Impact investing facilitates the systematic creation of well-being – even in economically difficult times. The idea is to steer private equity towards projects aimed at benefiting society as a whole. Representatives of investors, the public sector, organisations and research institutes were invited to join the national steering group set up in support of the new investment and funding model. The steering group is fostering the model’s introduction and development in Finland.
Impact investing is aimed at achieving a positive and measurable social impact as well as a financial return. It is an ideal form of investment for activities that boost well-being and prevent problems. The first projects were launched in Finland this autumn, and new ones are being planned in several municipalities.
“New methods are needed to stabilise the public finances and finance well-being,” says Pentti Pikkarainen, Director General of the Financial Markets Department at the Ministry of Finance and chair of the national steering group on impact investing. “The funding of public services in Finland is currently focused not on foresight, but more on remedying the prevailing problems.”
“Impact investing will help to expand the public sector’s funding base and slow the growth of the national debt. The model will also provide guidance to the state and municipalities in results-based purchasing,” Pikkarainen points out.
The steering group members were announced at the Impact Investing 2.0 seminar at the Korjaamo Culture Factory in Helsinki in December. Pentti Pikkarainen, Director General of the Financial Markets Department at the Ministry of Finance, was invited to chair the group. Its members are Tom Liljeström, Managing Director of LocalTapiola Asset Management (vice chair); Teri Heilala, CEO, FIM Group; Antti Savilaakso, Chairman of Finland’s Sustainable Investment Forum; Ulla Nord, Managing Director, Me-säätiö; Risto E.J. Penttilä, CEO, Finland Chamber of Commerce; Jari Vaine, Senior Adviser at the Association of Finnish Local and Regional Authorities (Kuntaliitto); Vertti Kiukas, Secretary General, SOSTE Finnish Society for Social and Health; Sirpa Kekkonen, Head of Government Strategy Secretariat at the Prime Minister’s Office; and Anni Huhtala, Director General of VATT Institute for Economic Research. Sitra is represented by Timo Lindholm, Director, and Mika Pyykkö, who leads Sitra’s Impact Investing focus area, is secretary to the steering group.
Deputy members are Veli-Mikko Niemi, Director-General, Ministry of Social Affairs and Health; Esko Torsti, Director, Ilmarinen Mutual Pension Insurance Company; Heikki Nystedt, Credit Portfolio Manager/Head of Fixed Income, Partner at Taaleritehdas Group; Jaakko Salminen, Chairman, Finnish Business Angels’ Network; Ilona Herlin, Kone Foundation, Vice Chairman of the Board; Kimmo Lipponen, Managing Director of Arvo-Liitto; Teemu Japisson, Secretary General of the Finnish Sport Confederation Valo; Taina Kulmala, Counsellor, Prime Minister’s Office; and Otto Toivanen, Professor, Aalto University.
Mission and return all in one
One of the available impact investing instruments is the Social Impact Bond (SIB), which is a performance-based funding contract. Based on the SIB, institutional and private investors finance activities that promote well-being, while bearing the financial risks. The public sector pays only for measurable outcomes.
“For investors, SIB provides the opportunity to have an impact on the societal issues closest to their hearts. SIB is an innovative combination of return, risk and social impact, an investment target that particularly appeals to institutions, foundations, families and private investors seeking a higher motive than mere profit in their asset management activities,” says Mr Pikkarainen.
An increasing number of investors want a sense of mission as well as a financial return. No wonder then that the largest global asset management companies – such as BlackRock, Goldman Sachs, JP Morgan and Merrill Lynch – are active in the international impact investing markets, which are worth an estimated 55 billion euros in invested capital.
“The national steering group will provide Finland with a doorway to joining the G8 of leading industrialised countries in its international development of impact investing,” says Mika Pyykkö of Sitra. On the United Kingdom’s initiative, in 2013 the G8 launched the Impact Investing Taskforce to prepare reports and issue recommendations on the promotion of impact investing.
Two SIB projects published
For more than a year, Sitra has been building an impact investing ecosystem in Finland, preparing the first pilot projects in co-operation with various stakeholders. Much has happened in that time: the first ever Social Impact Bond (SIB) has been launched in Finland and the Nordic countries, and several new ones are being planned. The Impact Accelerator, which empowers businesses and organisations in the well-being sector, has also been launched.
Finland’s first SIB aims to improve occupational well-being in the public sector. In the first phase, it will cover 1,300 public sector employees in Lounais-Suomen Maistraatti, Savon koulutuskuntayhtymä and Aleksia-liikelaitos (Nurmijärven kunta). Sitra, Me-säätiö, and a private financial investor will be the first anchor investors.
The Ministry of Employment and the Economy and Sitra recently announced that they are preparing a SIB project to promote the employment and work-based integration of immigrants. Other SIBs planned around Finland are focused on preventing the social exclusion of children and their being taken into care, and easing the employment of people in a difficult market position.
The Finnish Innovation Fund Sitra is a future-oriented organisation that promotes Finland’s competitiveness and the well-being of the Finnish people. Under the New working life and sustainable economy theme, Sitra is promoting the reform of working life and the sustainable economy through innovative practices and financing models. www.sitra.fi