Another Bond to Be Broken?

Bonds of all kinds are in the news these days—though generally not for very good reasons.

Take Greek bonds. They haven’t traded in over a month and understandably so as the latest Greek debt crisis unfolds. Then there are the holders of bonds tied to Puerto Rico’s electric power authority and its $9 billion of debt, who are none-too-pleased to extend—again—more time for a credit agreement to be structured. And just this week, activist investor Carl Icahn took to Twitter forewarning a crisis in high-yield corporate bonds. It’s a tough time to be a bond.

And just when I thought I couldn’t take any more bond-related news, I came upon this piece by Ali Montag, special to CNBC. She elevates the resurgence of focus on social impact bonds, a type of “Pay-For-Success” model where private investors invest capital and oversee the management of public projects. The projects are usually aimed at improving social outcomes for at-risk individuals, with the goal of reducing government spending in the long-term.

This latest piece put the spotlight on Pennsylvania, where it is assessing whether and in what areas to introduce social impact bonds as a way to tackle funding for improvements.

With social impact bonds, I find myself as interested in the pros and cons of the instrument itself as I am in how the two sides are choosing to frame their perspectives. For now, those in favor tend toward language like return on investment, long-term potential, improve future outcomes, and save money. Those against the bonds push against the administrative complexity, the chance for rigging the system, focusing on easy wins, and unjustified cost.

As more social impact bonds mature in the coming years, it will be worth watching how the narratives on both sides morph based on the real evidence of outcomes. Until then, it’s a great time to be watching the story unfold, to be listening to the growing chatter on the platform, and to take note of this rapidly evolving slice of the marketplace where investment meets philanthropy meets social good.

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