Unlocking Social and Environmental Impact: Outcome-based Finance in Clean Cooking, Distributed Renewable Energy, and Small-Scale Agribusiness
International Finance Corporation (IFC)
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Abstract: Global investment capital is lagging well behind levels needed to achieve the United Nations Sustainable Development Goals (SDGs) by 2030. However, outcomebased finance, a form of impact-linked finance, o-ers a way to increase funding that provides significant social and climate impact in emerging markets. Under this model, an ‘outcome buyer’—to date, often a foundation, government, or development agency—pays service providers when they achieve pre-agreed, verified social or environmental goals. This can drive investment into small but high impact enterprises in emerging markets and support their growth. This research explores factors required to support the use of outcome-based finance, along with the interests and priorities of potential outcome buyers in three sectors: clean cooking, distributed renewable energy, and smallscale agribusiness. A survey of potential outcome buyers and organizations with knowledge of outcome-based transactions provides insights into their characteristics, motivations, and priorities, along with key informant interviews, secondary literature, and data from MCSI Carbon Markets Intelligence (formerly Trove Research) and AlliedO¹sets. The research identifies barriers to building demand for outcome-based finance. Understanding and addressing these barriers could catalyze more outcome-based finance to help developers of clean cooking, distributed renewable energy, and small-scale agribusiness projects diversify their revenue streams, identify new investors, and access additional capital to grow their operations.