Social Impact Investing

SOCIAL IMPACT INVESTMENT: BUILDING THE EVIDENCE BASE
3.52 It is important to note that the focus on measuring outcomes (e.g. reduction of infection rates) is
different from a focus on measuring outputs (e.g. number of vaccines provided). Transparency is ensured
as outcomes are evaluated by an independent entity. The investors will be repaid, in tranches over time,
only if the agreed upon outcomes are achieved. The payments and any positive returns on investment
should reflect the innovation and more efficientsocial service provision provided by the social service
delivery organisation.. For information on the evaluation of the first SIB created (in the U.K), see Chapter
7.
3.53 The SIB model spread quickly across the U.K. and to other countries, including the
United States., Australia and other countries. These SIBs focus on a range of social issues including, for
example, criminal justice, child/family support, homelessness, employment, and health. These and many
other new models are currently being developed in a growing number of countries. A list of SIBs is
provided in Annex 3.1.
3.54 Building on the SIB model, Development Impact Bonds (DIB) are also structured as pay-forsuccess
schemes but focused on developing countries. As with SIBs, investors are paid on the basis of
whether the pre-defined social\development outcomes are achieved. DIBs seek to improve the
effectiveness of traditional donor-funded projects by shifting the focus onto implementation quality and the
delivery of successful results by introducing private sector actors who may be better-positioned than the
public sector to take on risks associated with innovation. However, it should be noted that applying these
models in developing countries might entail additional challenges such as the extent to which DIB
contract terms can be enforced. Annex 3.1 includes a number of DIBs currently being developed in
countries such as India, Mozambique or Uganda. Contrary to SIBs, the typical DIB commissioner is not
local governmental authorities but rather international organisations or development agencies — e.g. the
UK’s Department for International Development recently announced a DIB to invest in the prevention of
deadly sleeping sickness in Uganda.
3.6. Enabling environment
3.55 The general framework conditions in a country can have a significant impact on the development
of financial markets in general and the social impact investment market in particular. The existence of
vibrant entrepreneurial finance markets can facilitate the development of the social impact investment
market as experience with financial market tools can help in building the SII market (in fact, many people
in SII were active in investment banking, private equity, venture capital and/or angel investing).
3.56 The SII market is evolving in various ways across countries. This is influenced by the differences
in the country context and, in particular, the ways in which social and financial systems are structured
which determines the role and mix of public and private capital (Wilson, 2014). Chapter 5 provides further
details on the social systems in the selected countries.
3.57 In addition, political economy considerations also play an important role, since SII may be
perceived differently across and even within countries. Indicators that might proxy social perceptions can
shed some light on these aspects. Information on social perspectives is usually obtained through surveys
such as the World Values Survey or the European Social Survey Additional data may also be available
from the OECD (e.g. Society at a Glance; Better Life Index, Annex 6.2), World Bank indicators or the
Social Progress Index. Annex 6.1 provides a list of data sources with links to where this type of data can be
found.
3.58 For the SII market to function well, the necessary legal frameworks and structures need to be in
place for social ventures as well as streamlined regulations and requirements for investment (Thornley et
al, 2011). This includes corporate structures more suitable to social ventures as existing structures (either
34 © OECD 2015