Mika Pyykkö, Sitra Do good, do business presentation

1. Sitra and Impact Investing, especially SOC and
SIBs in Finland
Mika Pyykkö, Project Director
Impact Investing
Do Good, Do Business
August 28, 2019

2. A gift to Finland
The Finnish Parliament established
Sitra as a gift to celebrate the 50th
anniversary of Finland's
independence.
The public future-oriented
organisation was tasked with
developing the successful
Finland of tomorrow.
The year was 1967.
Erkki Laitila, HS/Lehtikuva 1967

3. + the most
important of all
Building our future together.
Five important things
1. A gift from Parliament to the 50-
year-old Finland. Still under the
direct control of the Finnish
Parliament.
2. An independent future house: a
futurologist, visionary, developer,
experimentalist, financier, partner,
trainer, and networker.
3. The aim is the successful Finland of
tomorrow, the vision is the next era
of well-being – a fair and
sustainable future.
4. Funded by returns on endowment
capital and capital investments.
5. The vision is implemented by three
themes and hundreds of projects.

5. The
circular
economy
FORESIGHT
SOCIETAL TRAINING
A CARBON-NEUTRAL
CIRCULAR ECONOMY
CAPACITY FOR
RENEWAL
NEW WORKING LIFE
AND A SUSTAINABLE
ECONOMY
WCEF
Leadership
training for
sustainable
economic
policy
Climate
solutions
Time-
Out –
dialogue
method Vision
Mega-
trends
Human-
driven data
economy
Lifelong
learning
Impact
investing
A roundtable
for working
life
organisations
Human-
driven health
Digital health
HUB
Public-sector
management
Sitra
forums
Reforming
democracy
Sustainable
everyday
life
Weak
signals
S I T R A’ S F U T U R E - O R I E N T E D
WO R K I N 2 0 1 9

6. Founded
in1967
Investments
by the Finnish State
1967: 16.8 M€
1972: 16.8 M€
1981: 16.8 M€
1992: 16.8 M€
84.1 M€
Market value
million euros
in 31 Dec. 2017
840
of endowment capital
Sitra by the figures
Annual budget
million euros
30-40
in 31 Dec. 2017
159
employees
Average return
7.7%in 2017
89 % higher education
11 % other education
66 % women
34 % men
Working for
the future
over
50years

8. Impact investing means all kind of allocation
Picture from: Investing for Impact:
Case Studies across Asset
Classes (2010) Bridges Ventures
and the Parthenon Group
Impact ventures
(equity...)
Social Impact Bond
Social enterprises
(loan...)

9. Principles of Impact Investing
1. Impact is targeted intentionally
2. Impact includes both hand print and foot print
3. Impact has been modeled
4. Impact is measured
5. Materiality principle is applied in modeling and measuring
6. Targeted impact must be net positive
Additionally (case by case):
- Impact is evaluated by independent party
- Return on investment may be linked to impact (new instruments)
- Fund manager’s financial profits may be linked to impact (so called impact hurdle)

10. Sitra and impact investing
Impact investing focus area 2014-2017
Impact investing assistance 2018-2019
- Especially SIB model, where appropriate also other financing instruments are in as large
use as possible in terms of impact investing
and as a result during next 5-10 years
- Increased well-being (including environmental perspective) and decreased costs in
terms of preventable harms, problems and ill-health

12. Why Social Outcomes Contracting (SOC) - Social
Impact Bond (SIB)?
- Payment by outcomes = tax payers’ money in successful use by support of private
capital
- Upfront investments to well-being and health = proactive and preventive
approach
- Foresight = sustainable well-being
- Data driven management = facts, not personal (political) opinion and/or hype
- Person/ population group in focus = segmentation, structures and processes for
outcome/impact
- Service design = co-operation/coalitions

13. Costs which can be prevented – examples from
Finland
Cost EUR per year
Child in custody care 130 000 / person / municipality
Social marginalized youth 20 000
Elderly in 24/7 care 40 000
Alcohol abuse 1 billion / society
Physical inactivity 1 - 2 billion
Sick leaves 3 - 4 billion
Smoking 1,5 billion
Diabetes (inc. Type 2 diabetes) 1 - 2 billion
Loneliness etc. …

14. Societal benefits (potential)
– Phenomenon and root causes
– Social aspects
– Economical value of benefits (positive changes)
Outcomes making
- Wanted positive changes
Solutions (interventions)
– Economical
– Operational
Modeling includes three joint layers
A Societal benefits
2010 2017 2020 2025
Economical potential
B Wanted outcomes
2018 2020 2025
Economical potential
Wanted outcomes
C Investment calculation of solutions
Costs
Economical value of changes
 Pricing
Refund of intervention

15. Modeling creates solid basis for SIB operations
1. Determine phenomenon/demand and define target group (preliminary) = segmentation
2. Verify the development inside the phenomenon, costs thereof during the past 2-5 years and obvious future
trends; compare change in well-being of target group to the demand
3. Verify causes for cost development
4. Define root causes for development and opportunities to influence to those = customer orientation, insight
5. Define the target results (changes; social and economic) = clear (changes in circumstances, behavioural
changes etc.) goals
6. Make the decision about the SIB project and if yes
7. Run the tendering process for choosing the Project/Fund Manager (entity/coalition), which is then in
charge of implementation in practice
- Define the operations necessary to affect to root causes (service/operational package) = theory, mix of
methods
- Select organization(s) to implement service package
- Design the final service package (in the beginning)
- Calculate investments, which are needed to run the service package
- Conduct a cost-benefit analysis: achievable benefits vs. required investment
- Find investors
8. Follow-up

16. Measurement of SIB project – based on
modeling
- Indicators
– Outcomes (impact) metrics for agreement (when money moves)
– Metrics to lead practical activities (optimising the use of resources)
– Process metrics (quality of outputs and process)
– Other metrics (based on interest of public sector as a bonus payer, investors and/or some other
stake holders)

17. Epiqus Occupational Well-Being I
INVESTORS
Capital
SIB (THE FUND)
EUR 0,6 million
Public Sector Employees
Reduction in the Number
of Sick Leave Days
CLIENTS
(PUBLIC
SECTOR
EMPLOYERS)
Payment
(EUR 175)
for Each
Reduced
Sick-leave
Day
Manages
Support programs
for mild depression
and social
anxieties
Management and
supervisor
coaching, shared
program
management
Employee-centric
coaching, non-
critical
interventions
Contact centre,
electronic health mgmt.
records, shared program
mgmt. staff testing,
interventions
Procurement of Services
Delivery of Services
Capital + Returns
INDEPENDENT
AUDITOR
Verify
”pilot-tendering”
• Local Register Office (S-W)
• Nurmijärvi Aleksia
• Savo Consortium for Education
• Ylä-Savon SOTE Joint Municipal
Authority

18. SIB portfolio in 2019 – altogether
6 (+1) different fund processes in Finland
SIB Status
Occupational Wellbeing (public sector organizations as
an employer)
Up and running since 2015 (FIM, previous Epiqus, as a
Project/Fund Manager); the fund about EUR 0,6
million
Fast employment and integration of immigrants (The
Ministry of Economic Affairs and Employment)
Up and running officially since January 2017 (FIM); the
fund EUR 14,2 million (One of the biggest in Europe)
Promotion of Children’s, families’ and youth’s wellbeing
(5 municipalities + possible edition 2)
Up and running officially since January 2019 (FIM in
co-operation with Central Union for Child Welfare); the
fund EUR 8 million (estimation)
Advancing employment
(The Ministry of Economic Affairs and Employment)
To start (FIM); the fund EUR 12 million (estimation)
Support of the elderly’s independence (municipalities?) Modeling has started including Impact co-creation
process in two regions
Type 2 diabetes prevention
(municipalities?)
Modeling is going on
SIB (commissioner) STATUS

19. Sitra Impact Accelerator
Design phase 3 month acceleration program for 10 impact actors
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

20. Social Impact Boot Camp
Developing Impact Driven
Business
Workshop + Mentoring
10 impact actors
Generating Evidence &
Measuring Impact
Workshop + Mentoring
20 impact actors
ABCs of Impact & Modelling
Impact
Workshop
30 impact actors

21. IMPACT CO-CREATION

22. Why Impact co-creation?
- To create common understanding concerning the phenomenon and outcomes
/ impact goals
- To ensure the commitment of all actors and especially the most important
stakeholders in public sector

23. Modeling of societal benefits
- Impact co-creation
–Phenomenon and root causes
–Social aspects
- Economical value of benefits (positive changes)

24. Impact co-creation in practice
Starting points:
–preventing and solving complex wicked problems, require collaboration and
system level solutions
–collaborative approach to execute system level solutions (including use of
SIB model) and focusing on targeted outcomes and impact
–joint development work between public sector, different kinds of service
providers and other professionals including expertise by experience and even
possible investors; identified specific challenge as a starting point for
collaboration

25. Used in Finland by Sitra
- Together with Oulu region: Supporting employment and preventing
unemployment among young adults under 34 years
- Together with Siun sote – Joint municipality authority of North Karelia:
Housing of disabled people and service voucher
- Together with South Savonia and Ostrobothia regions: Advancing
independency of the elderly

26. Phases of impact co-creation
Defining the
impact goal
Identifying
outcomes
By the end of 2022
Decrease the number of unemployed persons under
35 years old whose unemployment period has
extended beyond 6 months by 50 percent in order
to achieve 40 percent cost savings from passive
unemployment related costs and to increase the
experienced well-being of the target group.
Framing
the system
Modelling
the system
1 2 3 4

27. Impact
Impact is created by systemic approach
Change/
outcome
Solution
Activity
Resource
Resource
Solution
Change/
outcome
Activity
Activity
Resource
Resource
Solution
Activity
Activity
Resource
Resource
Resource
Activity
Activity
Resource
Resource
Resource
Resource
Solution

28. Finland’s EU Presidency and The Ministry of
Social Affairs and Health
Economy of wellbeing means that wellbeing and the economy are closely intertwined and
mutually reinforcing.
1 How does wellbeing generate economic growth and macroeconomic stability?
2 How does the economy boost wellbeing?
3 How does this interaction improve stability and security in society?
Identifying the links between wellbeing and the economy enables both security and
economic growth.
Joint effort of the Ministry of Social Affairs and Health, Ministry of Economic Affairs
and Employment, Ministry of Finance, Ministry of Education and Culture and
Ministry of the Environment. A common goal is sustainable development and
its social, economic and environmental components.

29. Finland’s EU Presidency, economy of wellbeing
and SOC
Advisory platform for SOC
Outcomes funds
Procurement
Co-creation

30. In practice – joint meetings/events etc.
- First workshop hosted by EIB Jan 31–Feb 1 in Luxemburg
– Austria, Belgium, Estonia, Finland, France, Lithuania, Slovenia, Sweden
– DG ECFIN, DG EMPL, DG GROW
- Technical meeting hosted by EIB May 15–16 in Brussels
- Side session during the WCEF 2019 June 3 in Helsinki
- Second workshop September 19–20 in Helsinki (The high level conference on
economy of wellbeing September 18-19)
+ meetings/events/domestic processes based on the needs of the Member States

31. REAL IMPACT IS BASED ON CO-CREATION AND
COLLABORATION

32. sitra.fi | seuraavaerä.fi
@sitrafund