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Goldman Sachs Goes to Rikers Island
Loutskina, Elena; Frank, Mary Margaret; Yemen, Gerry; Maiden, Stephen E. Case F-1807 / Published August 11, 2017 / 16 pages.
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Product Overview

Yi Hua, the leader of an impact-investing initiative at Goldman Sachs, was examining a new financial arrangement in a proposed public-private partnership called the Rikers Island Social Impact Bond (SIB). The proposed SIB was the result of a partnership between Goldman Sachs, the New York City (NYC) Department of Correction, Bloomberg Philanthropies, and three nongovernmental organizations (NGOs)?MDRC, Osborne Association (Osborne), and the Vera Institute of Justice (Vera). The investment that Goldman Sachs was considering would finance the implementation of a cognitive behavioral therapy program for teens (aged 16 through 18) incarcerated at Rikers Island. The goal of the program was to lower the likelihood of those teens returning to jail following their release (i.e., recidivism). If predetermined outcome-based metrics, which focused on lowering recidivism, were reached, the NYC government would repay Goldman Sachs its contributed capital along with a return. The case helps students develop an awareness of the growing innovative financial structure that attracts private capital to finance governmental efforts to address social issues: SIBs. Alongside SIBs, the following related issues could be discussed: financial and social returns, models of investing for social impact, measuring social impact, private-sector financial resources used for public benefit, and private debt vehicles. This case can be used as an introduction to SIBs in an MBA course or in undergraduate electives dedicated to impact investing, public-private partnerships, or other related courses covering the role of business in society. The material can also be used in executive education around issues of cross-sector collaboration to address social issues.

Learning Objectives

-Evaluate the structure of SIBs as a mechanism that allows private capital to finance solutions to social issues that do not have a for-profit solution. -Understand the roles and incentives of each stakeholder involved in this innovative way to finance solutions to improve society. -Examine the exposure of each stakeholder to risks associated with the SIB and ways to mitigate those risks. -Identify the core attributes needed for SIBs to be successful as both an investment for the private sector and a source of financing for the public sector (i.e., governments). -Identify methods of measuring the impact of a SIBs investments and the implications if the desired impact is not achieved.

  • Overview

    Yi Hua, the leader of an impact-investing initiative at Goldman Sachs, was examining a new financial arrangement in a proposed public-private partnership called the Rikers Island Social Impact Bond (SIB). The proposed SIB was the result of a partnership between Goldman Sachs, the New York City (NYC) Department of Correction, Bloomberg Philanthropies, and three nongovernmental organizations (NGOs)?MDRC, Osborne Association (Osborne), and the Vera Institute of Justice (Vera). The investment that Goldman Sachs was considering would finance the implementation of a cognitive behavioral therapy program for teens (aged 16 through 18) incarcerated at Rikers Island. The goal of the program was to lower the likelihood of those teens returning to jail following their release (i.e., recidivism). If predetermined outcome-based metrics, which focused on lowering recidivism, were reached, the NYC government would repay Goldman Sachs its contributed capital along with a return. The case helps students develop an awareness of the growing innovative financial structure that attracts private capital to finance governmental efforts to address social issues: SIBs. Alongside SIBs, the following related issues could be discussed: financial and social returns, models of investing for social impact, measuring social impact, private-sector financial resources used for public benefit, and private debt vehicles. This case can be used as an introduction to SIBs in an MBA course or in undergraduate electives dedicated to impact investing, public-private partnerships, or other related courses covering the role of business in society. The material can also be used in executive education around issues of cross-sector collaboration to address social issues.

  • Learning Objectives

    Learning Objectives

    -Evaluate the structure of SIBs as a mechanism that allows private capital to finance solutions to social issues that do not have a for-profit solution. -Understand the roles and incentives of each stakeholder involved in this innovative way to finance solutions to improve society. -Examine the exposure of each stakeholder to risks associated with the SIB and ways to mitigate those risks. -Identify the core attributes needed for SIBs to be successful as both an investment for the private sector and a source of financing for the public sector (i.e., governments). -Identify methods of measuring the impact of a SIBs investments and the implications if the desired impact is not achieved.