A recently published viewpoint in Nature floated the idea of public-private Research Impact Bonds (RIBs) as a novel way to fund academic research. RIBs propose a new funding model that promises greater accountability and risk transfer. If you were to take social media as an indicator of how well RIBs have been perceived, you’d be forgiven for thinking they are the worst idea to hit academia in forever. And they aren’t without their problems, but let’s take a look at what RIBs are exactly, why they’re a bad idea, and why they’re a good idea.
What are RIBs?
A research impact bond is an innovative funding mechanism that seeks to revolutionize how academic research is financed and incentivize impactful outcomes. Inspired by social impact bonds, RIBs propose a model where financial investors, rather than traditional funders, bear the financial risk associated with research projects. The core idea behind RIBs is to align financial incentives with research outcomes by linking the repayment of investors’ upfront funding to the achievement of predefined measurable goals.
Under a RIB, researchers propose projects with specific hypotheses, plans, and outcomes that are precise and measurable. These outcomes serve as the basis for evaluating and selecting the RIBs to be awarded. Investors, supported by brokers, analyze the risks associated with the projects and decide whether to invest upfront capital. If the project successfully achieves the defined goals within the specified timeframe, investors receive a return on their investment, typically in the form of financial compensation. However, if the project falls short, the investors bear the financial loss, while the funding organization is not obligated to repay the initial investment.
The idea here is to introduce greater accountability, encourage collaboration between funders and investors, and foster impactful research outcomes. By involving private investors, RIBs offer the potential to diversify funding sources for academic research and tap into additional financial resources.
Why they’re a bad idea
Honestly, I could have just linked to one of many threads on twitter on here, and to be fair to the author Michael Hill, he does point out some of the limitations to RIBs in his piece, but to pull together all threads on this…
Lack of empirical evidence: The proposal suggests using research impact bonds as a funding mechanism for research, drawing parallels with social impact bonds (SIBs). However, it acknowledges that RIBs are untested in academia. Without empirical evidence to support their effectiveness in the research context, it is difficult to assess the feasibility and potential drawbacks of implementing RIBs.
Financialization concerns: Critics argue that the adoption of financial models, such as impact bonds, in the public sector may prioritize the interests of the financial sector over public policy goals. This raises concerns about whether the proposed RIBs would truly serve the research community’s best interests or if they would be driven by financial considerations.
Limited applicability: The proposal acknowledges that RIBs may not work for certain types of research, such as highly innovative projects or speculative science. It does not provide a clear framework for determining which research projects are suitable for RIB funding and which are not, leading to potential biases and inconsistencies in the selection process.
Challenges to academic freedom: The proposal acknowledges concerns over academic freedom, as scientists may be hesitant to commit to specific research outcomes and prefer the flexibility to explore different avenues of inquiry. While the proposal argues that preregistration practices and flexible yet reliable research methodologies can address this issue, it does not provide concrete evidence or examples to support this claim.
Lack of accountability for investors: The proposal highlights that RIBs would transfer the risk from funders to investors, allowing investors to bear the financial consequences if a project fails. However, it does not address potential issues of accountability or conflicts of interest that may arise when financial investors have a stake in research outcomes.
Unclear long-term implications: The proposal briefly mentions the possibility of various RIB-like models and their potential benefits, such as shared risk between funders and investors or the use of smart contracts. However, it does not thoroughly explore the long-term implications, risks, or challenges associated with implementing and managing such models.
Potential for commercialization: Although not explicitly mentioned in the proposal, there is a risk that the introduction of financial mechanisms like RIBs could encourage the commercialization of research, potentially shifting the focus towards projects with immediate commercial viability and neglecting fundamental research or less commercially lucrative areas.
Why they’re a good idea
Firstly, any proposal to diversify and add to the overall academic research funding pool should be welcomed. Secondly, as a proposal, it deserves a small-scale trial to see if it works. But beyond that, there are other benefits that the author argues for:
Enhanced accountability & risk transfer: Researchers are required to articulate their hypotheses, plans, and measurable goals, ensuring transparency and focused research efforts. Additionally, by transferring the financial risk from funders to investors, RIBs incentivize thorough due diligence and rigorous project evaluation. This shift in risk allocation can foster a culture of responsible and impactful research, benefiting both researchers and society at large.
Diversifying Funding Streams: Traditional research funding often relies heavily on public sources or private foundations, limiting the available resources and potentially stifling innovation in certain areas. RIBs open up a new avenue for diversifying funding streams. By attracting private investors interested in seeking profit while enacting their philanthropic values, RIBs can tap into previously untapped financial resources. This infusion of capital can lead to increased funding opportunities, which could have an unintended side-effect: if funders are spending less money on less-risky research projects, they have more money to allocate to high-risk projects.
Preregistration and Replicability: One valuable outcome of implementing RIBs is the potential to reinforce the importance of preregistration and reproducibility in scientific research. The requirement for precise methodologies and measurable outcomes encourages researchers to be more explicit and transparent about their experimental designs, reducing bias and enhancing research rigor. Moreover, the preregistration culture, coupled with the flexibility to explore alternative paths within the predefined methodology, can strike a balance between academic freedom and the commitment to measurable impact. RIBs could contribute to a culture of reproducibility and reliable research practices, strengthening the credibility of scientific findings.
In a nutshell
Hopefully you can make up your own mind given the pros and cons of RIBs as outlined above. My personal opinion is that this may be a useful tool in some applied research environment, but the risk-averse nature of project selection is something traditional funders are frequently criticised for (and trying to move away from). A very similar approach to funding projects is seen in many DeSci projects – many investors funding research which is likely to work and likely to deliver financial returns in form of IP-NFTs.
If you are interested in blue-sky, long-shot, or cutting-edge research, I suspect RIBs will not be for you – unless traditional funders use RIBs as an opportunity to pivot away from funding applied, incremental research, and use those funds to open up funding to blue-skies research. Time will tell.
For expert-guided applications to traditional funding bodies, check out GrantDesk.
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