Investment Plan for Europe: First social impact bond scheme in Europe supports integration in Finland

The European Investment Fund (EIF), Epiqus, a fund manager dedicated to investments with a social impact, and the Finnish Ministry of Economic Affairs and Employment have announced a social impact bond scheme, the first of its kind in Europe.

EIF will make an investment of EUR 10 million into a social impact bond scheme that will support the integration of between 2,500 and 3,700 migrants and refugees into the Finnish labour market through the provision of training and job-matching assistance.

This agreement was made possible by the support of the European Fund for Strategic Investments (EFSI). The EFSI is the central pillar of the European Commission's Investment Plan for Europe, the so-called "Juncker Plan".

Social impact bond schemes facilitate risk-sharing between private and public investors to help local, regional and national governments improve efficiency in spending and increase the value for money in social service delivery.

EIF Secretary General, Maria Leander, commented: “Today we are signing the first EFSI payment-by-results scheme in Europe with Epiqus’ KOTO SIB in Finland. I am delighted that EIF, with the support of EFSI, can support this innovative scheme allowing Epiqus to provide finance for social sector organisations and social enterprises, and to catalyse private capital, all to help the social inclusion of refugees and migrants in the country. In addition, this scheme, through a powerful alignment mechanism, encourages the development of cost-effective solutions by focusing on the achievement of positive deliverables. As a result, this EFSI-backed EIF investment will contribute to overall social cohesion in Finland”.

European Commission Vice-President Jyrki Katainen, responsible for Jobs, Growth, Investment and Competitiveness, said: "The European Fund for Strategic Investments was devised as an innovative instrument to channel investment to address pressing challenges across Europe. Today's agreement is a further example of the great and growing role that the EFSI is playing in supporting important social initiatives, in this case the integration of migrants to labour markets. I wish everyone who is set to benefit from the education and training opportunities to be offered under this scheme, the first social impact bond scheme in Europe, every success in the future. We will monitor the success of this initiative closely and hope it can serve as an example for others to follow".

Permanent Secretary of the Finnish Ministry of Economic Affairs and Employment, Jari Gustafsson, said: "At the moment Europe is facing new challenges. That is why we have to be creative in searching innovative solutions to support immigrants on their way to the labour market. With SIB trial we can offer them work and education as well as help them to integrate into the Finnish society. Moreover, immigrants bring new ideas and know-how to companies”.   

Commenting on the operation, Epiqus Managing Partner, Jussi Savukoski, said: "We are honoured by the trust placed in us by the Finnish Ministry of Economic Affairs and Employment, as well as the European Investment Fund and other investors, to design, implement and manage Europe’s largest Social Impact Bond. The scope and size of this SIB signal that results-based procurement financed by impact investment is now a viable de-risking and financing tool for the public sector to use when tackling important social challenges”.

The Junker Plan is already expected to mobilise over EUR 4.4 billion in investments in Finland and EUR 194 billion across Europe.

About Payment by Results

Since 2010, Payment by Results investment schemes have been operational in Finland to fund positive social outcomes for vulnerable groups. They work by building partnerships between social service providers (social enterprises and social sector organisations), commissioners (usually government agencies at local, regional or national level, or private sector foundations), investors and intermediaries. By focusing on outcomes, the interests of all stakeholders involved are aligned and thereby the various resources, experience and know-how are combined, enabling targeted social service delivery. Payment by Results schemes encourage cross-departmental funding within public entities and improve the rigour in government spending.

The Payment by Results scheme begins with a ‘Commissioner’, in the current operation the Finnish Ministry of Economic Affairs and Employment, that wishes to achieve certain positive social outcomes, i.e. the integration and employment of immigrants and refugees. The Commissioner has selected an intermediary, Epiqus Oy (the Fund Manager) in the current structure, who enters into a payment by results agreement with the Commissioner to deliver, via selected social enterprises and social sector organisations, the desired positive social outcomes by identifying, teaching, mentoring and guiding migrants and refugees to social inclusion in Finland.

Investors in the structure prefund the social intervention of the social sector organisations and are remunerated by the Commissioner on the basis of the social impact results obtained through the social sector organisations' interventions.

About EIF

The European Investment Fund (EIF) is part of the European Investment Bank Group. Its central mission is to support Europe's micro, small and medium-sized businesses (SMEs) by helping them access finance. EIF designs and develops venture and growth capital, guarantees and microfinance instruments which specifically target this market segment. In this role, EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth, employment and financial inclusion. More information on EIF's work under EFSI is available here.

About Epiqus Ltd.

Epiqus Ltd. is a specialised fund manager dedicated to impact investment. Epiqus' vision is that hands-on investment management expertise and entrepreneurial talent can be harnessed to address social and environmental challenges. Epiqus is EuSEF (European Social Entrepreneurship Funds) -registered and supervised by the Financial Supervisory Authority of Finland. Epiqus’ currently active funds focus on public sector occupational wellness, rapid employment of immigrants, and prevention of social exclusion among children and the young.

About the Investment Plan for Europe

The Investment Plan for Europe, the so-called Juncker Plan, is one of the European Commission's top priorities. It focuses on boosting investments to create jobs and growth by making smarter use of new and existing financial resources, removing obstacles to investment and providing visibility and technical assistance to investment projects.

The European Fund for Strategic Investments (EFSI) is the central pillar of the Juncker Plan. It provides a first loss guarantee, allowing the EIB to invest in more, often riskier, projects. The EFSI is already showing concrete results. The projects and agreements approved for financing under the EFSI so far are expected to mobilise more than EUR 194 billion in investments and support over 416,000 SMEs across all 28 Member States.

In September 2016, President Juncker proposed to extend the EFSI by increasing its firepower and duration as well as reinforcing its strengths.

Press contacts:

EIF:
David Yormesor
Tel.: +352 24 85 81 346
E-Mail: d.yormesor@eif.org

Epiqus Ltd. : 
Jussi Nykaenen
Tel.: 358 (0)40 840 8001
E-Mail: jussi.nykanen@epiqus.com

European Commission:
Enda McNamara
Tel.: + 32 (0)2 29 64 976
E-Mail: enda.mcnamara@ec.europa.eu

Ministry of Economic Affairs and Employment:
Migration Director Sonja Hämäläinen
Tel. +358 29 504 711
E-Mail: sonja.hamalainen@tem.fi