Announcements of new federal regulations on the use of program-related investments (PRIs) and the launch of a groundbreaking fund in Chicago are the latest signals that impact investing, once a marginal philanthropic and policy tool, is moving into the mainstream. They are also illustrative of two important and complementary paths to institutional change: fast-moving, collaborative local leadership creating innovative new instruments to meet funding demands; federal regulators updating policy to pave the way for change at scale.

Impact investing, referring to “investment strategies that generate financial returns while intentionally improving social and environmental conditions,” provides an important tier of higher-risk capital to fund socially beneficial projects with revenue-generating potential: affordable housing, early childhood and workforce development programs, and social enterprises. It is estimated that there are over $60 billion of impact investments globally and interest is growing—an annual JP Morgan study of impact investors from 2015 reports that the number of impact investing deals increased 13 percent between 2013 and 2014 following a 20 percent increase in the previous year.

Traditionally, foundations have split their impact investments into two pots, one for mission-related investments, designed to generate market-rate returns and maintain and grow the value of the endowment, and the other for program-related investments. PRIs can include loans, guarantees, or equity investments that advance a charitable purpose without expectation of market returns. PRIs are an attractive use of a foundation’s endowment as they allow foundations to recycle their limited grant funds and they count towards a foundation’s charitable distribution requirement of 5 percent of assets. However they have been underutilized to date due to perceived hurdles around their use–in fact among the thousands of foundations in the United States, currently only a few hundred make PRIs.

But this is changing, spurred on by both entrepreneurial local action and federal leadership. On April 21, the White House announced that the U.S. Department of the Treasury and Internal Revenue Service had finalized regulations that are expected to make it easier for private foundations to put their assets to work in innovative ways. While there is still room for improvement, by clarifying rules and signaling mainstream acceptance of impact investing practices these changes should lower the barriers to entry for some institutional investors.

This federal leadership is welcome, but is not by itself enough to meet the growing demand for capital investment in the civic sector. Local innovation, spurred by new philanthropic collaborations, can be transformative. On April 25 in Chicago, the Chicago Community Trust, the Calvert Foundation, and the John D. and Catherine T. MacArthur Foundation launched Benefit Chicago, a $100 million impact investment fund that aims to catalyze a new market by making it easier for individuals and institutions to put their dollars to work locally and help meet the estimated $100-400 million capital needs of the civic sector over the next five years.

A Next Street report found that the potential supply of patient capital from foundations and investors in the Chicago region was more than enough to meet the demand – if there were ways to more easily connect the two. Benefit Chicago addresses this market gap by making it possible for individuals to invest directly through a brokerage or a donor-advised fund and for the many foundations without dedicated impact investing programs to put their endowments to work at scale. All of the transactional details of deal flow, underwriting, and evaluation of results are handled by the intermediary, which should lead to greater efficiency and a significant increase in the size of the impact investing market in Chicago.

In the last few years, a new form of impact investing has made measurement of social return to investments even more concrete. Social impact bonds (SIBs), also known as pay for success (PFS) financing, are a way for private investors (including foundations) to provide capital to support social services with the promise of a return on their investment from a government agency if some agreed-upon social outcomes are achieved. These PFS transactions range from funding to support high-quality early childhood education programs in Chicago to reduction in chronic individual homelessness in the state of Massachusetts. Both the IRS and the Chicago announcements are bound to contribute to the growth of the impact bond market which to date represents a small segment of the impact investing market.

These examples illustrate a rare and wonderful convergence of leadership at the federal and local levels around an idea that makes sense. Beyond simply broadening the number of ways that foundations can deploy funds, growing the pool of impact investments can have a powerful market-making effect. Impact investments unlock other tiers of capital, reducing risk for private investors and making possible new types of deals with longer time horizons and lower expected market return.

In the near future, these federal and local moves together might radically change the philanthropic landscape. If every major city had a fund like Benefit Chicago, and all local investors had a simple on-ramp to impact investing, the pool of capital to help local organizations meet local needs could grow exponentially. This in turn could considerably improve funding for programs—like access to quality social services and affordable housing—that show impact over the long term.

Impact investing can be a bright spot in an otherwise somber fiscal environment if localities keep innovating and higher levels of government evolve to support, incentivize, and smooth its growth. These announcements from Washington and Chicago are examples of the multilevel leadership and creative institutional change we need to ensure that we tap every source of philanthropic capital, to feel some abundance in an era where scarcity is the dominant narrative.

Editor's Note: Alaina Harkness is a fellow at Brookings while on leave from the John D. and Catherine T. MacArthur Foundation, which is a donor to the Brookings Institution. The findings, interpretations and conclusions posted in this piece are solely those of the authors and not determined by any donation.

Two decades ago, Hillary Clinton delivered a speech in Beijing that inspired feminists around the world, declaring “women’s rights are human rights.” Since that declaration, a lot has changed for women globally. But what has changed for women in China?

While Chinese women today have increased freedoms, there is still a long way to go before gender equality is realized. Civil unrest concerning gender inequality recently made headlines in China and abroad when a group of five female protesters in China were arrested and jailed for publicly demonstrating against gender inequities, such as inequality in higher education and domestic violence. This incident underlined much of the commentary at a recent Brookings’s John L. Thornton China Center forum on women’s issues and gender inequality in China, during which the following key messages were conveyed:

China is in the midst of a rapid, if quiet, sexual revolution

China’s first and leading sexologist, Li Yinhe, delivered a keynote address that emphasized that when it comes to sex, China is in the midst of an “era of important changes.” Li explained that all sexual activities before marriage were illegal in China before 1997 because of a “hooliganism law,” and a woman could be arrested for having sex with more than one man. Thus, premarital sex was forbidden. In surveys in 1989, only 15% of citizens reported having premarital sex—and “most of them were having sex with their permanent partners,” Li said. That law was overturned in 1997, and recent surveys show that 71% of Chinese citizens admit to having sex before marriage. This is a dramatic change in a short period of time, and marks what Li asserts is a sexual revolution for Chinese citizens.

Chinese law still lags behind changes in social customs

While some sex laws have adapted, others are far behind. Li highlighted some “outdated” sex laws in China that are still “on the book[s],” but that are no longer strictly obeyed by the Chinese people.

Li said the indicators are clear that the force of these laws is waning. There are fewer people being punished for these offenses and the punishments are becoming increasingly less severe. Her discussion stressed four areas where public opinion has changed drastically over the last few decades, but Chinese laws haven’t adapted:  

1. Pornography: Pornography isn’t considered to be protected as it is in the U.S. In contrast, Chinese law strictly prohibits creating and selling porn. In the 1980s, porn publishers would be sentenced to death. Now the punishment is less severe—for example, a 24-year-old Beijing woman published seven “sex novels” online. Her viewership was 80,000 hits on her novels, but her punishment was only six months in criminal detention.
2. Prostitution: Prostitution is another activity affected by outdated laws in China, where any solicitation of sex is strictly illegal. In the early-1980s through late-1990s the punishment for facilitating prostitution was severe. In 1996, a bathhouse owner was sentenced to death for organizing prostitution. Now, prostitution is widely practiced and the most severe punishment for organized prostitution is that those managing sex workers are ordered to shut down their businesses.  
3. Orgies and sex parties: Chinese law used to brutally punish swingers and individuals who planned sex parties. For example, in the early-1980s “the punishment for spousal swapping was death…[and] people would be sentenced to death for organizing sex parties,” Li explained. But this is another area where the punishment for the law has now become less strict. In 2011 in Nanjing, an associate university professor organized a sex party with 72 people, and the “punishment for him was three and a half years in prison.” Also, in 2014 in Shanghai, some citizens recently organized an online sex party, and their punishment was only three months of criminal detention. According to recent private surveys, “many people are [engaging] in sex parties or orgies.” While in theory these are punishable by criminal law, “no one reports [them], so they do not get noticed,” Li said.  
4. Homosexuality and same-sex marriage: In regards to homosexuality, Li was quick to note that China’s view of homosexuality is historically very different from Western views. For example, in some U.S. states, laws “criminalized or deemed homosexual activities illegal.” But throughout China’s history, there were not severe repercussions or the death penalty for homosexuality, and it “was never illegal.” However, this is not the case for same-sex marriage. Li thinks it will be “hard to predict” when same-sex marriage might be legalized.

Chinese women will have sexual freedom, but when isn’t clear

So what does the future hold for these laws? Li explained that sex is a “hot topic” right now in Chinese public debate, and the “general consensus among legal scholars and sociologists is that these [outdated] laws need to be removed.” Those who oppose removing these laws are “in the minority.” While that may be true, she suggested it would be difficult to “form a timetable” when politicians might consider amending these laws.

As for the five young women sentenced to jail last month, Li said she usually tries to stay out of politics, but thinks people “should stand up and speak out” when their own rights are being violated. Li argued that jailing these women for expressing their opinions violated the rights of all women—and hopes that other women speak up about their arrest.

If you are interested in learning more, watch Li Yinhe’s full keynote and the entire panel event here:

Alison Burke contributed to this post.