Harri Männistö works as Senior Advisor for Finnish Innovation Fund SITRA to activate the Finnish investor community for impact investing and to build impact investing ecosystem into Finland. He is also an advisor and angel investor for growth and impact companies.

1. Impact investing ABC
Harri Männistö
24.5.2017

2. Impact
Traditional
investing
Impact
Investing
Charity
Return
Principal
returned
N.A

3. UN Sustainable Development Goals provide a
global framework for Impact investing

4. Monitor institute 2009:
”Using profit-seeking investment to generate social and environmental good is moving
from a periphery of activist investors to the core of mainstream financial institutions.”
2016: 102B€
Global AUM
+32% growth
Picture from: Investing for Impact:
Case Studies across Asset
Classes (2010) Bridges Ventures
and the Parthenon Group
Impact ventures
(equity...)
Social Impact Bond
Social enterprises
(loan...)
Finland n*10M€ (est.)

5. GIIN 2017 Annual Impact Investor Survey
- 3/4 of investors use private equity while private debt leads monetary volume
- Main focus on early stage of business

6. Sitra’s Impact Investing Focus Area
- From May 2014 until June 2017
- Focus on well-being promotion
- Impact goals
1. Active impact investing ecosystem
2. Impact investing model (financing instruments etc.) in use in Finland

7. National Impact Investing Advisory Board
Director Pentti Pikkarainen, chairman
(Director Veli-Mikko Niemi
The Ministry of Finance
The Ministry of Social Affairs and Health)
CEO Tom Liljeström, vice-chairman
(Director Esko Torsti
LocalTapiola Assett Management Ltd
Ilmarinen Mutual Pension Insurance Company)
CEO Teri Heilala
(Investment Manager Heikki Nystedt
FIM Ltd
Taaleritehdas Plc.)
Board Member Riikka Sievänen
(Chairman Jaakko Salminen
Finland’s Sustainable Investment Forum
Finnish Business Angels Network)
Manager Director Ulla Nord
(Vice-chairman Ilona Herlin
Me-säätiö (foundation)
Kone Foundation)
CEO Risto E.J. Penttilä
(CEO Kimmo Lipponen
Finland Chamber of Commerce
Arvo Finnish Association of Social Enterprises)
Special Advisor Jari Vaine
(Labour Market Counsellor Jussi Toppila
The Association of Finnish Local and Regional
Authorities
The Ministry of Employment and Economy)
Secretary General Vertti Kiukas
(Secretary General Teemu Japisson
SOSTE Finnish Federation for Social Affairs and Health
Valo, Finnish Sports Confederation)
Head of Unit Sirpa Kekkonen
(Ministerial Advisor Taina Kulmala
The Prime Minister’s Office
The Prime Minister’s Office)
Director General Anni Huhtala
(Professor Otto Toivanen
VATT Institute for Economic Research
Aalto University)
Director Timo Lindholm Finnish Innovation Fund Sitra
Head of Focus Area Mika Pyykkö, sihteeri Finnish Innovation Fund Sitra

8. Costs which can be prevented – examples from Finland
Cost EUR per year
Child in custody care 130 000
Social marginalized youth 20 000
Elderly in 24/7 care 40 000
Alcohol abuse 1 billion
Physical inactivity 1–2 billion
Sick leaves 3–4 billion
Smoking 1,5 billion
Type 2 diabetes 1 billion
Loneliness etc. …

9. Goal!
Impact actor:
public, private or 3rd
sector actor, enterprise…
Impact buyer:
public actor, municipality,
enterprise, foundation…
Connects the seller and buyer
Input
Resources: money,
personnel,
competence,
networks…
Output
Measurable work
done: hours, number
of contacts, reports
written…
Outcome
A concrete change in
people or structures:
learning, new
attitudes,practices,
changes in legislation…
Impact
Welbeing of people
and benefits to society:
employment, years of
healthy life, lower
costs, communality…
Impact chain – the core of Impact business!
Investor
A. Seller
finance
B.
Impact bond finance
C. Buyer
finance
- even investor!

10. Sitra Impact Accelerator
Design
phase
3 month acceleration program for 10 impact actors
(3 x 3 month accelerators during 2015–2016)
Defining the
social challenges
Engaging P&P
stakeholders and
not reinventing
the wheel
Activating private
and angel
investors
Curriculum
development with
selected service
providers
Dedicated mentors @ 3 hours per week throughout
Face to face training (6 days) –
overarching themes:
1. Impact measurement: developing
frameworks and effectively
measuring / projecting impact as a
result
2. Developing a sustainable business
model per impact actor / service
case
3. Developing the investment-
readiness of each impact actors and
connecting to potential investor(s)
Demo day:
pitching to
investors
Publishing case
study about each
impact actor
Sharing learning
& training
materials publicly
Kick-off day:
importance of
community
development & peer
learning
opportunities
Individual, tailored
learning plans with
concrete goals
Online platform for
virtual coaching

11. Example of an ”impact accelerated” entrepreneur :

12. Impact ventures
(equity...)
Social Impact Bond
Social enterprises
(loan...)
Impact investing – instruments...
Equity+min.
impactreporting
Loan + min. impact reporting
Variations
+value sharing,
governance...

13. - Loan:
– Simple, standard terms apply
– Impact added to reporting practice
Impact investing instruments (1/3)
• Social Impact Bond – SIB
• ”Public-Private-Partnership”
• Public sector pays only for results
• Consortium of service providers
• Invested capital & return at risk -
payment tied to verified results
• Access to governance

14. Impact investing instruments (2/3) – Sitra SIB model
Example: Epiqus Oy: Immigrant employment SIB

15. Estimation of SIB portfolio in Spring 2017 –
altogether 5 + 1 different funds in Finland
SIB Status
Occupational Well-Being project (public sector
organizations as an employer)
Up and running since 2015 (Epiqus as a Fund /
Program Manager)
Fast employment and integration of immigrants
project (The Ministry of Economic Affairs and
Employment)
Has started in January 2017, inofficially in October
2016 (Epiqus)
Promotion of Children’s, families’ and youth’s
well-being (regions/municipalities)
To start (FIM in co-operation with Central Union for
Child Welfare)
Advancing employment
(The Ministry of Economic Affairs and Employment)
Procurement process for choosing the Fund / Program
Manager (one organization or consortium) is to start
Support of the elderly’s independence
(regions/municipalities)
Procurement process for choosing the Fund / Program
Manager (one organization or consortium) is to start
Type 2 diabetes prevention
(The Ministry of Social Affairs and Health?)
Modelling getting started

16. - Loan:
– Simple, standard terms apply
– Impact added to reporting practice
• Social Impact Bond – SIB
– ”Public-Private-Partnership”
– Public sector pays only for results
– Consortium of service providers
– Invested capital & return at risk - payment tied
to verified results
– Access to governance
Impact investment instruments (1/3)
Variations:
1. Convertable loan:
• example ”SeedIIT”-template (USA)
• convertability restrictions may apply
2. Loan + revenue participation
• may open access to
• sharing of impact value
• governance
• early cashflow, but more exposure
3. Loan + impact ratchet
• impact compensates interest
• for impact-first / philantrophic investor
4. Social Success Note (in pilot)
• repayable loan for (single) entrepreneur
• eg. a foundation pays investor return, if
entrepreneur generates verified impact

17. • Impact vs. company valuation
– intuitively positive correlation
• goal orientation, passion
• customer relationships
• employee motivation & loyalty
– value sharing contracts with customers
• terms, duration
Impact investing instruments (3/3) – Equity
• Impact additions
• reporting practice
• value share vs. business model with customers
• management incentive system
• Board of Directors agenda and composition
Co 1 Co 2
• Mission lock? (for special circumstances)
• when risk of ”mission drift”, e.g.
• lock invested funds for specific mission
• lock impact & business logic (?)
• to company articles, shareholder agreement
• ”golden share” for guardian, eg. a foundation?

18. - Wharton: no returns sacrifice
- GIIN 2015 Benchmark:
– Impact funds perform better!
- Social Finance: SIB performance
– 60 SIBs have impacted 90 000 lives
– 21 of 22 show positive impact,
– 12 have started capital repayment/ recucling, 4
fully repaid.
- Empirical evidence of
– lower mortality rate (tbc)
– valuation boost: BodyShop sold to Loreal’ for
652M£ (consensus was 400-450M£)
Impact investing - Experiences
Source: GIIN & Cambridge Associates: Impact Investing Benchmark 2015

19. - Very active Startup & Growth company and Angel, VC etc investor community
- UN Principles of Responsible Investing widely adopted
-> Impact investing as potential next step?
- Spring 2017 collaborative study by FVCA, Sitra & Deloitte:
Moving from managing investee ”negative footprint”
-> to proactively managing investee ”positive handprint”
19
Finnish Private Equity/Venture Capital sector:
Impact investing as evolution of responsible investing

20. Collaborative study
A collaborative study by FVCA, Sitra and Deloitte

21. Framework for responsible investing
ESG risks
ESG
opportunities
ESG
integration
Thematic
investments
Impact investing
Return & risk Return, risk & impact
Increased measuring, reporting and transparency
FOOTPRINT
• Emissions
• Human rights
• Governance
HANDPRINT
• Cleantech
• Sustainable
development
• Health and
wellbeing
Impact investing and
thematic investments
bring a third
dimension next to
return and risk.
The focus is on
solving environmental
and social problems.
A collaborative study by FVCA, Sitra and Deloitte

22. Footprint-Handprint matrixESG
Low
Low
HighImpact
High
IMPACT WITH RESPONSIBILITY
(FOOTPRINT + HANDPRINT)
IMPACT EXPERT
(HANDPRINT)
ESG EXPERT
(FOOTPRINT)
BEGINNER IN THE JOURNEY OF
RESPONSIBILITY
Based on the current
state of ESG maturity
and the role of impact,
actors can be divided
into four categories.
Moving to the right upper
corner =
Footprint + Handprint
A collaborative study by FVCA, Sitra and Deloitte

23. Future outlook?
5,60%
38,90%
27,80% 27,80%
No Maybe Yes I dont know
Are you going to consider impact in the next fund?
Only 5,6 percent of
respondents say that
they are not going to
consider impact in the
next fund.
A collaborative study by FVCA, Sitra and Deloitte

24. Lisätietoa:
harri.mannisto@sitra.fi +358 400 440347

25. sitra.fi | seuraavaerä.fi
@sitrafund