Outcome-based Finance in Clean Cooking, Distributed Renewable Energy, and Small-Scale Agribusiness
Outcome-based finance, a form of impact-linked finance, is paving the way for increased investment into high-impact projects with social and climate benefits in emerging markets. Yet, scaling up outcome-based finance for sectors like clean cooking, distributed renewable energy (DRE), and small-scale agribusiness presents challenges, especially around market mechanisms and pricing premiums for social outcomes such as gender equality. Inside the voluntary carbon market, a variety of factors drive outcome buyers to purchase credits, including portfolio diversification, transaction volume, reputational considerations, and the quality of the credits. These factors, along with a transparent revenue-sharing model and adherence to emerging standards, are essential to attracting buyers and ensuring fair value in the market.
Outside of the voluntary carbon market, there are emerging efforts to establish a standalone market for SDG outcomes. Building such a market requires buyers interested in standalone SDG outcomes, sellers capable of producing these outcomes, reliable tools for measuring and verifying outcomes, and an efficient market structure to connect both sides. A standalone SDG market could be a key catalyst for financing impactful social and environmental outcomes on a larger scale. This report seeks to explore this topic and provide actionable recommendations for the global market.
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