Federal Reserve Bank of San Francisco

Community Development

Innovation Needs Foundation Support: The Case of Social Impact Bonds

Author(s):

April 2013

Community Development Investment Review

For more than 100 years, philanthropy has taken risks other sectors either would not or could not take to advance innovations benefiting poor or vulnerable people. The Robert Wood Johnson Foundation hatched the idea for a national 911 emergency response system. The Ford Foundation promoted the concept of community development corporations that would create jobs, preserve affordable housing, and promote small businesses. The Carnegie Foundation supported the initial development of Pell Grants. The Rockefeller Foundation funded the research behind the ideas that evolved into the US Social Security system. Foundations are in the unique position to take risks, connect people and organizations with diverse perspectives, and cultivate groundbreaking innovations. And philanthropy is perhaps most useful when it can galvanize and leverage the actions and resources of others to build and sustain ideas that were once considered risky but have proven effective in meeting a pressing societal need.

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