Balancing evidence and risk: An evaluation of social impact bonds

Impact bonds aim to measurably improve the lives of the people most in need by driving resources towards better, more effective programmes. At their core, impact bonds are public-private partnerships whichfund effective service provision through outcomes-based contracts. Impact bonds enable federal, state and local governments and donors to partner with high-performing service providers by using privateinvestment to expand effective programmes.

Central to each impact bond’s effective operation is the confidence that both outcomes funders (governments or donors) and investors have around the validity of metrics on which payments will be made.

As use of impact bonds has grown over the last couple of years, much has been written about the basis on which such contracts are evaluated. Debate, particularly in markets like the US, is increasingly polarised. This paper offers a pragmatic way forward