This article for the international aid community explains how to create new money for sustainable development internationally. The advice below shows how monetised qualitative impacts can be used by everyone to better unlock private capital for SDGs.
Achieving the SDGs requires filling annual financing gaps of around 4 trillion USD, far beyond what public and philanthropic sources can provide. While private capital is increasingly interested in sustainable investing, many high-impact development interventions (especially social programmes, climate adaptation, and nature-based solutions) may often risk not being seen as providing the financial returns required for traditional investment.
However, these interventions generate substantial qualitative social and environmental value, such as increased well-being, ecosystem services, resilience gains, lower mortality, and many more. The concept of using impacts as collateral by monetarising qualitative outcomes can enable donors to leverage their grants many times over by crowding in private capital at scale.
Why this matters to the development community
The approach aligns well with the broader shift in development finance: from purely grant- or donor-driven aid, to hybrid models that attract private capital.
For practitioners, development organisations, NGOs, DFIs, social enterprises, and consultants, having credible, standardised systems to value qualitative impacts can help them build bankable deals, attract new kinds of investors, and scale up operations.
It can unlock funding in areas typically underfunded, like social programmes and sustainability initiatives, while contributing to higher equity, inclusion, and environmental resilience globally.
By creating a common ‘valuation language’ (e.g., monetised wellbeing, natural-capital accounting, impact-linked contracts), donors and investors can better compare, prioritise and scale projects, ensuring more efficient use of limited aid money.
Creating considerable collateral
Strategic SDG objectives here focus on modernising mainstream financing architecture, where donor-funded projects can unlock private capital by:
- Valuing qualitative impacts using consistent methodologies and standards.
- Registering verified outcomes within a transparent Impact Valuation Bank.
- Using these monetised impacts as collateral in blended-finance or outcome-contracting instruments.
- Enabling private investors to finance SDG-aligned interventions with reduced risk and enhanced returns.
Everyone reading this is interested in results. For instance,
- For donors, the leverage potential has been estimated on average at around 6 times in terms of new private capital mobilised per collateral dollar, depending on the thematic area. Such results reduce grant dependency and improve transparent accountability.
- For governments, this opportunity provides access to new financing sources supporting SDG-aligned public services.
- For private investors, a modernised financial market can reduce perceived risk, offer clearer impact pathways, and launches new return-generating possibilities in underserved markets.
- For communities, as the ultimate beneficiaries of SDG investments, these concepts and principles both expand access to essential services as well as improve resilience and wellbeing.
How it works in practice
Here are three key steps involved in discussing with your colleagues:
1. Establish a Valuation Methodology Framework
- Develop standardised ‘shadow pricing’ for social, environmental and resilience outcomes.
- Use existing tools (Social Cost of Carbon, QALY valuations, natural capital valuation, etc.).
- Create a Valuation Bank with a set of verified unit values.
- Don’t start it unless you have enough resources to keep it properly updated.
2. Register and Verify Impacts
Set up a digital Impact Valuation Registry that records:
- Baselines
- Methodologies used
- Verified outcomes
- Associated monetary valuations
This acts as a ‘ledger’ of qualitative impact that donors can back, and investors can trust.
3. Structure Financing Instruments
Practical options to pilot include:
- Outcome-Based Bonds: Investors pay upfront; donors pay returns based on verified impacts.
- Qualitative-Impact Collateralised Loans: Impacts serve as a partial risk-mitigation layer.
- Impact-Linked Credit Guarantees: Donor guarantees linked to qualitative value creation.
- Climate/Nature Impact Certificates: Tradable proof of social/environmental performance.
Concluding nutshell
To sum up this storyline for the development community, it can be shown that leveraging qualitative social and environmental impacts as collateral can transform development finance, enabling scalable blended-finance solutions, de-risking private investment, and expanding high-impact interventions across vulnerable regions to accelerate SDG progress.
Further-Reading List (2025 sources)
- OECD DAC Blended Finance Guidance 2025 – Offers up-to-date best-practice guidance on how blended finance should be structured, including impact measurement, additionality, risk mitigation and transparency requirements when mobilising private capital for development.
- UNSW Centre for Social Impact & Impact Investing Australia — ‘Benchmarking Impact: Australian Impact Investor Insights, Activity and Performance Report 2025‘ – Provides empirical data showing recent growth and performance of the impact-investment market: types of products, investor behaviour, financial vs impact returns — helpful to understand real-world investor sentiment and market scale.
- International Capital Market Association (ICMA) — ‘Harmonised Framework for Impact Reporting for Social Bonds’ (2025 edition) – Gives a concrete, globally-recognised framework (metrics, reporting templates) for reporting social and environmental impact — a foundational tool to anchor any ‘impact-as-collateral’ mechanism.
- Franklin Templeton — ‘Impact Report 2025‘ – A real-world ESG / sustainable-investment fund’s annual report: demonstrates how private capital managers are tracking and reporting both social/environmental outcomes (e.g. emissions avoided, jobs created, people served) alongside financial returns. Useful for seeing what ‘impact + return’ looks like in practice.
- SDG Impact Finance Initiative (SIFI) — Insights & 2025 Roundtable Reports – Offers up-to-date analysis and expert discussion on the structural challenges and innovation opportunities for blended finance and impact investing — especially around transparency, liquidity, risk perception, and scaling impact funds. This is directly relevant to designing a system where qualitative impacts become investable.
Why are these useful
- Recent & timely (2025): They reflect the most current thinking, developments, and data, which is essential if you plan to build a ‘valuation-as-collateral’ system now.
- Practical + academic mix: From high-level guidance (OECD, ICMA) to real-world investor practice (Franklin Templeton, Australian market data) – they cover both theory and practice.
- Frameworks & standards: The ICMA and OECD documents give you template tools and guidance which you could build on or reference directly for project design, measurement, and reporting.
- Market evidence: The Australian report and the Franklin Templeton report show that impact investing is scaling and delivering, which helps support the argument that private capital can be mobilised when risks/returns are clarified.
- Policy & systemic context: The SIFI resource highlights the structural barriers and enabling reforms needed for large-scale mobilisation – helping you situate any ‘qualitative-collateral’ idea within the broader global finance ecosystem.
