09/01/2021

Social Impact Guarantees

The next evolution in outcomes-based funding

When companies introduce an innovative product, they often provide a money-back guarantee. This assurance helps them convince buyers to take the plunge and try something new. From the buyer’s perspective, the guarantee protects their dollar and shows that the seller has an incentive to ensure the product delivers.

A social impact guarantee (SIG) works the same way. This new type of outcomes-based funding model—which our nonprofit, Tri-Sector Associates, recently launched in partnership with the Young Men's Christian Association (YMCA) of Singapore, the Lorinet Foundation, and the TL Whang Foundation—is a money-back guarantee for social impact, and we believe it can accelerate innovation, stretch funder dollars, and improve program results.

SIGs build on the core benefits of outcomes-based funding models like the social impact bond (SIB) and development impact bond (DIB) while helping resolve common barriers to their implementation. Because public, philanthropic, and impact investing organizations can easily apply the SIG’s insurance-like features, the model could help outcomes-based funding go more mainstream and provide a timely solution to social problems exacerbated by the COVID-19 pandemic. In the longer run, it could draw new players such as insurers to social investment and deepen our understanding of impact risk, which will foster a better-functioning market for impact.

Please select this link to read the complete article from SSIR.