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Everything you need to know about social investments.
Many societal challenges are too large and complex to be solved by individual measures alone. This is where socially sustainable investments come into play. Those involved are 'tied to the mast', with funding linked to requirements for positive outcomes. But how can we ensure that these investments are as sustainable as possible?
The first step in social investment is to identify a social issue related to people's living conditions that you wish to address through the investment of early, preventive measures. Examples of such challenges include segregation, inequality in healthcare, and declining school results.
Long-term challenges that require several parties to share responsibility.
'It is important to identify where regular work does not go all the way. Typically, these are cross-sectoral issues where responsibility needs to be shared by several parties or activities. Many of these challenges are difficult to address within the constraints of short-term budgets and political terms of office,” explains Tomas Bokström, head of the Social & Health Impact Centre (SHIC) at RISE.
It is important to identify areas where regular work does not suffice. These are usually cross-sectoral issues where responsibility needs to be shared by several principals or activities.
He provides a specific example of this gap: people with psychiatric disabilities who are not in employment. Scientific evidence shows that this group would benefit from a job where support is provided in the workplace, rather than going through various rehabilitation programmes, as is the current approach.
From a healthcare perspective, work is not considered a form of treatment. The Employment Service and the Social Insurance Agency believe that this group is too unwell to work. This means that people with psychiatric disabilities are caught in a void, as none of the relevant social actors are willing to take overall responsibility for their situation, says Tomas Bokström.
Special forms of financing are required
Several different financing models enable investments to extend across administrative boundaries and financial years. One such model is outcome-based loan financing. Kommuninvest, a credit market company owned by municipalities and regions, offers this model.
'Social Sustainability Loans' are designed to encourage municipalities to work on social sustainability. We place extra focus on impact assessment and follow-up. Our aim is to help municipalities adopt a more systematic and long-term approach to social sustainability,” says Björn Bergstrand, Sustainability Manager at Kommuninvest.
This form of financing can be granted for two types of investment. One type is a physical investment linked to a social initiative. The other type involves the physical investment itself constituting the social initiative. For example, this could involve installing more and better lighting in a socially disadvantaged residential area, which research suggests increases safety.
In order to achieve a positive outcome, it is important that all parties feel they have won. Conversely, if the outcome is not as desired, it is crucial that all parties feel they have lost.
‘Our social sustainability loans can be seen as one piece of the puzzle in a systemic shift towards a much more outcome-focused approach in the public sector.’ This approach places greater emphasis on actual change for specific target groups than on what has been done, focusing instead on follow-up and evaluation. It interacts well with developments elsewhere, such as social outcome contracts,” says Björn Bergstrand.
The importance of an intermediary in social outcome contracts
A social outcome contract is a financing model for social investments. Put simply, it is an agreement between different parties who have decided to work together to address a social challenge. These parties are often from both the private and public sectors. Together, they define the desired outcomes, the measures expected to have an effect and how progress will be monitored. Remuneration for the work is linked to the achievement of targets.
To achieve a good outcome, all parties must feel they have won. If the outcome is not as desired, all parties must feel they have lost. The idea is to encourage risk-sharing among the players and use this as a mechanism to drive change. Sometimes we talk about tying everyone to the mast. It shouldn't be so easy to abandon ship just because things get tough or another political assignment comes along,' explains Tomas Bokström.
This type of collaboration, like cross-sectoral work in general, requires an independent actor who can understand the different languages used by the various parties involved.
The intermediary's role is to understand how everything fits together and create a shared vision. It involves process management, but also being an active participant who suggests ideas. 'This is how we could define the target group, these are the outcomes we could measure, and this is how we could finance our work,' Tomas Bokström explains.
'This is an important pilot project from which we can learn lessons.'
RISE fulfilled this role within a social outcomes contract in the Stockholm suburbs of Hässelby and Vällingby. The City of Stockholm and the children and young people's social services in Hässelby-Vällingby recognised the need for initiatives to support children and young people at risk of substance abuse and crime.
'The aim was to engage with civil society in a systematic way so that they could provide a different kind of support to that offered by social services. The city therefore issued a reserved contract, meaning that only civil society and non-profit organisations could respond to the tender. Five organisations with expertise in different types of support were successful,’ says Tomas Bokström.
The evaluation of the project, which ran from 2021 to 2022, revealed positive findings, such as civil society actors finding it easier to reach the target group. There was also greater willingness among the target group to accept interventions. Social workers and civil society actors recognised the benefits of collaborating, working together to solve individual cases.
‘This was a pilot project from which all parties involved can learn. The key to all types of social investment is to be ambitious and scale up what you are doing so that it does not stop at one project,” says Tomas Bokström.
The concept of keeping track of
Social sustainability is about creating a society in which everyone enjoys good living conditions, both now and in the future. This requires social investments, i.e. targeted initiatives that will result in long-term socio-economic gains.
Social investment funds involve setting aside funds for preventive measures that extend across administrative boundaries and financial years.
Another approach is outcome-based financing and collaboration, which is often in the form of social outcome contracts. In this model, the public sector pays in full or in part when predefined outcomes are achieved. Risk sharing can occur between public authorities, as well as with private and philanthropic partners.
Use-of-proceeds social instruments are relevant for private and public real estate companies. Kommuninvest's Social Sustainability Loans are one example of this. These loans finance projects linked to the built environment that meet specific requirements and commit to annual reporting.
Sustainability-linked loans and bonds involve linking the interest margin to the borrower's fulfilment of social objectives within a specified timeframe.
