NEW CALL FOR INNOVATIVE INVESTMENT TOOL TO SUPER-CHARGE COVID RECOVERY
Reform Scotland, the independent non-partisan think tank, and The Growth Partnership, have today published a new paper – Investing for Good: Why Social Impact Investing is right for Scotland – which lays out the case for Social Impact Investment to super-charge Scotland’s recovery from Covid.
Social Impact Investment is an innovative partnership which delivers funding for social good, where none is available through traditional public financing.
It is a partnership between three parties:
- The Delivery Partner, usually in the social sector, who designs and delivers a service in the community to address an identified social issue e.g. homelessness, mental health, unemployment etc.
- The Investment Partner(s), who provide the working capital to cover the cost of the service delivery in the first instance until outcomes are achieved. Investment partners can be private individuals, philanthropic foundations or institutional investors.
- The Outcome Partner, usually in the public sector, who agrees a set of mutually desirable outcomes with the delivery partner. When these outcomes are achieved then the outcome partner pays for those outcomes allowing the investment partner(s) to be repaid with interest.
The paper includes practical examples of where this is working now. In Perth, the YMCA’s Living Balance Science project, which supported unemployed and disengaged young people into employment, was funded to the tune of £300,000 by private investors, 85% of whom lived locally. The DWP, as the outcome partner, only paid in arrears after the outcome was achieved, guaranteeing 100% impact for public expenditure. In the end, more than 3-in-4 of the participants achieved at least one of the defined outcomes.
“Social impact investment has been around for over a decade, but its use has so far been fairly limited. However, as we emerge from this most serious of financial crises, caused by the Coronavirus pandemic, we must be more innovative in how we ensure that those who have suffered the most are now given the greatest help.
“Social impact investment is a partnership with multiple mutual benefits. Most importantly, the public sector does not have to pay the investor until the outcomes have been met.
“Social impact investment is a copper-bottomed guarantee – the private sector shoulders the risk, and the people feel the benefit.
“There is no better display of this than in Perth, where social impact investment changed the future for dozens of young people in the Living Balance Initiative.”
“Post-devolution Scotland has a poor record of innovative financial solutions to economic crises, in part because of the limited financial levers which the Scottish Government has at its disposal.
“Social impact investment is a way to cut through all of that. It is a unique partnership which can be hugely beneficial to those who have slipped through the large cracks caused by the Coronavirus pandemic.
“The Scottish Government should now consider it as part of their Covid recovery toolkit.”
Attachments
Investing for Good: Why Social Impact Investment is right for Scotland
FAQs: Social Impact Investing