1. Impact Bonds Conference: Pathways to Scale
January 18th, 2018
Session: Measuring a mechanisms success
Speaker(s): Dr. Emily Gustafsson-Wright, Fellow, Center for Universal Education, Brookings
Marc Baumann, Chairman of the Executive Board and Partner, Invethos
Arthur Wood, Founding Partner, TOTAL Impact Capital
Moderator: Avnish Gungadurdoss, Managing Partner and co-Founder, Instiglio

2. Measuring a Mechanism’s Success
Dr. Emily Gustafsson-Wright
January 2018
#impactbonds

3. Our Impact Bonds research

4. Measuring success
Is there a demand for impact bonds/outcome based contracting?
Are impact bonds reaching the populations in need?
Are the contracts achieving outcomes?
Can impact bonds achieve something besides outcomes?
Are the deals efficient?
There are various ways of measuring success:
IS the contract achieving outcomes? Additionally, it is one thing to say if outcomes have been achieved, but can these outcomes actually be attributed to the SIB?
Is the impact bond achieving something besides outcomes (for example change in performance management strategy, quality of data collection)
How do we define success? Is it how large the market is? For example the amount invested relative to the overall impact bond investing market? Or the size of impact bonds relative to aid generally? The size in terms of beneficiaries? SDG funding gap of $2.5 trillion annually in developing countries
We are seeing the start of a increased focus on outcomes, with involvement from key development players (WB, USAID, IDB, DFID, along with other governments – Governments of Switzerland, Belgium, Italy, Netherlands)

5. 1. Is there a demand for impact bonds?

6. 108 Impact bonds contracted globally
January 1 : 108 globally
103 SIBs, 5 DIBs
The UK, the first country with a contracted impact bond, still has the most, with 42; followed by the USA with 19; Netherlands 9; Australia 8; Canada 4; Portugal 4; Israel, France, Finland, India, Japan, South Korea 2
1 each: Austria, Belgium, Colombia, Germany, New Zealand, Peru, Sweden, Switzerland. Kenya & Uganda, Mali, Nigeria & DRC
DIBs:
Educate Girls in India
Coffee and cocoa in Peru
The International Committee of the Red Cross Programme for Humanitarian Impact Investment (PHII). is being implemented in three countries: Mali, Nigeria and the Democratic Republic of Congo.
Village Enterprise in 2 countries (Kenya & Uganda)
India Maternal & newborn health (India)

7. ENVIRONMENT & AGRICULTURE
Sectors: Impact bonds contracted globally
EMPLOYMENT
HEALTH
EDUCATION
January 1: 108
ENVIRONMENT & AGRICULTURE
SOCIAL WELFARE
CRIMINAL JUSTICE

8. SIZE OF THE MARKET
2017 GIIN annual impact investor survey: respondents manage $114 billion in impact assets
Impact bond contracts globally: 336 million (of those with available data)
Impact bonds in developing countries: 4.4 million upfront capital
Foreign Direct Investment: About 1.4 trillion annually.
Net ODA: $145 billion in 2016 (OECD/DAC)
Average annual investment gap in SDG relevant sectors of $2.5 trillion to achieve the SDGs by 2030
Annual investment gap in developing countries.
We do not have upfront capital for colombia, ICRC or village enterprise. We have better data on outcome fund: 41 million dollars
Figure from OECD: total DAC countries.
Figures from non-DAC countries not available for OECD reports total ODA for 2015 as $153 billion (which includes all donors)

9. Who’s investing in LMICs?
Contracted or in design

10. who’s funding outcomes in LMICs?

11. 2. Are impact bonds reaching the populations in need?

12. IMPACT BOND BENEFICIARIES
Small size on average: over 50% of impact bonds have no more than 600 beneficiaries
Impact bonds have been used to target marginalized populations
Only two impact bonds have more than 20,000 beneficiaries: the Maternal and Newborn Health DIB in Rajasthan, India, with 600,000 and the DC Water environmental impact bond, with 650,000 
Target populations include refugees, single mothers, women affected by violence, children in residential care, the unemployed, ex-convicts, homeless people, young people not in education, employment or training (NEET), indigenous people, employees with cancer, pre-diabetic individuals, people in contact with mental health service, first time low-income mothers, individuals with physical disabilities, ultra-poor households

13. 3. Are the contracts achieving outcomes?

14. High-income countries:
RESULTS TO DATE
High-income countries:
One service Peterborough – reduced reoffending by 9%. Investors repaid in full, with return of over 3%
Energise (Innovation Fund UK) – 3200 positive outcomes across 1778 young people. Investors received initial capital + return
Rikers Island – SIB did not achieve targets, Goldman Sachs lost $1.2 million
Low-income countries
Coffee and Cocoa Peru - Outcome funder paid investor USD 75,625 in total (68.75% of initial investment of USD 110K).
Educate Girls India – Year 2 results enrollment 88% of target, learning at 50% of target
Many impact bonds are still in the implementation phase. These are just some examples of the results we have seen so far.
All impact bonds in blue box are closed or discontinued
There are two questions or considerations here:
We don’t know if these results would be achieved in the absence of the impact bond – none of the studies test the SIB or DIB effects
Only a handful rigorously evaluate for the intervention effect (only 8 RCT/experimental design, 6 of which in USA)

15. 4. Can impact bonds achieve something besides outcomes?

16. RIPPLE EFFECTS
What other effects have we seen from the development of impact bonds?
Shift from inputs to outcomes
Iterative performance management
Development of data systems
Costing the price of inaction
Collaboration

17. 5. Are the deals efficient?

18. COST-BENEFIT OF IMPACT BONDS
Evidence so far suggests many deals are taking a long time to be contracted though some variance
Can we calculate the benefit?
Lack of rigorous evidence comparing SIBs to other contracting mechanisms
Some benefits likely to be long term
How to price the benefit of the ripple effects? (data systems, performance management)
-On average deals take a long time to develop (2 years on average but some even longer) and in some geographies philanthropic money has been the primary source of funding for feasibility work etc.. In some cases, in particular in developing countries, engaging outcome funders has been the major bottleneck while in others legal obstacles and setting of metrics have been the hold up.
-This varies however by geography and has begun to shift in the last couple of years in particular among actors who have been engaged in multiple deals.
-Efficiency is in part related to the governance structure of these deals – so who is leading, who’s taking a cut etc..
One way to improve efficiency has been through outcome funds or the rate card approach where multiple deals (and service providers and investors) are included under one umbrella of funding from an outcome funder. The reason why the UK has the most deals in the world (42) is that they have used this approach (6 outcomes funds: Life Chances Fund, Rough Sleeping SIB Fund, Fair Chance Fund, Youth Engagement Fund, Social Outcomes Fund and Commissioning Better Outcomes Fund (treated as 1), Innovation Fund)
We see this approach beginning to be considered also in developing countries.

19. So how should we really be measuring success?

20. Thank you!
For more information on Brookings impact bonds research:
Credit: Educate Girls
Credit: RFUK