Environmental impact bonds as a transformative policy innovation: Frames and frictions in the construction process of the Nutrient-EIB.

• The EIB is a policy innovation that seeks to enable the role of finance as a mediator of sustainability transitions. • Transformative outcomes can be used to analyse the interpretation of novel policy innovations such as EIBs. • The EIB was interpreted in three different ways, according to visioned outcomes. • The dimensions of knowledge base and scale capture the differences of visioned outcomes. • The transformative potential of the EIB lies in bringing together stakeholders in separate policy spheres. Impact bonds have emerged as a policy innovation with the potential to change public policies towards being more outcome-based and pre-emptive – and more effective in answering sustainability challenges. This financial instrument has been used for social problems and only recently for environmental issues. One example is the Nutrient-EIB (environmental impact bond) which is in preparation to be implemented in Southwest Finland. We study involved stakeholders' framings of the Nutrient-EIB's potential for solving problems of eutrophication of the Baltic Sea and the lock-in situation of recycled fertiliser development. Based on stakeholder interviews, we identify three interpretative frames: applying the impact investing logic, challenging agri-environmental policy, and extending experimental policy-making. We recognise frictions between the frames regarding the required knowledge base and scale. We discuss how visions of transformative outcomes may challenge each other and what kinds of barriers transformative policy innovations may face. [ABSTRACT FROM AUTHOR]