As a society, we are facing many challenges that call for new kinds of solutions. There are many impact investing products currently in development to meet these challenges, and I hope that at least some of them see the light of day soon.
Jani Kempas, director, FIM

FIM

Työ-SIB – A New Tool to Reduce Long-Term Unemployment

12/06/2020

Our firm had the pleasure of advising FIM in the establishment of Työ-SIB, a social impact bond (SIB) to help long-term unemployed people find work. Social impact bonds are a good example of impact investing, which is an increasingly popular form of investment that seeks to achieve social impact in addition to financial gain.

The impact of Työ-SIB will be measured by comparing the income of people who find employment through the project to the predicted income of unemployed people with a similar background. Investors only profit if the people employed through the project earn more than the comparison group. The pay-out has also been graded so that the payment is higher for jobseekers who have more trouble finding work. The investors bear the financial risks of the project, and the public sector only pays for achieved outcomes.

Työ-SIB was commissioned by the Finnish Ministry of Economic Affairs and Employment. The project involves FIM as the programme manager and various employment service providers.

C&S Helping Build Sustainable Success Stories

As a firm, we have been working in the field of impact investing for a long time. We were involved in establishing the previous Lapset-SIB, which is focused on child and youth welfare.

SIB projects form part of our sustainability-focused assignment work, in which we help our clients in innovative projects that develop society. Sustainability is an important goal we share with our clients. Read more about our sustainability actions and goals.

A Tool for New Public Management

The Työ-SIB project has a long history. In 2015, the Finnish Innovation Fund Sitra asked Finnish municipalities what problems they most needed new solutions for. Long-term unemployment came up in almost every conversation. Recent economic development has increased the number of long-term unemployed people, and structural unemployment has exacerbated the problem. New solutions are desperately needed.

The Finnish public sector is one of the world’s largest per capita, and the economic pressure of supporting an aging population is further increasing the need for alternative models of financing. Impact investing is being looked at as one solution to the challenges of welfare policy.

In SIB projects, the public sector, investors, NGOs and companies join forces to solve a social challenge. SIBs are a good example of ‘new public management’, in which innovative solutions to growing public-sector economic challenges are sought in private sector operating models.

SIBs bring private-sector efficiency indicators and assessment policies into the public sector, and instead of paying for output, the public sector pays for outcomes and impact. Municipalities struggling with efficiency and outcome requirements have shown a great deal of interest in testing whether private-sector models could bring the desired added efficiency to the public-sector economy.

Työ-SIB in Practice

The first financing round for Työ-SIB ended last winter, and employment services are currently being funded in Uusimaa, Lahti and Oulu. Depending on the individual jobseeker’s situation, the programme lasts from one week to a year, and normal unemployment benefits are paid for the duration of the programme. The project as a whole will last five years and aims to find employment for a total of 1,900 people.

The needs of jobseekers vary. Some are looking for employment that matches their educational background, whereas others are looking to change fields. The service providers participating in the project are encouraged to tailor their services to jobseekers and to promote the creation of lasting employment relationships. A more important factor than education and profession is the jobseeker’s motivation to get back into working life.

‘In our previous employment-related SIB project, we were able to prove that our actions had a measurable positive impact on employment. We believe that the support provided by Työ-SIB will lead to faster employment and more long-term unemployed people getting to continue their careers’, says FIM’s programme director Samir Omar.

Instrument of the Future?

The investment periods of SIBs are long, even up to 10–15 years, so investors need to have a long investment horizon. Impact investment typically seeks moderate profits. On the other hand, the relevance and social benefit of the investment is a major factor for many investors.

At the early stages, SIBs are directed at professional investors—in Finland typically institutions. However, the parties to the project have their sights set on one day being able to offer these instruments to the general public. It would be great if everyone could participate in contributing to the common good, even with smaller sums. How well SIBs would work for small investors is certainly an important question. For example, what kind of background information would retail investors need to support their investment decisions.

Työ-SIB is a great example of a project that will benefit everyone by succeeding: unemployed jobseekers will get more tailored services, companies will get workers, the public-sector economy will get results and savings, and investors will get a moderate profit and the satisfaction of having contributed to improving society.

FIM’s director of impact investing Jani Kempas believes that impact investing is a matter of pride for many investors:

‘As a society, we are facing many challenges that call for new kinds of solutions. There are many impact investing products currently in development to meet these challenges, and I hope that at least some of them see the light of day soon.’

The Team

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