Social Impact Investing

SOCIAL IMPACT INVESTMENT: BUILDING THE EVIDENCE BASE
social target areas, the beneficiary context, the nature of good\service provided (public/private), delivery
organisation social intent, measurability of social impact, investor social intent and return expectations.
Within each characteristic, a further set of related attributes are highlighted and possible boundaries are
suggested to help further the discussion about what should and should not be considered social impact
investment.
The market is evolving in various ways across OECD countries. This is influenced by the differences
in the country context including history, social needs and value systems. In addition, the ways in which
social and financial systems are structured will determine the role and mix of public and private capital and
therefore the potential role of social impact investment. The variation in these contexts can provide
indications in terms of which SII approaches may be more appropriate in some sectors than in others, and
easier to implement in some countries than in others.
Social needs have been increasing in many countries requiring both more efficient and more effective
social service delivery. Trends in public expenditure show that services are taking up more of the social
protection budget, in some cases exceeding cash spending. However, social service delivery is complex
and entails a number of specificities and potential challenges for social delivery organisations as well as for
social impact investment models. The extent to which any investment can make a social impact will rely
on the type and extent of need – and demand for improvement – across an array of social outcomes. Social
outcomes are evolving in different directions, in different social sectors, for different reasons. These topics
are discussed in detail in Chapter 5.
A stronger evidence base is critical to increasing engagement in the social impact investment market
and encouraging a global market to develop. Different players involved in the market, including
policymakers, have been calling for more data as well as a better and more accurate understanding of the
size, scope, evolution and potential of the market. However, the specific data requirements for each of
these players can differ. It is therefore important to clarify these needs before embarking on a data
collection exercise, especially given the challenges in collecting social impact investment data.
Currently, available data on social impact investment is very limited. Various approaches have been
used to collect data and estimate the scope of the social impact investment market, but each of these
approaches requires strong assumptions or has other limitations. Being able to collect comprehensive
transaction data in an efficient manner would help in building a better understanding of market activity.
This would require specific common definitions of social impact investment as well as harmonisation of
data collection efforts to ensure comparability across countries and regions. Various efforts are underway
but the best way forward will likely involve a partnership between key players involved in data collection
across countries. These approaches are outlined in Chapter 6.
The public sector can play a catalytic role in the social impact investment market in terms of creating a
conducive regulatory environment, encouraging greater transparency and taking concrete steps to help
develop the market. Policy actions in some of these countries have addressed regulatory issues, notably in
terms of setting up legal structures to accommodate SII-specific types of market actors. Also, several
policy interventions have sought to enhance SII supply. Some governments have provided support through
tax credits (and tax-advantaged funds), guarantees or subsidies, established and co-invested in SII funds.
Other governments have focused on developing the social impact investment market infrastructure through
the creation of intermediaries such as SII wholesale banks, exchanges (or trading platforms) and other
channels to facilitate the links between supply and demand for SII (investors and delivery organisations).
Additionally some have sought to stimulate SII demand by providing support to delivery
organisations/investees through technical assistance or by encouraging procurement.
© OECD 2015 11