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BII makes first move into development impact bonds

Published: 20 July 2023

British International Investment (BII), the UK’s development finance institution, is backing what they describe as the first fund dedicated to development impact bonds in lower and middle-income countries.

African school
The SDG Outcomes fund uses a blended finance structure to invest in impact bonds that targets a number of SDGs, including SDG 3 – quality education | Blaire Harmon, Unsplash

In brief

  • BII is committing $10m to the new SDG Outcomes Fund.
  • This is the first fund dedicated to development impact bonds in low and middle-income countries globally.
  • BII believes its commitment “will help demonstrate viability of development impact bonds as an effective funding tool to unlock maximum impact within underserved communities”.

British International Investment (BII), the UK’s development finance institution (DFI), has announced a $10m (€9m) commitment to the SDG Outcomes Fund as an anchor investor, alongside the US International Development Finance Corporation. Both DFIs will support what they say is the first fund dedicated to development impact bonds in lower and middle-income countries globally including Africa and South Asia.

SDG Outcomes has been set up in partnership with UBS Optimus Foundation as lead investor, and Bridges Outcomes Partnerships as fund manager.

The fund uses a blended finance structure to invest in impact bonds and similar outcomes-based contracts that support the UN Sustainable Development Goals (SDGs). It targets goals on ‘Good health and well-being’ (SDG 3); ‘Quality education’ (SDG 4); ‘Decent Work and Economic Growth’ (SDG 8) and ‘Climate action’ (SDG 13).

SDG Outcomes has made initial investments in West Africa, which Sara Taylor, director and head of private equity funds and co-Investments at BII says are well-aligned with their mission “to provide patient capital to create productive, sustainable and inclusive economies and mobilise private investment capital to support communities in Africa and South Asia”.

She cites three projects. The first one focuses on education in Sierra Leone – supporting the local government to improve numeracy and literacy outcomes for 195 primary schools and working with over 42,000 children, while also helping to develop the schools through teacher training and curriculum improvement.

A second project, also in education, is in Ghana – a similar-government-backed outcomes partnership, which aims to assist over 40,000 children already in education and increase access to schooling for a further 18,000 children outside the education system in the Northern region of Ghana.

A third example relates to sustainability in Nigeria – supporting the growth of Wecyclers, a social enterprise that collects, re-sells and recycles plastic waste via a franchise model. Wecyclers is aiming to collect over 30,000 tonnes of plastic waste during the next five years, while creating over 700 jobs in franchises and improving the incomes of thousands of waste sorters across Nigeria.

Through the SDG Outcomes Fund, impact investors fund the up-front costs of delivering these services. The commissioners of the programmes, often a government or NGO, commit to repay this capital only if certain social and environmental outcomes are achieved. The partnership argues this keeps all parties accountable and focused on delivering better outcomes and value.

Maya Ziswiler, CEO of the UBS Optimus Foundation, adds: ”The SDG Outcomes initiative is one of the first of its kind to provide the scale so desperately needed to provide real impact. By creating an investible solution, we can help our clients and partners to mobilise all forms of capital – from philanthropic, through to public and private investors motivated by both financial and non-financial returns on their investments.”

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