass Technologies and Emsi to identify real-time gaps in the labor market. Their geographic-specific analyses allow us to pinpoint opportunities and identify local training providers that can equip individuals with in-demand skills.
• Centered on outcomes. Our intention is to forge a new way of financing skills-building where low-income people do not bear the risk. Unlike a loan, PIFFs connect repayment to job success: Students only pay if they earn an income above a particular threshold. All partners are aligned around student success to maximize the impact of the funds.

Over the past ten years, Social Finance has worked to challenge the status quo in how we fund social change. Through new strategies like Social Impact Bonds, we have mobilized $150 million to support over 20,000 people in areas such as workforce development, education, family stability, and health. We aim to transform how we invest in human potential by creating and guiding unique cross-sector partnerships built around evidence and accountability. Innovative financing strategies that link payment to results have always been at the core of our work. 

Since introducing our Career Impact Bond strategy in 2019, we have launched projects to support over 2,100 people in pursuing training for in-demand skills. We are seeing CIBs improve access to career pathways and well-paying jobs as well as make training programs more accessible across racial, educational, and income dimensions.

Now, our Pay-it-Forward funds offer a promising way to achieve impact at scale. We are currently developing these projects in collaboration with three states and are in active discussions in five more. We have been excited to see PIFFs resonate with state leaders for their ability to recycle funds; promote cross-sector collaboration; and achieve diverse labor, workforce, and economic development policy goals.

At present, we are directly serving 1,200 people through our Career Impact Bonds. Participants are overcoming historical barriers to access pathways to well-paying careers through four high-quality training providers:

• The General Assembly CIB expands access to software engineering and user experience design programs for people who qualify for public benefits or who have come into contact with the criminal justice system.
• The Acuitus CIB prepares graduates to become system administrators, network engineers, and IT specialists, with a focus on individuals who qualify as low income or served in the military.
• The Alchemy Code Lab CIB creates pathways to careers in mid-level software developer and engineering roles, particularly for women and LGBTQIA+ individuals, and it offers the option to cover students’ living expenses.
• The American Diesel Training Centers CIB provides hands-on training to become a diesel technician, an in-demand occupation that faces labor shortages across the country.

In one year, we anticipate serving 4,500 people through our Career Impact Bonds via our existing impact investment fund and new Pay-it-Forward funds. Because PIFFs are sustainable, this number will continue to grow organically over time as students find jobs and repay the funds, providing a ready pool of capital to help more people.

We are excited about the significant potential that Career Impact Bonds have to accelerate an equitable post-COVID recovery and build the workforce of the future. 

Over the next year, we will structure and deploy CIBs via our impact investment fund and Pay-it-Forward funds to help:

• historically marginalized populations enroll in job training, gain skills, and enter careers with long-term income growth;
• training providers expand their markets to new populations;
• employers access diverse talent equipped with in-demand skills; and
• governments build a stronger workforce to meet evolving economic needs.

Over the long term, these changes will lead to economic mobility for thousands of people – but they will do more than that. They will bring new capital to the education and training sector, incentivize providers to work toward outcomes (part of their payment is contingent on results), and forge a new way of financing skills-building where vulnerable people do not bear the risk.

Measurement is integral to our approach. We follow every student from enrollment through graduation and for several years afterward to understand our impact. We collect information such as employment status and earnings to assess whether training led to well-paying jobs.

Barriers that may affect our work over the coming year and the ways we plan to overcome them include:

• Shifting job landscape. COVID-19 brought seismic shifts to the labor market, which may continue to experience volatility. To address this issue, we have sought to continuously track local labor market trends, engage employers to meet real-time needs, and ensure students have strong job placement support.
• Uncertain regulatory environment. CIBs are based on income-share agreements (ISAs). The ISA market is largely unregulated, which could lead to products without an impact orientation negatively affecting perception of CIBs. We are committed to supporting ISA legislation that embraces student protections and establishing CIBs as an important precedent for student-friendly practices.
• New model. Alongside their potential, CIBs are a new model with significant space to learn. To address this challenge, we are educating stakeholders on the approach and have a robust learning agenda to inform how we refine our portfolio over time.

Winning the Elevate Prize would help us overcome these barriers by providing:

• funding that would allow us to help our participants succeed and execute our learning agenda;
• legal support to advance impact-first ISAs; and
• marketing to help stakeholders learn about our model.

The Elevate Prize would be extraordinarily meaningful in helping us advance our work and build awareness and replication of our Career Impact Bond approach. 

First, the larger platform, audience, and brand recognition would facilitate various stakeholders’ interest in CIBs as a model that can help low-income people and revive the American Dream. We would appreciate the opportunity the Prize would afford to expand our network, introduce our approach to new organizations, and push the boundaries of our work.

Second, the Prize would help to bring the public’s attention to our unique model – both the broader Pay for Success approach as well as CIBs specifically. By amplifying our work, we hope more people will learn about and be inspired by a new way to invest in human potential.

Ultimately, the Prize would help us advance our work at a critical time. In the wake of COVID-19 and rising calls for racial justice, there is a pressing need to both train the workforce of the future and support communities of color. Innovative solutions will be essential to meet the scale of the challenge. With the Elevate Prize, we will expand CIBs with the goal of increasing access to economic opportunity.

Social Finance is deeply committed to diversity, equity, and inclusion (DEI) on our team and in our project work. We recognize that more diversity on our team, Board, and advisory boards yields products and services with improved relevance to the needs of our stakeholders, particularly those of our target beneficiaries.

We acknowledge that this work is challenging and ongoing. We made progress in 2019 and 2020 by launching an internal DEI working group to better understand our strengths and identify opportunities to embed DEI principles internally and across our work. These efforts led to, among other things, a DEI policy statement that serves as a guide for our organizational culture and programs.

Over the past year, we have sought to deepen our DEI efforts so they are even more actionable and substantive. We retained the services of a DEI consultant to build upon our current DEI statement and goals, highlight blind spots in our thinking, and provide hands-on support as we work to turn our DEI commitments into reality. Ultimately, our aim is for DEI to be fully integrated into our internal functions and external programs so that we are living these values in everything we do.

My diverse professional background has prepared me for this multi-sectoral work. In running the nonprofit practice at a management consulting firm, I saw the same problem repeatedly – the most competent nonprofits were not always the best fundraisers, and the best storytellers did not always run the most effective programs. In working in asset management, I experienced the power and breadth of the capital markets. In advising government, I saw the fiscal constraints that hamper efforts to make our safety nets more effective. These experiences inform my work daily.

What makes us truly well-positioned for this work, however, is my 80-person team. They are some of the most purpose-driven and capable individuals with whom I have worked, and they show up every day with a deep commitment to excellence, collaboration, and impact. Our team has been nimble in the face of challenges and has exhibited creativity, grit, and resilience to advance our mission.

On top of this, we look to the people we serve to help guide the design and implementation of our work. We have engaged participants, for example, by conducting student surveys, holding community meetings, and including people from our target populations on project- and product-level advisory boards.

Bringing Pay for Success (PFS) projects like Career Impact Bonds to the U.S. was fraught with obstacles. In 2011, PFS was unheard of. We had to build a product and ecosystem around it – without templates or frameworks to lean on – while we were building a firm. Each stakeholder – government, investors, and nonprofits – required education and to be convinced to collaborate with uncommon partners. Early adopters had to trust us to try a radically new approach. We worked steadily – with myriad ups and downs – for almost three years before launching our first project. 

Despite these challenges, we succeeded in building a field from scratch. We worked tirelessly to elevate the idea, bring some of the first projects to fruition, and create a supportive ecosystem. We overcame partisan gridlock to shape historic federal legislation and see its passage in 2018 (the Social Impact Partnerships to Pay for Results Act). We have evolved PFS from a single product – Social Impact Bonds – to others like Career Impact Bonds and outcomes rate cards. Our success is due in part to our persistence but also the intersection of PFS with larger movements, including government accountability and impact investing.

Yes, recent examples of my speaking engagements include: 

Videos

• TEDxChicago in 2018, available at https://youtu.be/Xnl6E7qE1O8
• National launch event for the book that Social Finance co-authored with two Federal Reserve Banks entitled, “Workforce Realigned: How New Partnerships Are Advancing Economic Mobility,” in June 2021, available at https://socialfinance.org/workforce-realigned/#events (click “Watch the recording”, fill out the form, and start video at 0:26:32)
• CBS Boston feature on Social Finance’s Career Impact Bonds in March 2021, available at https://boston.cbslocal.com/2021/03/09/social-finance-nonprofit-job-training-skill-in-demand-jobs-unifying-america/ (starting at 00:52)

Podcasts

• Work in Progress podcast in June 2021, available at https://workingnation.com/innovative-investment-tools-financing-economic-mobility/
• Managing the Future of Work podcast in April 2021, available at https://www.hbs.edu/managing-the-future-of-work/podcast/Pages/podcast-details.aspx?episode=18645182

Print

• I was quoted in a New York Times article about our work entitled, “Job Training That’s Free Until You’re Hired Is a Blueprint for Biden,” in April 2021, available at https://www.nytimes.com/2021/04/07/business/job-training-work.html

The Elevate Prize funding would be tremendously helpful in our work to advance Career Impact Bonds and increase opportunities for economic mobility among historically marginalized populations. Unrestricted and flexible funding is particularly important to us as we embark upon extending CIBs beyond our investment fund to sustainable Pay-it-Forward funds with state governments. The funding would be allocated to where it is needed most to help us successfully launch and manage these projects as well as share our results and learnings broadly. Having this funding on hand would alleviate the time and effort needed to raise philanthropy to support our costs. It would also allow us to pursue projects with the highest potential for social impact and pivot as necessary to make the best use of our resources. 

In addition to supporting PIFFs, the funding would increase our capacity to move other innovative projects forward as well. For example, we are launching a first-of-its-kind loan program that will enable DREAMers to attend graduate school to achieve their professional goals. We are also developing a suite of tools and services to help donor-advised fund (DAF) sponsors mobilize DAF capital toward impact-first investments in low-income communities.

Our work is multi-sectoral. We are collaborating with a range of organizations to advance our Career Impact Bond strategy, including:

• Training providers. We are partnering with training providers to offer CIBs to their students. We aim to work with providers that have a track record of positive student outcomes; focus on skills with long-term economic value; and offer programs that can be financed through student-friendly terms.
• Governments. We are working with state governments to explore and design Pay-it-Forward funds that meet local workforce needs. We have been excited to see PIFFs resonate with a number of state leaders, in part from PIFFs’ ability to align workforce and economic development agendas and address urgent skilling needs within their communities.
• Employers. We engage employers to understand gaps in skills and to create seamless employment pathways for students.
• Data and analytics companies. We are engaging partners to increase the depth, accuracy, and speed with which we collect and analyze data. We are working with Burning Glass Technologies, for example, to integrate real-time labor market data and analytics into CIB project design and performance management.
• Investors. We work with institutional investors, high net-worth individuals, donor-advised funds, and foundations to commit upfront capital for CIBs.