Policy Webinar #13 Outcome Funds challenges and opportunities Wednesday 20 June :00 16:30 CET

Transcription

1 Policy Webinar #13 Outcome Funds challenges and opportunities Wednesday 20 June :00 16:30 CET

2 Matteo Mascolo Public Affairs Manager, EVPA WELCOME

3 GoToWebinar Tips & Tricks (1/2) GETTING STARTED You are able to Open and Hide your Control Panel The control panel will collapse automatically when not in use. To keep it open you can click the View menu and uncheck Auto-hide Control Panel. To Join Audio Choose Mic & Speakers to use the VoIP. If you choose Telephone, use the PIN code received upon registration [ ]. If you have technical issues accessing the Webinar please call Gianluca Gaggiotti in the EVPA Brussels office [+32 (0) ].

4 GoToWebinar Tips & Tricks (2/2) Q&A TIME Participants will be kept muted. But you are invited to ask questions in written form to our panellists. Those will be directed to them and answered during the Q&A time. If you have a technical issue while connected to the Webinar please submit a text question or comment to the organisers using the Questions panel. This session is recorded.

5 Policy & Public EVPA Thought Leader Catalyst

6 Policy Webinar Series Policy Webinar #1 EuSEF Regulation Policy Webinar #2 Impact Measurement Policy Webinar #3 Social Impact Bonds in the EU Policy Webinar #4 How can VP/SI Practitioners access EU funding Policy Webinar #5 Social enterprises and Public Procurement Policy Webinar #6 Crowdfunding for Impact Policy Webinar #7 Ordinary People as Social Impact Investors Policy Webinar #8 EU Funding Update for VP/SI Practitioners Policy Webinar #9 Foundations & Social Impact Going beyond grant - making Policy Webinar #10 The Sustainable Development Goals & VP/SI Policy Webinar #11 Fostering public private collaboration to address social issues Policy Webinar #12 How EuSEF s recent reform can impact the VP/SI sector

7 Policy Webinar #13 Introduction Outcome Funds Why it is important now? What do we want to accomplish?

8 Time Description Speaker Programme 15:00 15:10 Welcome to participants Introduction to the topic, agenda and speakers Matteo Mascolo, EVPA 15:10 15:20 EU Outcomes-Based Financing Initiatives 15:20 15:30 The EIF perspective on Outcome Funds Georgia Efremova, European Commission Philippe Bernard-Treille, European Investment Fund 15:30 15:40 Outcomes Funds the UK experience Jane Newman, Social Finance UK 15:40 15:50 Lessons learned from establishing an Outcomes Fund in Portugal Filipe Almeida, Inovação Social Portugal 15:50 16:25 Q&A session (moderator and participants) All panellists 16:25 16:30 Summary and conclusions Matteo Mascolo, EVPA

9 Welcome to our e-speakers! Georgia Efremova European Commission Philippe Bernard-Treille European Investment Fund Jane Newman Social Finance UK Filipe Almeida Portugal Inovação Social 9

10 EU Outcomes- Based Financing Initiatives Georgia Efremova European Commission

11 EU Outcomes- Based Financing Initiatives EVPA Webinar on Outcomes Funds New Approaches to Financing Social Innovation Brussels, Georgia Efremova Directorate General for Economic and Financial Affairs

12 Policy Context Outcomes-based finance is a key element of the emerging framework. Developed as ecosystem approach, the framework combines: EU impact investing financial tools developed over time under the EaSI Programme and European Fund for Strategic Investments (EFSI) Capacity building and market development actions Stimulating enabling conditions sustainable finance, EU leadership in global SDGs agenda A recent historical glance: Focus on impact/outcomes inherent in first EU social entrepreneurship instruments developed since 2015 PbR equity instrument launched under EFSI in first developed as additional tool for social enterprise finance and stimulating social inclusion-focused interventions

13 Policy Context cont'd Gradual recognition of Social Outcomes Contracting as catalysts for social and place-based innovation and sustainable change-management processes. EU Capacity Building actions in support of PbR as second step: ECFIN EIB SOC Workshop January 2018 explores SOC as potential vehicle for effective public service provision A number of important actions at EU level identified establishing practitioners' networks, model templates and data collection. Outcome Funds identified as a further milestone. Social Impact Platform in the process of being developed under European Investment Advisory Hub ( ) Social innovation, service delivery, social enterprise finance strengthened under EFSI 2.0 ( ) Invest EU ( ) a new paradigm for EU social investments, with outcomesbased financing at its heart.

14 The Invest EU Programme ( ) Single investment EU support mechanism Eur 38bn Fund Single budgetary guarantee as policy and delivery tool (June 6, 2018 Proposal)- efficiency gains, single agreement with diverse implementing partners, reinforced EC role Policy driven approach implemented through four thematic policy windows- R&I, Sustainable Infrastructure, SMEs, and Social Investments and Skills Blending harmonised combination rules for synergies and complementarities between EU and MS action Social Investments and Skills Window Eur 4bn Guarantee expected to mobilise Eur 40bn of investment into the social sector (health, education, housing, employment etc) Integrated investments in social infrastructure, social services, human capital & skills, innovation, microfinance, social economy

15 Outcomes-based finance in next MFF Invest EU Social Investments Window: Social investments Mainstreamed under the 'four legs' of Invest EU Programme InvestEU Fund, Advisory, Portal and Blending Develop and consolidate the nascent market structures underlying the European social economy organisations and social enterprises ecosystem; focus on developing the social outcomes market Strategic EC Partnership with Foundations and Philanthropic Actors Outcomes-based finance as a key element of the Social Investments policy window Invest EU Regulation, Annex 2 on Eligible Sectors Impact Assessment of the Social Window (Staff Working Document) discusses Outcomes Funds as key element for outcomes-based investment Investment Guidelines for Implementing Partners (EC Delegated Act in Fall 2018) to add further delineations on Outcome Funds and Social Impact Incentive Mechanisms SIINCs.

16 The soul of the new economy is fundamentally social, and paradigmatically impact-driven. Thank you!

17 The EIF Perspective on Outcome Funds Philippe Bernard-Treille European Investment Fund

18 EIF- The outcome fund perspective EVPA Webinar - June 2018 SIA 2016 Presentation 18

19 Disclaimer This document is for information purposes only This document does not constitute a recommendation, a solicitation, an offer or a binding commitment either implicit or explicit on the part of the EIF This document and any information contained therein may not be circulated and/or reproduced in part or in full without the prior written consent of EIF SIA 2016 Presentation 19

20 Impact Investments to support social enterprises alongside their development Public Stock Markets Portfolio Guarantees & Credit Enhancement Social Impact Accelerator (SIA) VC Lower Mid-market & Mezzanine Funds Payment-by-Results investment schemes Social Impact Funds VC Early Stage Business Angels Microcredit EFSI Social Impact window Incubator/Accelerator-linked funds Technology Transfer PRE-SEED PHASE SEED PHASE START-UP PHASE EMERGING GROWTH DEVELOPMENT SME Development Stages HIGHER RISK LOWER RISK SIA 2016 Presentation 20

21 Social Outcome Contract: a new complementary tool for social delivery Many countries are facing today declines in public budgets and in parallel increase social needs. This is a signal that new methodologies and innovative solutions need to be developed for making an optimal use of existing public resources. Many actors in the impact investing industry request for a long time a stronger cooperation between the public and the private sectors, particularly toward vulnerable groups facing social issues. Social innovation is needed within the EU and is a visible element for government and local authorities toward citizens. There is a strong appetite for testing Social Outcome Contracts in the EU through small pilots.

22 Mapping of European SOC projects UK is well advanced with SOC. The six outcome funds have strongly contributed to the development of SOCs in the country. Finland is continuing to work on the commissioning of more SOC projects. Denmark is starting with few projects in the pipeline. France, Belgium, and Germany have shown good developments in In Italy, some SOCs projects are currently developing. Portugal has tested SOCs. In CEE, Poland is starting to look at testing SOC projects. Overall, governments and local authorities show a strong appetite for the SOC concept, wishing to engage with pilots, motivated by social innovation and an optimal use of public resources. SIA 2016 Presentation 22

23 Budget contraints: possible source of funding Political barriers lead to budget constraints and ultimately limit the number and size of Social Outcome Contracts ( SOC ). Setting-up a social outcome contract can also be long due to product design and the learning curve of the various actors, including public commissioner and local authorities. Government / Public Agency Positive political achievement & Efficient spending Outcomes Outcomes Fund Commitment linked to political objectives Buying impact units Social Outcome Contracts Set-up of Outcome Funds by national / regional / local government support the development of SOCs: Outcome Funds provide funding to buy outcomes / impact units. They enable a faster provision of SOC operating in the same vertical. They provide an optimal use of public and tax payers resources. They contribute to simplify the SOC process SIA 2016 Presentation 23

24 Social Outcome Contracts Intermediated structure Intermediary Performance Management Reimboursment + premium Cash Flows Investors Special Purpose Vehicle Pre-financing (equity, hybrid) Payment(s) by results option 1 Financing (debt / Hybrid / cash) National / Regional / Local Gvt Outcome Fund Social Sector Organisation Payment(s) by results option 2 Independant Evaluator

25 Social issues and dedicated sources for buying impact units Linking outcome funds to sector specific often help due to political objectives and ultimately will provide a better acceptance by the social sector Limited competition amongst public agencies or public authorities Government(s) / Public Agency (ies) Positive political achievement & efficient spending Commitment linked to dedicated political objectives Outcome Fund for Education Outcome Fund for Health and wellbeing Outcome Fund for Unemployment Outcome Fund for Homelessness Outcome Fund for Reoffending Outcomes SOCs Buying Impact Outcomes Buying Impact Outcomes SOCs SOCs SOCs SOCs Buying Impact SIA 2016 Presentation 25

26 Various complementary sources of funding Outcome fund(s) can be complemented by other sources of funding to serve market demand, increase SOC size and ultimately address social needs. Government / Public Agency Positive political achievement & Efficient spending Commitment linked to dedicated political objectives Ex: Outcome Fund for Education + + Local Authority budget Donor / Foundation Outcomes Buying impact units Social Outcome Contract SIA 2016 Presentation 26

27 Outcomes Funds and EU Structural funds Possible use of the European Structural Funds to fund outcome payments Absorption issues at national and regional level GvT EU Structural funds Mixing different types of funding is challenging with the current regulatory framework Ex: Outcome Fund for Education Local Authority + or / budget and Foundation / Donor New MFF 2020 would facilitate the set-up and the management of Outcome Funds within the EU Outcomes Buying impact units Social Outcome Contract SIA 2016 Presentation 27

28 Outcome Funds: a complementary funding tool for Social Outcome Contracts Outcome funds have demonstrated their ability to speedup the development of social outcome contracts. They have been a key element in the development of Social Outcome Contracts in the UK Launching pilots requires outcome funds of small size Outcome funds enable knowledge pools Many governments are currently brainstorming on the setup of small outcome funds to test Social Outcome Contracts motivated by social innovation

29 Thank you! Philippe Bernard-Treille Equity Investments - Impact Investing - p.bernardtreille@eif.org SIA 2016 Presentation 29

30 Outcomes Funds the UK experience Jane Newman Social Finance UK

31 OUTCOMES FUNDS THE UK EXPERIENCE EVPA WEBINAR 20 JUNE 2018 Social Finance is authorised and regulated by the Financial Conduct Authority FCA No:

32 Capital Raised (US$, million) THE UK MARKET Capital Raised in UK SIB market since Peterborough SIB, US$ 60.4M # Cumulative SIBs SF launches Peterborough SIB in Sept 2010, raising 5M Social Finance M DWP Innovation Funds launched 10 SIBs in 2012 across UK London Mayor funds 2 Rough Sleeping SIBs SF launches Essex Edge of Care SIB in Nov 2012, raising 3.1M 15M DCLG/Cabinet Office Fair Chance Fund launches 7 SIBs raising in total 4.5m 16M Youth Engagement Fund launches SIBs for NEET Prevention CBO/SOF 60M Fund open for applications in 2015 LCF 80M Fund opens for applications in Social Prescribing SIBs launched SF launches MHEP Platform SIB in 2016 DCLG launches 10M Rough Sleeping SIB Fund

33 OUTCOMES FUNDS SIT WITHIN A RANGE OF OUTCOMES- BASED COMMISSIONING MECHANISMS Cash on Delivery and other results-based aid International development Payment by Results Impact Impact Bonds Bonds Outcomes Outcomes Funds Funds Domestic commissioning/funding and international development Used by international development institutions to incentivise partner governments to deliver effective programmes by paying for outputs and outcomes Financing approach used to incentivise service delivery bodies by linking payments to preagreed outputs or outcomes Form of Payments by Results contract which involves external capital - used to incentivise investors through payment for outcomes achieved by service providers, for individual projects Structure used to commission/fund a broader series of interventions and services, in parallel or consecutively a programmatic approach Social Finance 2018

34 OUTCOMES FUNDS EVOLVED OUT OF OUR EARLY EXPERIENCE OF IMPACT BONDS The wrong pockets problem the benefits of an effective social programme fall across multiple budgets or tiers of government, making it hard to commission A tool for (central) government to test multiple interventions and providers side by side using the same tariff payment structure The lightbulb moment: the need to move from deal by deal to programmatic mechanisms Scale In our view, Outcomes Funds will be the means by which impact bonds and other outcomes-based commissioning will achieve scale, and cost effectiveness. Social Finance 2016

35 AN OUTCOMES FUND IS DEDICATED FUNDING THAT IS SET ASIDE TO PAY FOR OUTCOMES FOR MULTIPLE PROJECTS Types of funds Thematic outcomes funds focus on one issue area and commissioning of multiple interventions targeting the same outcomes Innovation outcomes funds focus on commissioning new interventions to test and prove effectiveness OUTCOMES FUND Source of funding Funds can be provided by: Single public funder Several public entities Philanthropic organisations Investors.. if needed. External investment- e.g. SIBs, if delivery organisations need access to upfront capital Funding agreement 1: payment for outcomes Funding agreement 2: payment for outcomes Funding agreement 3: payment for outcomes Project 1 Project 2 Project 3 Social Finance 2018

36 OUTCOMES FUNDS ARE NOT ONE SIZE FITS ALL Pay vs. Copay (top up) Thematic Innovative Social Finance 2016

37 EXPERIENCE FROM THE UK: OUTCOMES FUNDS HAVE EVOLVED AS AN EFFECTIVE COMMISSIONING TOOL Social Finance 2018 Thematic OF Co-funding (Top up) OF Local OF

38 OUTCOMES FUNDS: DESIGN CONSIDERATIONS SHOULD MEET A NUMBER OF OBJECTIVES KNOWLEDGE BUILDING Act as a platform for knowledge building beyond one-off projects OUTCOMES PRICING Allow price discovery by testing different interventions in parallel, and / or progressive rounds of funding CONTRACTING EXPERTISE Build understanding of outcomes-based commissioning for donors, governments and delivery partners and a focal point to develop contracting expertise INTEGRATED INTERVENTIONS INCREASED COLLABORATION SUSTAINABLE FUNDING Incentivise greater efficiency in the use of resources and support holistic approach to service Build more integrated interventions delivery and allow increased collaboration between service providers and other stakeholders Social Finance 2018 Allow increased collaboration between delivery partners and with other stakeholders Act as a longer-term source of funding, providing increased stability and capacity to delivery organisations Resources:

39 THANK YOU!

40 Lessons learned from establishing an Outcome Fund in Portugal Filipe Almeida Portugal Inovação Social

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42 WHAT IS IT Portuguese Government initiative Develop Social Investment Market Finance Social Innovation Projects 150 M ESF European Social Fund FOUR financing instruments

43 Financing instruments Aligned with the life cycle of a Social Innovation project CAPACITY BUILDING FOR SOCIAL INVESTMENT Supports the development of management skills of the teams involved in the implementation of social innovation projects. Promotes on-the-job consultancy with experts, in a cocreative approach. Pays for deliverables instead of reimbursing expenses. 1 st CALL 168 applications 7,85 M 99 approved projects 3,5 M

44 Financing instruments PARTNERSHIPS FOR IMPACT Aligned with the life cycle of a Social Innovation project SOCIAL IMPACT BONDS SOCIAL INNOVATION FUND Supports the creation, implementation or growth of social innovation projects. Match fund model: 70% of the project is financed by this instrument 30% must be financed by social investors (public or private organizations) 1 st CALL. 57 applications 10 M. 35 approved projects 7 M 2 nd CALL (Education). 26 applications 7,6 M 3 rd CALL. 91 applications 18,5 M Supports innovative projects that should provide measurable social outcomes with public budget savings. Projects must be aligned with public policy priorities in areas like Employment, Social Protection, Health, Education or Justice. Social investors finance the project. Public entity validates it. Outcomes payment: if the contracted social outcomes are met, social investors are fully reimbursed. 1 st CALL. 9 applications 2,7 M. 3 approved projects 1,5 M 2 nd CALL. 15 applications 5,2 M The Social Innovation Fund is a ESIF-ESF financial instrument. Addresses market failures in access to financing by more mature social innovation projects stimulates the social investment market Hybrid model: Debt guarantees for loans (Wholesale) Equity co-investment (Retail) deal-by-deal approach

45 Social Impact Bonds A MAIN CHALLENGE Promote broad change in culture in three sectors at the same time Define desired outcomes Pay for Results PUBLIC SECTOR SIB PRIVATE SECTOR Contratualization with the Government Risk associated with Social Outcomes SOCIAL SECTOR Social outcomes oriented strategy

46 Social Impact Bonds FINANCING MODEL Innovative projects Measurable social outcomes Public budget savings Public policy priorities Employment Social Protection Health Education Justice Digital Inclusion Private organization implements the project Corporations NFP organizations Social investor finances the project Corporations NFP organizations Public Entity validates project Central Government Applications are submitted in Partnership Social investor Public Entity Service provider Real costs reimbursement if Outcomes are met No remuneration Tax benefit for Social Investors

47 7 Tax incentive KEY SUCCESS FACTORS 1 Political support at the center of the Government Social Impact Bonds 2 A Mission Unit responsible for implementing the Social Innovation Public Policy 3 Close relationship with Public Entities that validate projects 4 Strategic partnerships with key players 5 Activation team in the field 6 Highly qualified and committed intermediaries

48 CHALLENGES 1 Mobilize central Government and Public Administration Social Impact Bonds 2 Promote meaningful partnerships between Investors and Social Organizations 3 Overcome resistance and ignorance LIMITATIONS 1 Limited practice of payment for results in Public Administration 2 Lack of data to measure outcomes 3 Existence of simpler and less demanding social intervention financing mechanisms 4 ESF funding is still mainly based on the reimbursement of expenses

49 8 Specific budget for independent Social Impact Assessment Social Impact Bonds RECOMMENDATIONS 1 Pay for Results instead of reimburse expenses 2 Accept unitary costs data certified by Government 3 Simplify and expand cap for lump sums 4 Allow municipalities to invest in SIBs 5 Allow longer periods for the implementation of projects 6 Allow match investment with public entities 7 Coordination of the Partnership by the social organization

50 Social Impact Bonds 3 SIBs IN PORTUGAL Name of project CODE ACADEMY BOOTCAMPS PROJETO FAMÍLIA FAZ-TE FORWARD Social issue Youth unemployment Children in care Youth unemployment Intervention model 14-week coding bootcamps for unemployed young adults 6-week intensive support to families followed by 12 month ongoing support 10 month mentoring, coaching and job readiness program Outcome metric(s) Entry into employment (50% of cohort) Care placements avoided and confirmed by court order (50% of cohort) Entry into employment (40%) 6 month job maintenance (20%) Investment size 723, , ,848 Nr of beneficiaries 180 young adults 216 children at risk 150 young adults Location Fundão (centre of Portugal) Porto Porto Investors Fundação Calouste Gulbenkian + Consortium of businesses in Fundão (e.g. Altran) Fundação Calouste Gulbenkian + Montepio Bank Fundação Calouste Gulbenkian + Deloitte

51 CONTACTS Tel.: /8 Headquarters: Rua Bernardim Ribeiro, Coimbra PORTUGAL

52 6. PANEL DISCUSSION & Q&A Georgia Efremova European Commission Philippe Bernard-Treille European Investment Fund Jane Newman Social Finance UK Filipe Almeida Portugal Inovação Social

53 Don t hesitate to contact Matteo Mascolo, should you have any follow-up question related to this webinar and / or to EVPA s activities! MMascolo@evpa.eu.com 53

54 This webinar is kindly supported by:

55 RUE ROYALE 94 B-1000 BRUSSELS T EVPA.EU.COM info@evpa.eu.com