Social Impact Investing

SOCIAL IMPACT INVESTMENT: BUILDING THE EVIDENCE BASE
Table 4.4. Social Returns and Economic Efficiency
Impacts at the individual or societal\systemic level
Degree of publicness
Social impact on the
individual
Social impact on the
society
Source: OECD.
Individual efficiency
gains
PRIVATE
Possible SII
Systemic efficiency
gains
Possible SII
PUBLIC
4.28 Two levels of “Social” are defined here: 1) the provision of goods that address the social needs of
an individual or society to improve life outcomes (social impacts); and 2) the provision of goods that result
in savings in the costs or improvements in the effectiveness of providing for social need (efficiency gains).
The provision of goods that have no social impact is not discussed here, as they are screened out in the
discussion of Social Target Areas.
4.29 Where the consumption of a good has a social impact at the individual level only (very limited
spillovers) and does not result in meaningful systemic efficiency gains these are considered ‘private’ – as
the benefits/costs of the consumption is limited to the individual alone. Where the consumption of a good
has both a social impact on society as a whole and result in systemic efficiency gains these are considered
‘public’ – as their consumption is in the broadest social interest, as well as the potential for ‘free-riders’.
4.30 Where the consumption of a good has only individual efficiency gains, but there are social
returns to the society as a whole there may be space for SII; this would be the case for lowering the cost of
consumption for ‘social impact’ private goods at the individual level – such as affordable housing. 11 Where
the consumption of a good creates social impact primarily at the individual level but also results in
systemic efficiency gains (e.g. lowering recidivism rates, to reintegrate offenders and lower costly prison
budgets) there is also potential for SII.
4.31 When the consumption of a good favours individual efficiency, but has broader social returns, it
is important that any social impact spillovers are correctly factored in the SII instrument (e.g. through the
use of SIBs). The consumption of affordable private goods with broad social impacts is clearly desirable,
but nonetheless challenging for private enterprise models because the incorporation of externalities and
monetisation of outcomes into businesses objective function is not always straightforward.
4.32 The Social Impact Bond (SIB) model is based on a “pay for success” feature that allows setting
outcomes (and objectives for providers and investors) that take into account externalities. This model is
described in detail in Chapters 3 and 7. As an example, the Development Impact Bond (DIB) addressing
malaria in Mozambique has a clearly defined outcome measure - reducing incidence rates by at least 30%.
The approach is to provide anti-mosquito nets and indoor spay to at-risk populations. By focusing on
incidence rates, the DIB incorporates not outputs at the level of non-affected individuals, but also a
systemic health issue.
11 . In the U.K., the percentage of the population living in households where the total housing costs (net of
housing allowances) represent more than 40% of disposable income (housing cost overburden rate) was
almost 41%, well above the EU average of 25% (OECD, 2013c, pp. 61).
50 © OECD 2015