Tackling environmental challenges by means of impact investing

Challenge

Public investments and procurement are often implemented with the outcome as the first priority, without examining the impacts of the investment or procurement on society. To enable the most efficient use of tax revenue, the starting point for investments and procurement should be the promotion of societal and environmental benefits instead of the provision of outcomes and services alone.

Solution

Impact investing uses private capital for the sustainable development of society. Investors bear the financial risks of a project and the public sector pays only for the results achieved. It is essential to set clear performance and impact objectives and financial return targets and to monitor their realisation.

The Ministry of the Environment and the Ministry of Agriculture and Forestry have collaborated with Sitra to prepare a circular economy impact investing project (link in Finnish). The goal is to launch Europe’s first impact bond focusing on solving an environmental challenge (environmental impact bond, EIB) in Finland in 2019. It will channel funding to projects and actions that help achieve predefined measurable circular economy goals.