In this report, Roots of Impact explores the insights gained from eight years of implementing Impact-Linked Finance (ILF). ILF involves linking financial incentives for market-based organizations to the achievement of positive social outcomes.
ILF operates at the crossroads of impact investing, blended finance, and results-based finance, utilizing a unique mix of features and distinct characteristics. Key attributes that align ILF with blended finance include enhancing returns for investors and providing direct support to value creators who generate additional impact.
Key insights from the report:
- A deep understanding of the enterprise’s long-term strategy is essential, and the rewarded outcomes should be well aligned with this strategy.
- ILF is applicable to a wide range of scenarios, such as encouraging commercially successful enterprises to create greater and more meaningful impacts, or promoting additionality through both incentives and the investment itself.
- A combination of incentives and technical assistance has proven to be highly effective.
