DIBs and SIBs, a match made in heaven? Discussion of both including an article by UK social finance guru, Ronald Cohen…
Development is a risky, complex business. So it’s not surprising that development experts sometimes question why private investors would choose to invest in Development Impact Bonds (DIBs), a new model for funding and designing programs that address such seemingly unprofitable problems like disease burden or poor education outcomes.
Under a DIB, private investors pay for programs to be delivered, work with a coordinating agency to deliver services using innovative and flexible approaches, and take the risk that the desired outcomes are not achieved. If programs do achieve results, donors or governments pay for those results, with a premium, but if they don’t, investors lose some or all of their money. It’s a good value-for-money case for donors and governments; public funds are only spent on programs that have proven they lead to better outcomes. But can this really be attractive for investors?
Impact Investing: An Idea Whose Time Has Come
Impact investing links measurable social outcomes and financial returns. By harnessing entrepreneurship and innovation it can fund the growth of non-profits and for-profits to tackle society’s toughest challenges more effectively and at scale. It has made great advances in 2013. The debate is now increasingly about how the market will take off.
The UK is leading this revolution in addressing social issues. The social finance sector in the UK is innovative, and our policymakers see the huge potential for impact investing and are supportive of measures to develop the market. In June this year the prime minister put impact investment firmly on the international agenda at the London G8 Social Impact Investment forum where he announced the establishment by the G8 of the Social Impact Investment taskforce.
The taskforce, which I am privileged to lead, is tasked with developing a set of recommendations for G8 nations, the EU and Australia. Supported by national advisory boards that bring together country leaders in the field of impact investment and working groups comprising subject experts from many countries, the taskforce will examine key issues such as asset allocations by investors, profit-with-purpose businesses, impact in international development and, most importantly, how to go about measuring social outcomes.