Thursday, December 16, 2004

$25 Billion: Idea #3: Social Dividend Reinvestment

Social Dividend Reinvestment: Idea #3 for new sources of philanthropic capital.

We all know about pro bono contributions to the social sector. Lawyers do legal work, designers produce reports, CPAs sit on boards and help keep the books in order. These contributions are enormous and the social sector wouldn't function without them.

Can we build on this resource and draw direct financial support from it? In those subsectors where nonprofits and commercial providers both function - health, for example - nonprofits make up 85% of all hospital facilities and the majority of all medical teaching programs. Yet they are considerably disadvantaged compared to their commercial brethren when it comes to raising capital. Moody's Investor Services, which grades bond worthiness in many industries, has downgraded 9% of its nonprofit hospital portfolio to below investment grade.

Given the convergence of nonprofit and commercial sectors, the infrastructure of financial services that exists for commercial investment, and the need for new capital sources for philanthropy, can we find ways to draw capital for the social sector directly from the financial services that underpin so much of the economy?

What if there were a "social dividend" drawn from all financial transactions in health care facilities financing that would a fund a "trust" for nonprofit facilities. The percentage could be tiny and still throw off a large enough revenue stream to make a difference. Instead of (in addition to?) taxing hotel patrons to finance the arts, what if there were a Social Dividend drawn from Hollywood movie receipts to fund educational programs for the next generation of film directors, artists, and producers? How about a dividend on textbooks, test prep, and school construction companies that would fund such a trust for education?

President Bush has made it clear that he believes in the "Ownership Society" and is actively promoting tax reform that would reward investments and dividend income. The administration is also pushing hard to make trillions of dollars of social security resources available for investment in corporate stocks and bonds. The nonprofit and philanthropic sector has an enormous incentive right now to look at these revenue streams as capital for the work they do in the public good. Looking for social returns on investment is a start. But building social dividend incentives into corporate investments and financing is where the money is.

Does this exist already? Got a better idea? Want to make this happen? Email me at or comment on this post at Philanthropy 2225.

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