Impact Investing

Year: 2016 – 2017
Duration: 1 Year

Limestone Analytics has been commissioned to research and write a manual on the opportunities and risks inherent in incorporating impact investment into the financing for social sector intervention. We aim to provide readers a clear description of what impact investment is, how it can play a role in project finance for the social sector, and what pitfalls to avoid when trying to leverage private finance for social impact. The paper concentrates primarily on impact bonds as the primary way of incorporating impact investment into the project finance side of social programming.

The paper will address some of the following questions:

  • What is impact investment?
  • What is an impact bond?
  • What different ways can an impact bond be structured?
  • SPVs: What are they, and when/why should they be used in an impact bond?
  • Term-sheets: What are they, and how can I set one up?
  • What are the Pros and Cons of an impact bond as opposed to traditional grants?
  • How do I decide if my organization has the capability to implement an impact bond?
  • How do I develop an impact bond?
  • What institutional challenges are relevant to impact bonds?
  • What technical aspects of cost benefit analysis are relevant to impact investment?
  • How should I evaluate impact?

Key sections with novel information:

  • Risk sharing in payment by results contracts
  • Alternative impact bond structures
  • Sample heads-of-terms for a typical term sheet
  • Decision tool for deciding organizational suitability for implementing an impact bond
  • A project cycle that emphasizes the importance of monitoring and evaluation, cost-benefit analysis, experimental design and other quantitative tools
  • A road-map through all the stages of identifying, designing, financing and implementing an impact bond.
  • An ongoing discussion of how the topics addressed in the paper relate to a real world social sector project

World Vision