Impact investing has gained popularity, with the ability to invest in noble causes that also offer financial gain appealing to many. UBS Optimus Foundation launched the first-ever Development Impact Bond (DIB) targeting girls' education in Rajasthan, India, earning investors a 15 percent rate of return. The bond performance indicates that impact bonds could be a useful philanthropy tool for penetrating emerging markets.
Impact bonds finance development projects, but instead of going to the government, they fund nonprofits and aid agencies. Identifying and measuring successful outcomes are agreed upon in advance and independently evaluated. If a program is successful, investors earn a return, which is funded by a third-party donor.
In this case, the goal was to get 92 percent of Rajasthan's "out-of-school" girls attending class and outperforming a random control group by 75 percent. The program exceeded its mission by 116 percent and 160 percent, respectively. UBS spent a year setting up the bond and working with the nonprofit to establish an effective method for tracking progress. The time it took to set up a second, larger bond was reduced by half, indicating a promising outcome for future investments. LEARN MORE