Social Impact Investing

SOCIAL IMPACT INVESTMENT: BUILDING THE EVIDENCE BASE
1. EXECUTIVE SUMMARY
Social impact investment is the provision of finance to organisations addressing social needs with the
explicit expectation of a measurable social, as well as financial, return. Social impact investment has
become increasingly relevant in today’s economic setting as social challenges have mounted while public
funds in many countries are under pressure. New approaches are needed for addressing social and
economic challenges, including new models of public and private partnership which can fund, deliver and
scale innovative solutions from the ground up.
Social impact investment has evolved over the past decade as the result of a number of factors,
including a growing interest by individual and institutional investors in tackling social issues at the local,
national or global level. The recent economic crisis has further highlighted the tremendous social and
economic challenges facing countries across the globe. Governments are seeking more effective ways to
address these growing challenges and recognizing that private sector models can provide new innovative
approaches. Chapter 2 provides further background on the evolution of the market as well as highlights
parallels to traditional capital markets.
Awareness of the potential opportunities of social impact investment has grown considerably across
several OECD and non-OECD countries including in the G8 and G20. In the context of the UK’s G8
presidency in 2013, the UK Prime Minister hosted a G8 Social Impact Investment Forum in London in
June 2013 and launched the Social Impact Investment Taskforce. As one of the outcomes of the G8 Social
Impact Investment Forum, the OECD was asked to produce a report on the social impact investment
market. This report seeks to provide a framework for building the evidence base of the evolving social
impact investment field. It follows an overview paper on social impact investment, published by the OECD
in July 2014. 1
A growing range of actors are emerging in the social impact investment market to form an ecosystem
consisting of social ventures, intermediaries and investors committed to addressing social needs.
Government also plays a key role in the ecosystem, in terms of setting conditions for the enabling (or
hindering) environment as well as potential indirect or direct engagement in the market. Framework
conditions (e.g. tax and regulation) have a significant impact on the social impact investment market.
Chapter 3 provides a framework for looking at the various components of the social impact investment
ecosystem and the different channels through which SII takes place.
The social impact investment market is in the early stages of development. The international
initiative, led by the Social Impact Investment Taskforce, established under the UK’s presidency of the G8,
has helped in raising awareness and clarifying the broader definition of social impact investment.
However, for purposes of scoping and sizing the market, it is essential to work towards a precise common
understanding of what is meant by social impact investment and agree upon a working definition to clarify
what is included and what is not. This is important for policy makers, researchers and practitioners as well
as for the overall development of the market.
Chapter 4 of this report expands on the definition with the aim of spelling out the underlying criteria
for assessing a social impact investment. It also provides a framework to help in working towards a
common detailed definition, which in turn will facilitate data collection and a better understanding of the
market. Seven key characteristics of social impact investment are identified in the paper including the
1 . Wilson, K. E. (2014), "New Investment Approaches for Addressing Social and Economic Challenges", OECD Science, Technology
and Industry Policy Papers, No. 15, OECD Publishing. DOI: 10.1787/5jz2bz8g00jj-en
10 © OECD 2015