Are impact bonds delivering outcomes and paying out returns?

This brief examines available data on outcome achievement and investor returns on completed impact bond projects across the globe. It also examines the critical processes in an impact bond of defining and determining outcomes, payment thresholds, and the methods for verification of outcome achievement. The findings show that for the nearly 50 completed impact bonds (out of 194 contracted to date), outcomes have in fact been achieved and investors have been repaid in all cases but two.

Most impact bonds that have come to a close fall in the social welfare and employment categories, with outcomes including sustained employment, stable housing, and reunification of families. Investor returns range from around 1 percent to 20 percent of the original investment, with an average potential return of $2.5 million.

Anecdotal evidence suggests that the structure of the impact bond model, which encourages collaboration, shifts focus to outcomes, and incentivizes performance management, could effectively drive outcomes achievement. An important caveat is, however, that without a counterfactual, it is not possible to attribute outcome achievement and thereby investor returns to the impact bond model itself. Further research will be necessary to determine this with rigor.