Oct 7 (Reuters) - Goldman Sachs Group Inc and its investment partner will be paid $267,000 for helping to fund a philanthropic program that reduced the number of children needing special education services after preschool.
The milestone marks a turnaround for so-called social impact bonds, which are issued by local governments in partnership with charities and private investors to fund philanthropic projects. Investors receive a return if a project saves public money.
The first social bond project earlier this year failed to achieve its goals.
In the latest program sponsored by the United Way of Salt Lake, Goldman’s Urban Investment Group and Chicago investor J.B. Pritzker committed up to $7 million collectively to help increase school readiness for at-risk 3- and 4-year olds in Utah.
The group said it had significantly reduced the number of students who would need special education services in kindergarten and beyond.
The results, which saved school districts and governments around $281,000 in total, triggered the first investor payment for any pay-for-success program in the United States. Goldman and Pritzker received a total payout of around 95 percent of those savings, or around $267,000.
The repayment was coordinated by the United Way, who convened a group of partners and investors.
Future payouts depend on the number of students who avoid the use of special education each year through sixth grade.
Salt Lake City is an important hub for Goldman as its second largest office in the United States besides its New York headquarters.
Goldman helped to fund the first social impact bond in the United States three years ago, a $9.6 million plan to reduce recidivism among teenagers at New York’s Rikers Island jail. Earlier this summer, the program announced that it had failed to hit its goal of cutting repeat offenses by 10 percent. (Reporting by Olivia Oran in New York; Editing by Bernard Orr)