Beyond Compliance 2024

Beyond Compliance: Embedding Impact through Innovative Finance21Market sizing and trajectory There is a wealth of knowledge that the corporate sector can draw from the ecosystem, many parts of which have scaled over the last decades into a robust market. Current estimates size the OBF market including RBF and ILF, at $185 billion. Credit instruments linked to sustainability that focus on avoiding harm, mitigating risk or benefiting stakeholders mobilize about $1.3 trillion. The following infographic highlights market statistics, recent trends and growth projections for each segment, reflecting how these financial tools are being used to drive measurable social and environmental impact. Current OBF market size estimates FIGURE 4 Approach Targeted outcome Impact area Results based finance and outcomes partnerships – Market size: Estimated $150 billion. – Primary sectors: Public health, education, workforce development. – Major contributors: Multilateral development banks (MDBs), DFIs and bilateralagencies; domestic governments, philanthropic donors. World Bank constitutes 80% of donor-based RBF. – Growth trend: World Bank increased RBF lending portfolio cap from 5% to 15%. – Additional insights: $763 million in impact bond investment to date; downward trend in some areas, but new pipeline projects remain active. Impact-linked finance – Market estimate: $35 billion, with $1.24 billion raised through specific ILF facilities, based on estimates provided by Roots of Impact. – Notable tool: Social Impact Incentives (SIINCs), leveraging up to 10 times additional investment, focusing on sectors like off-grid energy, agriculture, and water and sanitation. – Trend: Proliferation of structures suitable for a variety of corporate use case ranging from impact linked debt to equity, convertible notes and revenue sharing agreements. Sustainability–linked finance – SLL market size: $1.3 trillion in total with $548 billion invested in 2023, for general corporate financing needs. – SLB market size: $240 billion in total with $68 billion in 2023, for specific project financing needs. – Social KPIs: Growing integration of social KPIs within these instruments. – Potential growth areas: Greenwashing, measurement costs and high-interest rate environments have dampened growth in short term. Although expected increase in SLLs and SLBs as companies adapt to broader ESG and regulatory standards. Carbon, biodiversity, plastic credits – Carbon credits market: Current voluntary market $723 million in 2023 down from $2 billion in 2020 due to increased market scrutiny. – Biodiversity credits: Expected growth from $10 million to $2 billion in 2030 and $69 billion in 2050. – Plastic credits: Currently under $10 million, with projections indicating growth to $30 million annually within the next 5 years, depending on standardization efforts. Support solutions for material issues Integrate impact considerations in decision-makingSocial SocialSupport solutions for material issues Integrate impact considerations in decision-making Mitigate sustainability risks Optimize operations for sustainability Offset negative footprint Integrate impact considerations in decision-makingMostly environmental Mostly environmental Sources: Instiglio & SECO. (2024). RBF Experience Review; Global Partnership for Results-Based Approaches (GPRBA). (n.d.). Results-based finance database; Kenyon, T. (2022). Embedding long-term sustainability in the World Bank’s Program-for-Results instrument. Government Outcomes Lab, Blavatnik School of Government, University of Oxford; INDIGO. Government Outcomes Lab, Blavatnik School of Government, University of Oxford; Investing for Good & Esmée Fairbairn Foundation. (2021). A review of impact-linked finance: Does incentivizing impact work?; Roots of Impact. (2024). Impact-linked finance: Learnings from eight years and ideas for the future; International Finance Corporation (IFC). (2023). SOCIAL KPIs MATTER: Setting robust indicators for sustainability-linked finance; BloombergNEF. (2024). Carbon credits face biggest test yet, could reach $238/ton in 2050, according to BloombergNEF report; World Economic Forum & McKinsey & Company. (2023). Biodiversity credits: Demand analysis and market outlook; The World Bank. (2024). Unlocking financing to combat the plastics crisis; L, J. (2024). Why the voluntary carbon market took a hit in 2023.Carbon Credits. The market volume for outcome- based funding is estimated at $185 billion.