Achieving the ambitious sustainable development goals (SDGs) by 2030 will take an estimated $5 to $7 trillion per year, with a financing gap of $2.5 trillion in developing countries.In India alone, the outsize challenge has been translated into a financing gap of $565 billion. While the country has seen huge progress across the social sectors, enormous challenges remain. For example, only slightly over half of all children enrolled in standard 5 can read at least a standard 2 level text, while just 21% of mothers receive full antenatal care.

Closing this gap requires action on several fronts; efficient and effective domestic resource mobilisation, outcome-focused donor efforts to ensure that money is spent well and harnessing private capital for good. In recent years, interest has grown globally amongst governments and markets to develop new investment approaches, such as impact investing or purpose-driven finance. Impact investment refers to the provision of finance to organisations with explicit expectations of financial returns as well as measurable social outcomes.

According to a recent analysis by the Global Impact Investing Network (GIIN), over 1,300 organisations manage $502 billion in impact investing assets globally. The impact investing sector in India attracted over $5.2 billion between 2010 and 2016, with over $1.1 billion invested in 2016 alone.

With the emergence of impact investing as a new asset class in India, investors are not only providing capital and support to social enterprises but also growing to understand the potential of this new form of investing. Given the risks and complexities of serving the social finance sector, several innovations have emerged – not only the way capital is structured but also how impact is delivered. There has also been a rise in public-private partnerships, largely driven by government budgetary constraints, the new public management ethos and the fact that innovation is increasingly cooperative and network-based. Financing development through extra-budgetary means and public-private partnerships offer potential solutions, such as a focus on outcomes and improved performance management for service providers.

Read the rest of Shamika Ravi and Emily Gustafsson-Wright’s article at Brookings Institution