National Impact Investing Advisory Board: Finland needs an outcomes fund

In its statement, the National Impact Investing Advisory Board (NAB) proposes that an outcomes fund be established under the Finnish government. The fund would be used for paying results-based bonuses for projects that produce beneficial social impacts as a result of co-operation between the private and public sectors. A prerequisite for receiving the bonus would be that the significant, predetermined objectives are achieved.

Chairman of the National Advisory Board, Henri Grundstén, explains why an outcomes fund is needed:

“The fund is an instrument that helps central government renew its public procurement processes and enables the piloting of new funding models. It is based on the growing interest in impact investment.

Central government and local authorities purchase services and products worth approximately 35 billion euros each year. When the focus of procurements shifts from outputs to outcomes and impact, we can ensure that tax revenue is used as efficiently as possible.”

What is impact investing?

“Impact investing aims at both financial return and measurable, beneficial societal and/or environmental impacts. From the viewpoint of investors, impact investments are an advanced form of responsible investing.”

What makes the outcomes fund timely right now?

“Several ministries and local authorities are interested in target-oriented joint projects between the public and private sectors. Social Impact Bonds (SIBs) are a new way of organising such projects. With the SIB model, funds used for contributing to well-being are raised from private investors. While the investors bear the financial risks, the state and the people receive the greatest benefit.

The projects are designed in such a way that if the predetermined objectives are reached, the public sector makes savings or receives additional economic value. From that, it pays the result bonus, with which the invested capital is returned with reasonable profit. If the objectives are not reached, the performance bonus is not paid.

The challenge of these projects is that the beneficial impacts are typically felt across several administrative sectors, which makes it difficult to identify the party responsible for paying the bonus. This can be overcome if the results are compensated for out of a common outcomes fund for all government sectors.”

Are there any practical examples of impact-based procurement?

“The SIB model is already being piloted in two projects in Finland, and several new projects are under way. The projects include facilitating the employment of immigrants and the long-term unemployed, and preventing environmental problems and the exclusion of young people.”

What does the National Advisory Board do?

“The NAB directs the national development of the impact investing ecosystem and market. In addition, it acts as Finland’s link to the Global Steering Group for Impact Investment (GSG), which Finland joined in the summer of 2017.”

The members of the National Advisory Board are Jenni Airaksinen (Director of research and development, Association of Finnish Local and Regional Authorities), Teri Heilala (CEO, FIM), Olli-Pekka Heinonen (Director General, Finnish National Agency for Education), Anni Huhtala (Director General, VATT Institute for Economic Research), Hille Hyytiä (Managing Director, Motiva Ltd), Terhi Kilpi (Deputy Director General, National Institute for Health and Welfare), Kimmo Lipponen (CEO, ARVO ry, Finnish Association for Social Enterprises), Juha Majanen (Deputy head of Budget Department, Ministry of Finance of Finland), Pekka Samuelsson (Investment Director, Taaleri), Jukka Vähäpesola (Head of Equities, Elo Mutual Pension Insurance Company) and Sami Tuhkanen (Vice President, Endowment Capital, Sitra). Mika Pyykkö, Project Director of Impact Investing at Sitra, acts as secretary of the NAB.

• Read the statement of the National Impact Investing Advisory Board:
  Outcomes fund to support sustainable well-being and economic growth (13/11/2018).