Seizing the momentum : The rise of impact investing market in Finland

Abstract

Recently, there has been a lot of discussion on strengthening the role of the private sector in addressing the 21st-century challenges. Over the last decade, one topic that has increasingly gained popularity in business and public policy is impact investing, which challenges the traditional dichotomies between the world of philanthropy and investing. In other words, impact investors believe that they can both do well and do good at the same time by seeking measurable social or environmental impact alongside financial returns. Despite the growing interest, impact investing as its own academic research field has only recently started to develop. It is evident that the industry practitioners currently lead the research efforts on the topic. Therefore, this study sought to address the identified academic gap by conducting a study in the Finnish market environment. This diversifies the geographical focus of the existing research, which is currently heavily focused towards the UK and the US market. Since the Finnish market is still in its early development phase, the aim of this study was to conduct an initial mapping of the current market ecosystem. The following individual objectives were formed to achieve the stated aim: 1) to examine the structure of the market ecosystem 2) to examine how the concept of impact investing is understood, 3) to explore the perceived opportunities of impact investing and 4) to identify the perceived challenges that impede participation in the market. This study adopted an exploratory and qualitative research design and conducted 10 unstructured interviews among investors, intermediaries and impact-driven organizations. Generally speaking, the main finding is that the Finnish impact investing market is currently strongly organized around the application of the SIB model. Moreover, SIBs can originally be seen to have had dual objectives in the Finnish context: 1) to increase outcomes-based procurement in the public sector and 2) to establish a broader impact investing ecosystem in Finland with a variety of different instruments and actors. Currently, considerable effort has been directed towards advancing the first of the abovementioned objectives. However, the broader impact investing ecosystem is still lacking some fundamental elements that would encourage wider participation in the market. Furthermore, the findings imply that the strong orientation around the SIB model may have, at least partly, blurred the boundaries between the concept of SIB and the concept of impact investing.