Social impact investments: a forced choice


 A cultural leap

To date, social policies have been considered a mere cost. Assisting the elderly, caring for the disabled, reintegrating former drug addicts, caring for long-term patients, etc., are examples of public interventions seen as a burden on the community: current spending money stolen from investments.
This is no longer the case: today there is a way to transform social spending into an investment for community development. No more money spent on a few, but made fruitful for everyone.
In countries like the United Kingdom, the USA and Canada, this new culture has already spread and goes under the name of innovation and social impact investments.

The current context

The approach that contrasts social policies and development policies is outdated. It does not work anymore. First of all, because the local government has less and less financial resources; secondly, because if the Municipality does not spend today on the needs of the community it will spend more tomorrow on social tensions.
The solution attempted so far, generally, has been to delegate most of the social services to the non-profit world, which, in turn, however, works thanks to public funds or private donations.

This model of social policy has shown its limits: it is good for emergency situations, but not for managing ordinariness. Caritas, for example, cannot, and must not, replace local government in responding to poverty: that of Caritas must be an intervention for the extraordinary, that of the Municipality for the ordinary. Otherwise, you could pay taxes to Caritas directly.

Social impact innovation

The idea that we are launching is that of a new way of understanding and financing social policies: they are no longer to be understood as non-repayable money, a pay to pay for caring for the most disadvantaged, but, on the contrary, an instrument to create social cohesion and development within our community. Without cohesion, in fact, there can be no growth.

What is the proposal? In reality, it is a challenge, because it presupposes the will to radically innovate. How?

Disused public goods to invest in the social sector

It is a matter of make the public and the private working together, at the same table to design and finance policies that are no longer simply “social” but “socially impacted”. The difference is not just terminology.
To understand this, a concrete example is needed: the 2015 stability law introduced the possibility of recovering disused public assets. This means that an abandoned building can be requested by citizens for purposes of general interest. But who puts the money to recover those assets? The Municipality has none and private individuals do not want to risk it.

The solution, then, is that already positively tested in the United Kingdom, the United States and Canada: the Municipality still allocates money, but without spending it, instead it puts it it as a guarantee of private investment (dedicated investment funds, bank bonds, etc.). .), which will not only get their capital back, but also, in the medium term, a return on invested capital.

How? In the assigned building, for example, some rooms could be obtained for craft activities of ex-convicts and/or disabled people, whose revenues would not only produce a private income, which can be transformed into consumption and therefore general wealth in the Municipality, but also, to a small extent, to return capital and pay interest over the years. Other rooms could be reserved for scholastic recovery of children in difficulty, and so on.

The projects would be carried out by non-profit organizations and followed by independent assessors who certify their correctness and effectiveness in their progress.

The impact, obviously, is greater than the simple recovery of a disused public good set in degradation: the neighborhood becomes more livable and safe; the city more cohesive and rich.

This is an example, but the cases of applicability of Social Impact Investing are many. It’s just a matter of getting started.

The actors of innovation

The instrument of social impact investments means that, alongside local government and private investors, banking and supply foundations also participate, which will fuel the guarantee fund, and also the banks, as bonds, non-profits and project evaluators. Non-profits and the evaluators of the social impact produced are also essential players in social impact policies.