(Bloomberg) -- Two Sigma Investments has a yearly contest where employees submit proposals for business ideas, with some picked for a final presentation on Spark Day, when colleagues vote. A win gives the idea a mandate to move forward.

Five years ago, Ben Wellington and some others at the hedge fund firm won with a pitch to marshal the talents of Two Sigma quants on behalf of the social sector in the same way lawyers work pro bono. Since then, 60 employees have volunteered on 15 projects, using data to give insights into incarceration rates for the Vera Institute of Justice, engaging visitors at the New York Hall of Science and job-training efforts for the Hope Program.

The Two Sigma Data Clinic now has more than 100 employees on a volunteer waiting list, and three full-time staff members. Director Rachael Weiss Riley, who has a background in public health, is charged with bringing in more projects and positioning the clinic as a thought leader by holding events and publishing papers. Support comes from the highest levels of the firm, including co-Chairman David Siegel.

“Data and technology are changing all aspects of society and I believe that innovation from the private sector can be used in service of the public good,” Siegel said.

Data science is a relatively new field, and its use by the public sector is still in the early stages. Part of the challenge is the paucity and poor quality of data, as well as the specialized skills required to crunch it. While nonprofits have gotten better about collecting measures of their performance, pushed by their funders, they might not have the people on staff who know how to learn from it.

Meanwhile, data are driving almost every business from retail to basketball. In the financial industry, data scientists are a key part of how investment decisions are made, with firms like Renaissance Technologies, D.E. Shaw and Two Sigma leading the way. Their work creating trading algorithms based on everything from satellite maps to mobile phone pings has proven profitable.

One difficulty bringing this expertise into the philanthropic area, even through a free service like Two Sigma’s, is getting nonprofits to make it as much of a priority as fundraising and advocacy.

“While it’s so needed, it can be hard to get nonprofit executives to pay attention to it," said Danielle Holly, chief executive of Common Impact, which organizes corporate volunteers to work on behalf of nonprofits and hasn’t worked with Two Sigma. “It’s not always the hottest fire. It doesn’t feel urgent.”

Mastercard, IBM

Still, corporate talent is ready to help. Mastercard Inc. donates data. Microsoft Corp. has a unit that focuses on urban problems. IBM has worked on automating the detection of hate speech online.

Two Sigma focuses on projects that build off the firm’s experience in time-based prediction to help an organization increase its impact, Riley said. For the Environmental Defense Fund, it took public data from Pennsylvania on inspections of oil and gas wells and developed predictive models that can be used to send inspectors to places where there’s a better chance of finding violations.

EDF hooked up with the Data Clinic after a staff member came across Wellington’s blog I Quant NY, an extracurricular project in which he explores his fascination with data the city makes available. Wellington spoke with EDF’s board on how data analysis can inform policy making, and it’s expanding its own staff in this area, said Beth Trask, director of strategic initiatives for the environmental nonprofit’s energy program.

‘Better Leverage’

Two Sigma brings data expertise to the projects it takes on, but is guided by the nonprofit’s experience and knowledge, according to Riley. “The innovation is meshing these two together,” she said.

The projects last about four months, with teams composed of one Data Clinic staffer and three or four employees carving out time in addition to their regular job responsibilities. An internal benefit is that the clinic has drawn potential hires and helped retain them.

Chris Mulligan worked on the Vera Institute project, looking to understand factors behind incarceration rates in different parts of the U.S. over 14 years.

“It makes me think about the power of all this data that’s out there, and how we can better leverage it for all sorts of different questions,” Mulligan said. “We might have an impact in making the world a better place.”

To contact the reporter on this story: Amanda Gordon in New York at agordon01@bloomberg.net

To contact the editors responsible for this story: Pierre Paulden at ppaulden@bloomberg.net, Steven Crabill, Peter Eichenbaum

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