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The University for Sustainability is establishing a Sustainable Development Innovation Fund (SDIF). A fund-of-funds, it will pool resources to scale up proven and / or innovative technologies and services that support sustainable development challenges, by paying for the results achieved. Development Impact Bonds (DIBs) will be used to attract upfront capital and drive performance and innovation. The SDIF will complement other financing vehicles in pursuit of scalable innovation for sustainable development.

How it Works:
The objective of Sustainable Development Innovation Fund (SDIF) is to support sustainable development priorities by harnessing the capacity and capabilities of the University for Sustainability's member universities and research institutes to help achieve Sustainable Development Goal 9: Build resilient infrastructure, promote sustainable technologies and foster innovation. Within its thematic research programme, the SDIF will pool resources to programmatically challenge innovative reearcher to work towards a scalable solution. Typically, impact investors will provide upfront capital and management support to the University's members, and will be repaid by SDIF on the basis of the outcomes achieved. Given the role of governments in setting the the sustainable development agenda, governments will be key partners in this work.

1. Set objectives and commit outcomes funding: Government sets objectives in collaboration with SDIF.  Donors with aligned priorities make commitments for the achievement of these objectives
2. Define outcomes payment metrics and commission providers: SDIF will set metrics in line with these objectives, and establish a price for each targeted outcome. This will create an 'outcomes market’ in which innovators bid for contracts and are selected based on their suitability, ability to demonstrate impact, and cost efficiency
3. Invest and build capacity: Impact investors support service providers with upfront working capital at risk and performance management, to help them drive results
4. Deliver services and achieve outcomes: Innovators scale their programs and achieve outcomes for beneficiaries, with the flexibility to adapt and and scale to the contexts
5. Evaluate results: Independent evaluators measure outcomes against agreed upon metrics
6. Pay for outcomes, if achieved: SDIF pays innovators and impact investors their principal plus a modest return, on the basis of the outcomes that have been achieved

THE VALUE PROPOSITION:
The SDIF will be a large focused pay-for-results project financing vehicle. The structure represents a major shift in how we finance and deliver programs and has a number of core benefits, allowing us to:

1. Only pay for what works: Results-based contracts ensure scarce grant funding has the desired impact by paying for independently verified learning outcomes, once achieved
2. Develop service provider capacity, with private sector rigour: Impact investors are incentivized to work with and manage the performance of service providers as they would a traditional portfolio company. This has had a transformational positive impact on many service providers involved in similar impact bonds
3. Create new partnerships aligned around outcomes and beneficiaries: Donors, investors, government, and non-state actors work together towards a common objective, combating aid fragmentation and applying a relentless focus on the targeted outcomes for beneficiaries
4. Improve transparency on intervention effectiveness and efficiency: By creating a ‘market for outcomes,’ SDIF will help build a greater public understanding of ‘what works’ in each local context, as well as the cost efficiency of a wide range of interventions (on a true cost per outcome basis). This process in turn supports rapid scaling of the most effective and cost-efficient interventions, informing education policy and innovation
5. Leverage impact bonds more effectively as a development tool: An outcomes fund approach will develop a centralized commissioning capability and standardize the process of establishing impact bonds. In doing so, SDIF will significantly lower transaction costs for impact bonds and more effectively leverage the tool for development in education and more broadly​

​​​WHERE WE ARE IN THE PROCESS
The University for Sustainability is currently in the design phase of the SDIF initiative, determining the countries where we will pilot and the education outcomes that are best suited for this financing structure. Over the course of 2019, we will engage stakeholders across government, philanthropy, civil society and the private sector, to ensure that the fund design is robust and will support a strong partnership between these players. 

Fundraising efforts will Indicative timeline for the establishment of SDIF begin towards the end of 2020, as we work to raise commitments from aid, philanthropy, and corporate giving. The University has a target launching the first funds in 2021. 

Read the concept note for a detailed description of SDIF and its core value proposition