Social investments – from niche to a billion
Social investments and saving products are growing in France by double digits thanks to the increased demand. All employees are offered social investment options for their pension savings. How did that market develop?
On May 9 Impact Invest Scandinavia organised a seminar for its members, hosted by SPP at their headoffice, with the purpose to broaden the discussion in Sweden on social financing. As inspiration we had invited two international speakers, Cyrille Langendorff from Crédit Cooperatif in France and Mika Pyykkö from Sitra in Finland to showcase a couple of very different approaches to using financial instruments and building impact invest eco-systems.
In France legislators and policy makers have paved the way for asset manager, including the big banks and pension funds, to develop new fund products through which the general public can finance social enterprises focusing on e.g. job creation and social housing. Cyrille Langendorff showed data that demonstrated that the bank’s social investment strategy has led to 69 social businesses benefiting, so far, and that the bank has made money along the way. The French social investment market is now worth €7bn.
The Finish semi-governmental “Think-and-Do”-tank, Sitra shows that one dedicated actor can help define the sector and bridge the gap between private and public interests and vocabulary in a country where the social sector is traditionally fully tax funded. Their first Social Impact Bond (SIB) has been directed to an area much debated also in Sweden – how to reduce the length of sick leave.
“Our early data shows that by funding new organisations which tried new interventions we have already achieved the target we needed to make this financially viable for external investors. It also benefits the tax payers, since these organisations get paid on performance which reduces inefficiencies”, said Mikka Pykköö.
Both guest speakers are members of their respective National Advisory Board in Impact Investment and testified to the value created by these boards. These values range from the true mapping and visibility of the national eco-system, the establishment of a common language for the sector to the true access to the ideas and innovations of other countries, through the Global Social Impact Investment Steering Group.
We at Impact Invest Scandinavia would like to broaden the discussion on private financing for social challenges beyond its present focus on Social Impact Contracts, as we would like to rename SIBs. With potential actors ranging from NGOs and social entrepreneurs with innovative ideas requiring piloting to municipalities and regions/counties wishing to make investments into proven technologies or ideas a variety of financing instruments will be required. In order for some of these to become widely usable several actions need to be taken:
1) Regulation governing the asset classes into which pension funds and other major fund managers can invest need to be opened up to also include (minor) instruments adapted to the social economy’s needs. The French “90:10 funds” are a clear inspiration in this regard.
2) The Green Bond Framework, outlining the processes, roles and responsibilities of different actors involved in the issuing of green bonds has been key to the rapid growth of this instrument. A similar framework for Social Bonds (NB: not Social Impact Contracts) would need to be developed.
3) Sweden needs a National Advisory Board in Impact Investment for the cohesion of the impact investment eco-system as well as the establishment of a common understanding and language among interested participants.
While private institutions and organisations, including Impact Invest Scandinavia, can address the second point the two other need Government action and leadership. Discussions on these points have been initiated, and will be followed up over the next few months.
Contact us if you are interested to find out about opportunities to participate. firstname.lastname@example.org