Actors and Types of Social Impact Bonds

According to Social Finance data, 138 total impact bonds are contracted with $441 million capital raised globally as of 13- April 2022. Although 1,711,902 lives have been touched by the work due to impact bonds, the size of impact bonds accounts for less than 1 percent of the global impact investing market. Global Impact Investing Network (GIIN), 2020 survey estimates the size to be $715 billion globally. The top four sectors are Workforce Development (44), Housing/ Homelessness (23), Health (22), and Child and Family Welfare (20). Unite Kingdom, United States, Netherlands, and Australia are the top four countries that have contracted these bonds.

Actors in Impact Bond Sector 

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Investors include governments, bilateral and multilateral institutions, foundations, IFI, banks, philanthropists, and impact investors. Bridge Ventures, UBS Optimus Foundation, and BNP Paribas are some of the big investors in impact bonds. UBS Optimus Foundation has funded three Development Impact Bonds (DIB) in India. Educate Girls, Quality Education India DIB and India Maternal and Newborn Health. The first two are in the education space, the third is in healthcare.

Intermediaries are nonprofits, community organizations, and foundations. Social Finance, Dalberg Advisors, and Instiglio are examples of intermediaries.

Outcome payers can be government entities, bilateral and multilateral organizations, and foundations. Service providers are non-profits, social entrepreneurs, and for-profit and hybrid organizations. Impact Evaluators play a critical role in measuring the impact of the interventions against outcomes. Impact Evaluators are nonprofits, research organizations, academic institutions, and consultants.

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Different Types of Impact Bonds

There are three types of social impact bonds.

Direct Social Impact Bond: The principal actors for the contract are the outcome payer and service provider or special purpose vehicle of the service provider. Implementation and performance management is done by the service provider who holds most of the power. The intermediaries raise capital, structure the deal, and conduct the feasibility of the deal.

Intermediated Social Impact Bond: In this type of SIB, a contract is signed between outcome payer and investor, or investor controlled SPV or intermediary. The implementation and performance management team hold the most power, appoints service provider, and implements the project. The intermediary has the maximum role and also invests in the impact bond.

Managed Social Impact Bond: The principal actors for a contract are the outcomes payer and an intermediary or an intermediary controlled special purpose vehicle. Managed SIB differs from the Intermediated SIB in one aspect, the intermediary is not invested in the project but holds the most power and appoints the service provider.

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