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Policy Webinar #13
Outcome Funds – challenges and opportunities Wednesday 20 June 2018 | 15:00–16:30 CET
WELCOME
Matteo Mascolo
Public Affairs Manager, EVPA
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Policy & Public Affairs @ EVPA
Catalyst Thought Leader
Policy Webinar Series
25.06.2014 Policy Webinar #1 | EuSEF Regulation
25.09.2014 Policy Webinar #2 | Impact Measurement
05.03.2015 Policy Webinar #3 | Social Impact Bonds in the EU
17.06.2015 Policy Webinar #4 | How can VP/SI Practitioners access EU funding
23.09.2015 Policy Webinar #5 | Social enterprises and Public Procurement
16.03.2016 Policy Webinar #6 | Crowdfunding for Impact
21.06.2016 Policy Webinar #7 | Ordinary People as Social Impact Investors
23.11.2016 Policy Webinar #8 | EU Funding Update for VP/SI Practitioners
22.03.2017 Policy Webinar #9 | Foundations & Social Impact – Going beyond grant - making
14.06.2017 Policy Webinar #10 | The Sustainable Development Goals & VP/SI
12.12.2017 Policy Webinar #11 | Fostering public private collaboration to address social issues
11.04.2018 Policy Webinar #12 | How EuSEF’s recent reform can impact the VP/SI sector
Outcome Funds
Policy Webinar #13 Introduction
• Why it is important now?
• What do we want to accomplish?
Programme Time Description Speaker
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 Georgia Efremova, European
Commission
15:20 – 15:30 The EIF perspective on Outcome Funds 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
Welcome to our e-Speakers!
9
Georgia Efremova
European Commission
Jane Newman
Social Finance UK
Philippe Bernard-Treille
European Investment Fund
Filipe Almeida
Portugal Inovação Social
Georgia Efremova
European Commission
‘EU Outcomes- Based Financing Initiatives’
EU Outcomes- Based Financing Initiatives
EVPA Webinar on Outcomes Funds New Approaches to Financing Social Innovation
Brussels, 20.05.2018
Georgia Efremova Directorate General for Economic and Financial Affairs
Policy Context
Outcomes-based finance is a key element of the emerging EU impact investing framework.
Developed as ecosystem approach, the framework combines:
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 2016 - first developed as additional tool for social enterprise finance and stimulating social inclusion-focused interventions
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 (2018-2020)
Social innovation, service delivery, social enterprise finance strengthened under EFSI 2.0 (2018-2020)
Invest EU (2021-2027) – a new paradigm for EU social investments, with outcomes-based financing at its heart.
The Invest EU Programme (2021-2027) 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
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.
Thank you!
The soul of the new economy is fundamentally social, and paradigmatically impact-driven.
Philippe Bernard-Treille
European Investment Fund
‘The EIF Perspective on Outcome Funds’
SIA 2016 Presentation 18
EIF- The outcome fund
perspective EVPA Webinar - June 2018
SIA 2016 Presentation 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 20
SME Development Stages
DEVELOPMENT
HIGHER RISK LOWER RISK
Public Stock Markets
Incubator/Accelerator-linked funds
Technology Transfer
Microcredit
VC Early Stage
Portfolio Guarantees & Credit Enhancement
VC Lower Mid-market & Mezzanine Funds
PRE-SEED
PHASE
SEED PHASE START-UP
PHASE
EMERGING
GROWTH
Social Impact Funds
Business Angels
Payment-by-Results investment schemes
Social Impact Accelerator
(SIA)
EFSI Social Impact window
Impact Investments to support social enterprises
alongside their development
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.
Social Outcome Contract: a new
complementary tool for social delivery
SIA 2016 Presentation 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 2017.
• 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 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.
Outcomes Fund
Government / Public Agency
Commitment linked
to political objectives
Social Outcome Contracts
Buying impact units Outcomes
Positive political
achievement &
Efficient spending
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
Social Outcome Contracts
Intermediated structure
Investors
Special Purpose
Vehicle
Social Sector
Organisation
Outcome Fund
Pre-financing
(equity, hybrid)
Cash Flows
Reimboursment
+ premium
Financing (debt /
Hybrid / cash)
Intermediary
Performance
Management
Payment(s)
by results – option
1
National / Regional /
Local Gvt
Independant
Evaluator
Payment(s)
by results – option
2
SIA 2016 Presentation 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
Outcome Fund for Education
Outcome Fund for
Unemployment
Outcome Fund for
Health and wellbeing
Outcome Fund for
Homelessness
Outcome Fund for
Reoffending
Government(s) / Public Agency (ies)
Commitment linked
to dedicated political objectives
Positive political
achievement & efficient spending
SOCs
Buying
Impact Outcomes
SOCs SOCs SOCs SOCs
Outcomes Buying
Impact Outcomes Buying
Impact
SIA 2016 Presentation 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.
Ex: Outcome Fund for Education
Government / Public Agency Commitment linked
to dedicated political objectives
Positive political
achievement &
Efficient spending
Social Outcome Contract
Buying impact
units Outcomes
Local Authority budget
Donor / Foundation
+ +
SIA 2016 Presentation 27
Outcomes Funds and EU Structural funds
Structural
funds
GvT
EU
Possible use of the European
Structural Funds to fund outcome
payments
Absorption issues at national and
regional level
Mixing different types of funding is
challenging with the current
regulatory framework
• New MFF 2020 would facilitate the
set-up and the management of
Outcome Funds within the EU
Ex: Outcome Fund for Education
Social Outcome Contract
Buying impact
units Outcomes
Local Authority budget
Foundation / Donor
+ or / and
• Outcome funds have demonstrated their ability to speed-
up 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 set-
up of small outcome funds to test Social Outcome
Contracts motivated by social innovation
Outcome Funds: a complementary funding tool
for Social Outcome Contracts
SIA 2016 Presentation 29
Thank you !
Philippe Bernard-Treille Equity Investments - Impact Investing - [email protected]
Jane Newman
Social Finance UK
‘Outcomes Funds – the UK experience’
OUTCOMES FUNDS – THE UK EXPERIENCE
EVPA WEBINAR
20 JUNE 2018
Social Finance is authorised and regulated by the Financial Conduct Authority FCA No: 497568
©Social Finance 2018
THE UK MARKET
SF launches
Peterborough SIB
in Sept 2010,
raising £5M
US$ 60.4M
0
10
20
30
40
50
60
70
2010 2011 2012 2013 2014 2015 2016 2017
Cap
ital
Rai
sed
(U
S$, m
illi
on
)
Capital Raised in UK SIB market since Peterborough SIB, 2010-2017
£30M 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
£16M Youth Engagement
Fund launches SIBs for
NEET Prevention
£15M DCLG/Cabinet
Office Fair Chance Fund
launches 7 SIBs raising in
total £4.5m 2 Social Prescribing
SIBs launched
SF launches MHEP
Platform SIB in 2016
CBO/SOF £60M Fund
open for applications
in 2015
14
30
#
Cumulative SIBs
1
LCF £80M Fund opens for
applications in 2016
DCLG launches £10M
Rough Sleeping SIB Fund
35
©Social Finance 2018
OUTCOMES FUNDS SIT WITHIN A RANGE OF OUTCOMES-
BASED COMMISSIONING MECHANISMS
Impact Bonds Payment by
Results Outcomes
Funds
Cash on Delivery and
other results-based
aid
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 pre-
agreed outputs or
outcomes
Structure used to
commission/fund a
broader series of
interventions and
services, in parallel
or consecutively – a
programmatic
approach
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
Domestic commissioning/funding and international development
Impact Bonds Outcomes
Funds
International
development
©Social Finance 2016
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
Scale
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
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 2018
AN OUTCOMES FUND IS DEDICATED FUNDING THAT IS SET
ASIDE TO PAY FOR OUTCOMES FOR MULTIPLE PROJECTS
OUTCOMES
FUND
Project 1 Project 2 Project 3
Funding agreement 1:
payment for outcomes Funding agreement 2:
payment for outcomes Funding agreement 3:
payment for outcomes
Funds can be provided by:
• Single public funder
• Several public entities
• Philanthropic organisations
• 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
External investment- e.g. SIBs, if delivery organisations
need access to upfront capital
Source of funding
Investors….. if needed….
Types of funds
©Social Finance 2016
OUTCOMES FUNDS ARE NOT ‘ONE SIZE FITS ALL’
‘Innovative’
‘Thematic’
Pay vs. Co-pay (top
up)
©Social Finance 2018
EXPERIENCE FROM THE UK: OUTCOMES FUNDS HAVE
EVOLVED AS AN EFFECTIVE COMMISSIONING TOOL
Thematic OF
Co-funding (Top up) OF
Local OF
©Social Finance 2018
OUTCOMES FUNDS: DESIGN CONSIDERATIONS SHOULD MEET
A NUMBER OF OBJECTIVES
Allow price discovery by
testing different interventions
in parallel, and / or progressive
rounds of funding
OUTCOMES PRICING KNOWLEDGE BUILDING
Act as a platform for knowledge
building beyond one-off projects
CONTRACTING EXPERTISE
Build understanding of
outcomes-based commissioning
for donors, governments and
delivery partners and a focal
point to develop contracting
expertise
Allow increased collaboration
between delivery partners and
with other stakeholders
INCREASED COLLABORATION
Act as a longer-term source of
funding, providing increased
stability and capacity to
delivery organisations
SUSTAINABLE FUNDING
Build more integrated
interventions and allow
increased collaboration
between service
providers and other
stakeholders
Incentivise greater efficiency in
the use of resources and support
holistic approach to service
delivery
INTEGRATED INTERVENTIONS
Resources:
www.socialfinance.org.uk/sites/default/files/publications/sf_outcomes_fund_note_feb_2018.pdf
THANK YOU!
Filipe Almeida
Portugal Inovação Social
‘Lessons learned from establishing an Outcome
Fund in Portugal’
Portuguese Government
initiative
Develop Social Investment
Market
FOUR financing
instruments
Finance Social Innovation
Projects
150 M€ ESF
European Social Fund
WHAT IS IT
Financing instruments Aligned with the life cycle of a Social Innovation project
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.
CAPACITY BUILDING FOR SOCIAL INVESTMENT
1st CALL
168 applications | 7,85 M€
99 approved projects | 3,5 M€
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)
PARTNERSHIPS FOR IMPACT
1st CALL . 57 applications | 10 M€ . 35 approved projects | 7 M€ 2nd CALL (Education) . 26 applications | 7,6 M€ 3rd CALL . 91 applications | 18,5 M€
SOCIAL IMPACT BONDS
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.
1st CALL . 9 applications | 2,7 M€ . 3 approved projects | 1,5 M€ 2nd CALL . 15 applications | 5,2 M€
Financing instruments Aligned with the life cycle of a Social Innovation project
SOCIAL INNOVATION FUND
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
Social Impact Bonds
A MAIN CHALLENGE
Promote broad change in culture in three sectors at the same time
PUBLIC SECTOR
PRIVATE SECTOR
SOCIAL SECTOR
• Define desired outcomes
• Pay for Results
• Contratualization with the Government
• Risk associated with Social Outcomes
• Social outcomes oriented strategy
SIB
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
Social Impact Bonds
KEY SUCCESS FACTORS
1 | Political support at the center of the Government
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
7 | Tax incentive
Social Impact Bonds
CHALLENGES
1 | Mobilize central Government and Public Administration
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
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
8 | Specific budget for independent Social Impact Assessment
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 723,500€ 468,457€ 387,848€
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
CONTACTS
Tel.: +351 239 863 577/8
Headquarters:
Rua Bernardim Ribeiro, 80 |
3000-069 Coimbra |
PORTUGAL
E-mail: [email protected]
www.inovacaosocial.portugal2020.pt
6. PANEL DISCUSSION & Q&A
Georgia Efremova
European Commission
Philippe Bernard-Treille
European Investment Fund
Filipe Almeida
Portugal Inovação Social Jane Newman
Social Finance UK
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!
This webinar is kindly supported by:
RUE ROYALE 94 B-1000 BRUSSELS T +32 2 513 21 31 EVPA.EU.COM [email protected] european-venture-philanthropy-association @_EVPA_
