An impact bond brings together an investor, funder, and service provider to achieve clearly defined outcomes. The investor fronts capital to a service provider, generally a CSO. Since the payment of money to the investor is directly tied to the achievement of agreed-upon outcomes, the CSO is expected to have a rigorous impact measurement and data reporting process. Once the service provider achieves the agreed-upon outcomes—verified by an external evaluation agency—the funder pays back the capital amount to the investor in addition to a return on investment.
This model is especially good for
A CSO with an intervention that is backed by strong research and evidence regarding the intervention’s success in achievement of outcomes.
Key factors to consider
Accessible funding supply: Investors/funders are willing to provide funding for an impact bond mechanism
Sufficient infrastructure and capacity: CSO already has the key infrastructure in place to provide services and the capacity to measure and report data rigorously
Where to begin
Is there strong evidence and data to prove the high effectiveness of the CSO’s intervention approach and outcomes?
Example in practice
Zero HIV Social Impact Bond (SIB) was launched in the U.K. and funded by the Elton John Aids Foundation (EJAF). SIB estimates 10–15 percent of people living with HIV in the U.K. are not on treatment. It addresses this problem by using the mechanism of an outcomes-based contract in which providers are paid on outcomes achieved—rather than on providing services—to drive detection of HIV among these high-risk groups in areas where prevalence is highest.
Multi-Stakeholder Initiatives: A Strategic Guide for Civil Society Organizations – provides a comprehensive overview of partnerships involving multiple stakeholders and various considerations for CSOs to determine which partners and what type of multi-stakeholder relationships will work best for any particular initiative. https://www.somo.nl/wp-content/uploads/2012/03/Multi-stakeholder-initiatives.pdf
