Social finance has entered the Swedish market

Social finance is on it’s way on to the Swedish financial marketplace, but there is still a long way to go. In Europe the United Kingdom has years of experience and is seen as somewhat of a role model. Stockholm recently hosted Peter Sebastian from Social Finance and Joe Ludlow from NESTA, and asked them to share what they have learned about impact investment and social finance.

In Sweden social finance is still a relatively new phenomenon, but there are a few active participants. Ekobanken, with the longest track record of social finance in Sweden, has specifically targeted social businesses such as Saltå Kvarn, Dem Collective, Weleda and more, providing ethical loans to businesses and organisations who target challenges our communities are facing today. Jak Bank, a Swedish membership bank with the vision of a fair and just society free from interest, FundedByMe and Polstjärna, (providing crowdfunding platforms) are also examples of new components on the financial market in Sweden. Networks to promote impact investment, such as Uppstart Malmö, is on the rise as well and through that network Sweden has landed the next SOCAP Europe, which will be held in Malmö this year.

Promoting social finance through collaboration

To raise awareness and create a dialogue between various sectors and stakeholders on how to develop and promote social finance in Sweden the Stockholm office for British Council, Sektor3 and Forum for Social Innovation Sweden arranged a seminar and invited experienced speakers from NESTA and Social Finance to share their knowledge. Rather than giving the reader a break down of their talks I will refer you to the webcast of the seminar which can be viewed on Bambuser and move on to sharing some insights, advice and suggestions I gained from Peter Sebastian (Social Finance) and Joe Ludlow (NESTA) after the seminar last week.

Outside perspective on Sweden

As Sweden is a novice in the field of social finance I decided to ask Peter Sebastian to share his view on Sweden and it´s current position in the field of social innovation in Europe.

­– It seems like the concept of fairness appears more clearly on the agenda across Swedish society than in the UK and there is an interest in social innovation from high-net-worth individuals and retail investors in Sweden. As well as a corporate and institutional interest in this area, says Peter Sebastian. On the other hand, he continues, Sweden has no wholesaler of capital for the social enterprise sector such as Big Society Capital is in the UK. Sebastian also feels that Sweden has fewer problem areas where non-public sector players can play a constructive role as well as less of a track record of entrepreneurship compared to Anglo-American models.

Learning from experience

When asked to share a few important lessons and advice from the UK, as well as their experience of social finance and social impact bonds, Sebastian raises the importance of measurement and statistical relationship between intervention and outcome. Joe Ludlow points out the role of individuals in advancing the field, and the need for sets of policies coming from the people, not from government.

– Sweden needs a group of people who are powerful, either through their past roles in government, industry or wealth, who are able to understand what social finance is about and advocate on it’s behalf, Joe Ludlow suggests.

Showing that the field has supporters and building a strong lobbying group will have a long-term impact.

– In the UK a small group of people tested and found how social finance can make a difference. They formed a task force in 2000 and worked strongly as a group to advocate social finance to government.

Ludlow also raises the issue of philanthropy and impact investment, suggesting that the successful entrepreneur as a public figure may find social investing more aligned with his or her persona rather than classic philanthropy.

Measurement methodologies and clustering

There are some strong points that Sweden has and which could be shared with the UK and Europe in general, according to Peter Sebastian. One of which is the importance of measurement.

– One of the most important ways that a Social Impact Bond can lead to positive change is helping government spend their money in a different way, in other words paying for the success of an intervention and focusing on these outcomes, says Sebastian. Measurement methodologies are important. The UK social investment sector has begun to develop significant expertise in measuring social impact. One example is New Philanthropy Capital, a think tank focusing on helping charities to demonstrate the effectiveness of what they do and helping investors to search for tangible results they can invest in. The more results the more likely to get investments, thus providing the chance to scale. Scaling and clustering go hand in hand.

– Take Malmö for instance, says Joe Ludlow. There is great ambition there and one of the very few examples of social innovation clustering in the world. We have a similar clustering in London, but the issue is we don’t see it scaling to other parts around London nor to other regions.

Ludlow also questions whether the UK really is leading in the field of social finance, in terms of their Big Society Bank.

– People assume we are leading the field. But compare us with the Netherlands and you might see it differently. They are pioneers of investing in sustainable and ethical companies.

Triodos Bank finances companies which it thinks adds cultural value and benefits both people and the environment. Ludlow thinks that the Netherlands is probably leading the world in this area. He also believes that the values in Swedish culture are perfectly suited for developing social investment. And when comparing, crowdfunding in the UK is no further advanced than Polstjärna in Sweden.

– I suspect there are innovators in the field of social finance in Sweden and they are most likely as advanced as we are in the UK, says Ludlow.

Predicting 2012

Social finance, impact investment and social innovation are growing areas in Sweden at the moment and the question of what will happen next is highly debated. So what directions and trends are emerging within this field?

– Within the UK, there is a large amount of capital coming into the market through Big Society Capital, but the product offering is still relatively undeveloped. This may make it difficult to find a significant number of investable projects during 2012, says Sebastian. He also predicts that Social Impact Bonds will expand into other social issue areas with the potential for a range of other projects to be launched over the course of 2012. And at NESTA, Joe Ludlow spells out his predictions for 2012 on their website, but in our conversation reiterates the importance of measuring the impact of impact investment.

– This has been ridiculously overlooked. How do we measure the impact? Most tools out there at the moment count output, rather than results. There is a great need for capturing evidence over a long-term period, says Ludlow.

For those interested in learning more about social finance and impact investment Peter Sebastian suggests attending the Good Deals conference in the UK, as well as SOCAP Europe which will be held in Sweden in may, hosted by Forum for Social Innovation Sweden, Region Skåne and the City of Malmö.

– But most importantly it is about doing stuff, says Ludlow. Not about going to conferences. The most important thing is creating those practical examples and case studies for social innovation.

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