Private investments, public funding and one goal Mika Pyykkö, Head of Focus Area Impact Investing

Hybrid Finance in Practice EVPA Roundtable 13 October 2016

2 Sitra • 13.10.2016 •

1. A gift from Parliament to the 50-year-old Finland

2. An independent foresight agency: futurologist,

researcher, visionary, developer, experimentalist, partner, trainer, networker

3. Funded by returns on endowment capital and

capital investments

4. Vision of Finland as a successful pioneer in

sustainable well-being

5. Vision includes three themes,

6 focus areas and dozens of projects + 1 Building our future together

5 + 1 key facts about Sitra

Photograph: Erkki Laitila, HS/Lehtikuva 1967

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• From May 2014 till June 2017

• Focus on well-being promotion

• Impact goals

1. Active impact investing ecosystem

2. Impact investing model (financing instruments etc) in use in Finland

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Sitra’s Impact Investing Focus Area

4

Costs which can be prevented – examples from Finland

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Cost EUR per year

Child in custody care 100 000

Social marginalized youth 20 000

Elderly in 24/7 care 40 000

Alcohol abuse 1 billion

Physical inactivity 1 - 2 billion

Sick leaves 3 - 4 billion

Smoking 1,5 billion

Type 2 diabetes 1 billion

Loneliness etc. …

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• Can be used, when

• the buyer (public sector) wants to purchase outcome/impact = payment by results

• investments have to be done very up-front compared to expected social impact and financial return = promotion and prevention

• there is a very large or narrow population group

• there are political issues or practical risks

• Strong future orientation with focus on preventive measures

• Functional and financial modeling and impact measurement

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SIB

I SIB in Nordic Countries: Occupational Well-Being

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Objective

• Provide municipal/state employers with a service package that enables them to promote occupational wellbeing and thereby e.g. reduce sick leaves in their own organisations

• Envisaged duration of contract per organisation 3 years

Parties to the Agreement

• Municipal/state employer

• Epiqus Occupational Well-Being I Fund (Epiqus, social enterprise managing the fund/project)

Service funding and

pricing

• Service will be produced on the basis of SIB funding

• The customer organisation will be automatically liable only for its own participation fee (EUR 15/person)

• As the actual outcome-based service payment, the customer organisation will pay a separately agreed proportion of the cost-savings generated by the reduction in sick leave and any other measurable positive developments

Service providers

• The subcontractors of The Fund (Epiqus): Aino Health Management Oy, Headsted Oy, Tietotaito Group Oy and Trainers’ House Oyj

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Epiqus Occupational Well-Being I - Structure

INVESTORS

Capital

SIB (THE FUND)

Public Sector Employees

Reduction in the Number of Sick Leave Days

CLIENTS (PUBLIC SECTOR

EMPLOYERS)

EUR 175 per Reduced Sick-

leave Day

Manages

Procurement of Services

Delivery of Services

Capital + Returns

INDEPENDENT AUDITOR

Verify

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SIB II: Integration and fast employment of immigrants

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• Speed up employment of immigrants, pilot new models of education and employment and combine education and work in a flexible way

Purchacer • The Ministry of Economic Affairs and Employment

Status

• Program/Fund Manager has been chosen (started officially June 1) and is especially in charge of

• Planning and managing the project

• Building up the financial instrument = fund (limited partnership)

• Fund raising and managing the fund

• Organising according to the impact goals of the project education and employment activities of immigrants in co-operation with different service providers

• Follow up, interim reporting and the final reporting

Objective

MODULE 1 30 days intensive period

Career coaching

Language training 1

DIVISION TO SECTORS

Modules 2 - 3 sector specific

Logistics

HoReCa

Cleaning

Real estate

maintenance

Environmental services

Management

IT

Entrepreneurship

Etc.

MODULE 2

20 to 50 days sector-specific

training

Priority: Deep sector-

specific skills

and knowhow

Language training 2

Work life skills

Work training

MODULE 3

Measures that commit to

work relation;

(at least 85 days

during 3 years)

Committing

Language training 3

Deep sector-specific

skills and knowhow

EXPRESS LINE (15%): To work from module 1

TRAINING LINE (10%): Training at work, education, etc.

ENTREPRENEURAL LINE (10%)

One can reverse to previous stages at any point, if necessary.

SPECIALIST LINE (5%): Tailored support for managerial tasks

Deep screening of

knowhow/skills

Due Diligence (2 to 5 days) 4 900

3 680 / 5 070

490 / 720

490 / 710

250 / 540

Employments / man-years

4 000 / 7 000

Epiqus / Intervention process

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• Occupational Well-Being project (public sector organisations)

-> Epiqus as a Fund / Program Manager; up and running since 2015

• Integration and fast employment of immigrants project (The Ministry of Economic…)

-> Epiqus has started as a Fund / Program Manager in June

• Promotion of Children’s, families’ and youth’s well-being (municipalities)

-> FIM (in co-operation with Central Union for Child Welfare) has started as a Fund / Program Manager in October

• Support of the elderly’s independence (municipalities)

• Advancing employment (government and/or municipalities)

-> Procurement process for choosing the Fund / Program Manager (one organization or joint venture) is to start

• All possible investors have shown (quite) high interest

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Estimation of SIB portfolio in 2016 – altogether 5 different funds in Finland

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13 Sitra • 13.10.2016 •

Sitra Impact Accelerator for SMSes

Design phase

3 months acceleration program for 10 impact actors (3 x 3 months accelerators during 2015–2016)

Defining the social challenges Engaging P&P stakeholders and not reinventing the wheel Activating private and angel investors Curriculum development with selected service providers

Dedicated mentors @ 3 hours per week throughout

Face to face training (6 days) – overarching themes: 1. Impact measurement: developing

frameworks and effectively measuring / projecting impact as a result

2. Developing a sustainable business model per impact actor / service case

3. Developing the investment-readiness of each impact actors and connecting to potential investor(s)

Demo day: pitching to investors Publishing case study about each impact actor Sharing learning & training materials publicly

Kick-off day: importance of community development & peer learning opportunities Individual, tailored learning plans with concrete goals Online platform for virtual coaching

• Mastering social and emotional skills

• www.mightifier.com Founder,

CEO Mervi

Pänkäläinen

Mightifier

Mightifier impact

IMPROVED

SOCIAL SKILLS

Long term

wellbeing €

Decreasing social

exclusion €

Improved working

readiness €

Increased efficiency

of school work €

INPUT OUTPUT OUTCOME IMPACT IMPACT VALUE

Regular use

of Mightifier

Better

self-

esteem

Better

learning

results

Less

bullying

Efficient

use

of

teacher’s

time

Future belief

Increased

social capital

17 Sitra • 13.10.2016 •

Impact Education Program for NGOs – piloting

Design phase

x months acceleration program for x impact actors

Defining the social challenges Engaging public stakeholders and not reinventing the wheel Activating co-operation

Dedicated mentors

Face to face training (x days) – overarching themes: 1. Impact measurement: developing

frameworks and effectively measuring / projecting impact as a result

2. Developing a sustainable working model per impact actor / service case

3. Developing the funding readiness of each impact actors and connection to funders

Demo day: presentations to other NGOs Publishing case study about each impact actor Sharing learning & training materials publicly

Kick-off day: importance of community development & peer learning opportunities Individual, tailored learning plans with concrete goals Online platform for virtual coaching

• Building Social Impact Bond pilots

- Payment by results, promotion and prevention in terms of well-being -> economic and operational modelling and other support to Fund / Program Managers

• Sitra Impact Accelerator III

- Sustainable business model, economic and operational modelling, measurement, investment readiness

- Impact Education Program for NGOs

• Interaction with possible investors, public sector representatives etc

- Guidelines for Impact Investor

- Guidelines of innovative procurement, payment by results and SIB model -> payment by results training for municipalities and government offices

• Fund of fund survey

• Preparation of national coordinative support unit

• International co-operation

• Communication

Sitra • 13.10.2016 •

Summary of Sitra’s Impact Investing Focus Area - Autumn 2016

18

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