Ministry of Economic Affairs and Employment takes over impact investing development work from Sitra
The Ministry of Economic Affairs and Employment (MEAE) will establish a Centre of Expertise for Impact Investing that will continue the work of Sitra on the development in Finland of effective procurements and a social impact bond (SIB) model.
The task of the new Centre of Expertise will be to improve the procurement skills relating to public-sector performance, develop the impact investing market, model the societal benefits of the projects and make these new, alternative financing models more widely known. The Centre of Expertise will advise the different stakeholders – the public sector, project managers and service providers – on the preparatory work for the contracts.
Sitra’s work on impact investing, which began in 2014, will finish as planned at the end of 2019. The goal of the Ministry of Economic Affairs and Employment is for the Centre of Expertise to begin operations at the start of 2020.
“The Centre of Expertise for Impact Investing continues the good work done for more than five years at the Finnish Innovation Fund Sitra. Impact investing is a good example of how we can contribute to finding new solutions for promoting employment and creating new financing models across the whole public sector,” says the Minister of Employment, Timo Harakka in MEAE’s press release.
Impact investing is a means of channelling private equity to projects aimed at achieving positive, measurable social benefit. In the public sector, impact investments enable goal-orientated, effective services and extra resources without taking economic risks.
MEAE to take ownership of two SIB projects
“Impact investing supports state and municipal reform, eases the financial pressures faced and shifts the focus of activities to proactive operations and the purchase of results rather than performance,” says the Sitra President Mikko Kosonen. “It is a truly excellent result that the work initiated by Sitra will be continued by a government body that also has practical experience of impact investing. The Ministry of Economic Affairs and Employment has been a true pioneer in the utilisation of SIB projects.”
The MEAE is participating in two SIB projects. The Koto-SIB initiated in 2017 promotes the rapid employment and integration of immigrants in Finland. By August 2019, nearly 2,000 immigrants had participated in the Koto-SIB programme, and around 750 of these had found employment through the support received. The Ministry of Economic Affairs and Employment estimates that the project has generated savings for the government of as much as 20 million euros.
In addition, this autumn saw the introduction of the Työ-SIB, which will focus on finding employment for the long-term unemployed. The MEAE hopes that around 3,000 job applicants will join this programme over the next five years.
SIB – an impact investing model
Sitra began its impact investing development work in Finland in summer 2014. The task was to construct an impact investing ecosystem in Finland and promote SIB projects as the first practical pilots.
The social impact bond is one form of impact investing. With a SIB, investors fund services that promote well-being and assume the risks associated with the provision of these services. The public sector only pays for results that are in line with the set targets.
Through Sitra’s support, a total of six SIB projects are being run or taking shape in Finland. In addition to integration and employment, the themes of these projects relate to well-being at work, the well-being of children and young people, the independence of elderly people and the prevention of type 2 diabetes. Work is also being carried out to develop two environment-related projects. You can read more about SIB projects on the Sitra website.
In spring 2019, Sitra carried out a survey of public-sector opinion on impact investing. Nearly 70% of respondents considered it either important or very important that there is a body in Finland that continues to support the implementation of SIB projects once the Sitra project comes to an end. The Impact Investing National Steering Group has also stated its support for the establishment of the Centre of Expertise for Impact Investing.