The impact bond market expanded in 2018, according to analysis by the Brookings Institution. As of Jan. 1, the institution’s global impact bond database tracked 134 contracts, 24 more than a year ago.
The vast majority of contracts — 127 — are social impact bonds, where the outcome funder is the government. Third-party funders pay for seven development bonds.
The social welfare sector with 47 contracts and the employment sector with 45 contracts account for 69% of impact bonds. Health, education, criminal justice, and environment and agriculture together account for the remaining 31%.
Brookings reported that 24 new impact bonds were contracted in 2018, down from 34 in 2017. Nine of the new contracts will focus on social welfare, six on employment, five on health and four on education.
Although most of the new contracts were in high-income countries, four were in low- and middle-income countries. Cameroon rolled out a development impact bond for cataracts, and India launched its third DIB, with three service providers offering different interventions to improve learning outcomes. In addition, South Africa contracted one social impact bond for youth employment and another for early childhood development.
Although the majority of impact bonds are still in the implementation phase, an increasing number of the early deals are ending, with more than a quarter of the 134 contracts completed, according to the Brookings analysis. These provide evidence on the successes, challenges and lessons learned.
The impact bond market is growing steadily and has spread across many regions, but remains small at about $370 million invested over eight years. By comparison, impact assets under management last year amounted to $228 billion.