Good News! The Leaders’ Declaration has now over 700 signatories from leaders in the worlds of finance, business, government and philanthropy across six continents.
But how are we progressing on the implementation?
Stitching NAB has curated a mini-series of posts featuring examples of achievements of the Declaration's 3 targets. In this first post of the Series: Leaders’ Declaration Progress, the NAB dives deeper into what has been achieved towards the 1st goal: scale impact investment to combat unemployment, reduce inequality and preserve the environment.
GSG has shared a new guide, together with the Education Outcomes Fund, on results-based finance. This guide explains how results-based finance holds the potential to create sustainable jobs, improve education and broaden access to healthcare for the most vulnerable. Fiscally constrained governments face the need to invest more and better, and results-based finance offers them a range of tools to attract private investment at scale to achieve their objectives.
In 2018, the International Labour Organization (ILO) estimated that young women and men were three times more likely to be unemployed than adults. The issue is especially acute in emerging markets including but also worryingly high in OECD. The COVID-19 pandemic has not helped improving the situation, the ILO estimated that 17.3% of working hours (equivalent to 495 million full-time jobs) were lost to workplace closures. This had a disproportional impact on the youth.
According to Cliff Prior, CEO of GSG, performance-based contracts can help governments address the challenges of unemployment. They are an evolution from traditional interventions that fund inputs, such as hours of training, to focus on the achievement of measurable outcomes, such as job placements, retention and increased wages. These instruments can transfer the upfront costs and risks of initiatives to private investors and link their financial rewards – or payments from the commissioning body – to pre-agreed and measurable targets.
Cliff Prior also states that innovative solutions, like the career impact bonds launched in the US, transfer upfront training costs to impact investors instead of students. The General Assembly Career Impact Bond aims to give 1,000 individuals, who have limited means or have had contact with the criminal justice system, training in software engineering and user experience (UX) interface design, equipping them with in-demand skills to secure and hold down high-value jobs in IT. The individuals involved in such projects pay back the costs of training only when they get secure employment.
The reality of vulnerability and these two examples illustrate that results-based finance solutions are very promising. However, despite the growing evidence supporting its merit and the more than 200 social and development impact bonds launched worldwide, they remain far from mainstream. This is why the work of GSG’s National Advisory Boards, such as Stichting NAB, is so crucial to highlight the opportunities in results-based finance for education, health and employment.