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Goldman Sachs executive analyzes the benefits of impact investing

| Friday, October 30, 2015

Andi Phillips, a vice president in the Urban Investment Group at Goldman Sachs, spoke about the importance of impact investing during a conversation with director of the Gigot Center for Entrepreneurship Sam Miller on Thursday evening. Phillips served as the keynote speaker for the 2015 Irish Impact Social Entrepreneurship Conference.

According to the conference’s website, the aim of the conference is to discuss impact investing, the practice by which investors finance projects that can provide social benefits to a community. Phillips said her work at Goldman Sachs aligns with this practice and that she has made it her mission to “drive strong financial returns while also having a very strong social impact.”

“There are opportunities to invest in the communities where we live and work that can have that double bottom line,” Phillips said.

As a result, impact investing is not only be beneficial to the investor, but also to the government and individual communities, Phillips said. She said the main problem service providers face in trying to help the community is a lack of funding.

“If what I’m paying for is outcomes, which is at the end of the story, how do I get the capital I need as the service provider to actually deliver the service?” Phillips said.

Furthermore, Phillips said many service providers would be unable to recover from large investment failures.

“Service providers don’t have the financial wherewithal to absorb the risk of not reaching the impact and therefore not getting paid.”

In contrast, large companies like Goldman Sachs can absorb this type of risk, Phillips said. She said because of this, service providers can “use private capital to finance the services people need.”

Phillips discussed several projects through which impact investing has already been beneficial for Goldman Sachs and the community. She said one particular project involved funding prevention programs in Massachusetts for at-risk young men in order to prevent recidivism, which is the cycle of arrests and convictions to which many first-time criminals fall prey.

The problem, Phillips said, was that “the government was spending of all its money to actually put these kids in prison and incarcerate them and didn’t have the money to pay for the preventive services.”

She said Goldman Sachs provided this funding, with the potential to receive financial returns depending on the success of the program.

“For every decrease in recidivism and increase in employment, the commonwealth will make a payment,” Phillips said.

The program was a great success, Phillips said, lowering Massachusetts’s recidivism rates and bringing financial returns to Goldman Sachs.

Phillips also discussed the positives of some of Goldman Sachs’ impact investing failures, specifically an attempt at Rikers Island to lower recidivism through cognitive behavioral therapy. Although the therapy failed to have an effect, Phillips said the venture “represented a very different way of the government doing business.”

“There was no waste of taxpayer dollars, because it was Goldman Sachs and Bloomberg Philanthropy that lost money,” Phillips said.

Finally, Phillips offered advice for those looking to become involved in the impact investing field.

“Get involved in the social issues you care about in such a way that you begin to understand what the challenges are and how to effectuate change in that area,” she said.


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