How is social impact bonds model used by public sectors in impact investing in Finland?

Abstract

This is a paper to look into how Social Impact Bonds model is used by public sectors in impact investing in Finland. Finland has made a number of impact investments to promote the nation’s well-being in different themes in the last decade.

The paper started with the discussion of the modified definition of impact investing concept in Finland and its development. Combined with the multiple case studies including the Finnish Innovation Fund (Sitra), other public organizations, different municipalities in various impact investing projects using Social Impact Bonds model, I emphasized on the use of Social Impact Bonds model in the impact investing process as a key factor to ensure the realization of the expected outcomes.

Based on the Finnish characterized impact investing method of modelling, the research has concluded that Social Impact Bonds (SIBs) model is believed to be effective in carrying out impact investing for positive outcomes in Finland, which not only prioritizes the significance of impact investments but also highlights the importance of Social Impact Bonds model in the process.

Furthermore, the Social Impact Bonds model in impact investing has attracted private funds into public projects, which helped ease the public financial budget limitation for impact investing. In the meanwhile, “performance-based contracting” has enabled public sectors to pay only for the outcomes achieved, which is both cost-effective to the public sectors and on the other hand, encouraging the investors to perform their best. Though some of the projects are still on-going on a long-term basis and significant outcomes are yet to be seen, Finnish public sectors are holding an affirmative attitude to this Social Impact Bonds model in impact investment practices in Finland.