Global Impact Bond Market Growing, Brookings Finds

Global Impact Bond Market Growing, Brookings Finds

As of January 1, 2019, the number of impact bond contracts — either completed or in implementation — had grown to a hundred and thirty-four in twenty-seven countries, up from a hundred and ten a year ago, an analysis by the Brookings Institution finds.

According to the Brookings Global Impact Bond Database, the majority of the contracts are social impact bonds (SIBs), where a government is the funder, compared with just seven development impact bonds (DIBs), in which third-party funders invest in and are rewarded for pre-specified outcomes. Social welfare and employment remain the most popular sectors, accounting for forty-seven and forty-five contracts, respectively, and together making up 69 percent of all contracts, followed by health (nineteen contracts), education (twelve), and criminal justice (nine), with a third of the contracts focused on interventions the United Kingdom. The analysis also found that impact bond contracts average fifty-two months in duration; that the number of beneficiaries targeted by the interventions averages 14,733, with half the contracts targeting no more than 522; and that the impact bond market remains relatively small, attracting a total of $370.15 million in upfront capital over eight years, compared with $228 billion in impact assets under management.

Of the twenty-four new contracts signed in 2018 — down from thirty-four in 2017 — nine will focus on social welfare, six on employment, five on health, and four on education, with most targeting beneficiaries in high-income countries. The four new contracts signed in low- and middle-income countries include a DIB targeting cataract patients in Cameroon; the Quality Education India DIB (that country's third DIB to date); and two SIBs in South Africa, one focused on youth employment and another on early childhood development.

More than a quarter of the hundred and thirty-four contracts in the database have been completed, with most having repaid investors their principal plus positive returns; only one, the NYC Able Project for Incarcerated Youth SIB, made no outcome payments. According to the analysis, India's Educate Girls DIB, the first education impact bond in a low- or middle-income country, enrolled seven hundred and sixty-eight out-of-school girls and achieved learning outcomes that were 160 percent of the final target by its completion date in 2018.

"One of the key observations from our study of the global impact bond market is the role of data and the need for service providers to be able to gather, analyze, and respond to information to achieve outcomes," the Brookings Institution's Izzy Boggild-Jones, Emily Gustafsson-Wright write. "If impact bonds are to increase in scale...the demand for timely, usable data, and the systems that support their use, will continue to grow."

Emily Gustafsson-Wright, Izzy Boggild-Jones. "A Global Snapshot: Impact Bonds in 2018." Brookings Institution Blog Post 01/02/2019. "Brookings Impact Bonds Snapshot – January 1, 2019." Brookings Global Impact Bond Database Snapshot 01/02/2019.