Great interest in investing in social problems

7. September 2021

The interest in the new fund Den Sociale Kapitalfond EFFEKT is great among investors.

The Danish Growth Fund, Arbejdernes Landsbank, PKA, SI Safe and, most recently, the Lind Foundation and Det Frederiksbergske Ejendoms-Societet Aktieselskab have invested money in the new fund Den Sociale Kapitalfond EFFEKT, which now amounts to DKK 95 million.

The fund aims to improve the quality of life for 3,000 Danes while ensuring investors a return of 5-7%.

It is Den Sociale Kapitalfond that is behind the fund, which will use so-called social impact investments as a tool to solve social problems. Social impact investments are effected in a partnership between the investment fund, an organization or company that has a solution to a social problem and a municipality that wants to solve the problem.

The goal is to enter into agreements with 15-25 municipalities to invest in specific initiatives in, for example, getting mentally vulnerable people into jobs, developing vulnerable children’s language, reducing sickness absence among public employees and ensuring that more vulnerable young people pass the 9th grade final exam. Important initiatives in areas where municipalities currently do not have the opportunity to take on the risk by testing a new innovative approach.

Need for social innovation

Jannik Tharben Buchholtz, who is one of the two leading partners in Den Sociale Kapitalfond’s impact investment fund, is pleased with the great interest in investing in social vulnerability.

“In Denmark, we are in a situation where the demographic development and the complexity of a wide range of social problems mean that we will need to add additional resources to our welfare system over the coming years if the level of service is not to fall. At the same time, when we see that measurements of Danes’ trust in the welfare system have been declining over the past 10 years, there is a need to explore new forms of cooperation and focus more on the effect of the money we spend. Therefore, it is with great pleasure that so many serious investors have chosen to put money into the fund,” he says.

The latest investor is the Lind Foundation, for whom the long-term perspective is central. This means that the investments in the fund create long-term changes for the individual citizen and long-term effects for society.

“With the investment in Den Sociale Kapitalfond Effekt , we can, together with other serious players, scale the forces that to a greater extent can create long-term changes based on a systematic approach to efforts. In order to create the changes, it is crucial that the effects are measurable, investigated and evaluated, so that what works can be implemented – for the benefit of citizens and society,” says Henrik Lind, Chairman of the Board of the Lind Foundation.

The method tested successfully

Den Sociale Kapitalfond Effekt is based on Den Sociale Kapitalfond’s extensive experience with social investments since 2011. Over the years, Den Sociale Kapitalfond has continuously assessed the possibilities of working with social impact investments in Denmark, e.g. pba. collaboration with 40 Danish municipalities in the Foundation’s various activities.

In 2017, this led to the Social Den Sociale Kapitalfond starting to test models for social performance payments in collaboration with a number of municipalities and in 2018 to the launch of two social impact investments, one of which was a collaboration with Aalborg Municipality, the Obel Family Foundation and FOKUS Folkeoplysning.

The goal was to help mentally vulnerable citizens to stable employment. After two years of efforts, 46 percent of the 120 activity-ready, mentally vulnerable unemployed people in Aalborg Municipality were in work. This is significantly more – in fact, about twice as many – than after the company internship course that the job centre usually offers.

 

Facts about Den Sociale Kapitalfond Effekt

To begin with, Den Sociale Kapitalfond Effekt will amount to DKK 95 million. However, it is still possible to invest in the fund, which is open for up to a maximum of DKK 120 million.

The fund can invest directly in service providers via social impact investments, where a performance contract with e.g. a municipality, region or state determines the payment based on the effects achieved in the project. The fund expects to make 40-50 investments in the following focus areas, among others:

  • People with stress, anxiety or depression.
  • Mentally vulnerable people who are outside the ordinary labour market or in some other way need help or support.
  • Vulnerable families who are struggling with domestic violence or other social challenges.
  • Citizens with complex challenges, such as homeless people or other citizens who cut across many administrations or initiatives.
  • The working environment area in relation to stress, sick leave or the like.

 

The fund focuses on both social impact and financial returns. The greater the social impact created by the fund’s investments, the greater the performance payment is achieved through the performance contracts. If the total performance payments are greater than the fund’s total investments and other costs, the fund’s investors will achieve a financial return. The fund will continuously measure both the social and financial returns.

In social impact investments, the payment for the social initiatives is regulated via a performance contract: The investment fund finances the efforts of the social organisation from the start, and the better social results that are achieved for the benefit of vulnerable citizens, the more money the municipalities save in the long run. The municipality’s savings form the basis for the repayment to the social investor, and thus the quality of the effort, the social effect and the municipality’s price are closely linked, and a connection is ensured between the effects actually created and the payment that the municipality undertakes to pay.

Documents

Contact

Jannik Tharben Buchholz
Managing Partner
+45 3131 9260

Den Sociale Kapitalfond raises a record fund of DKK 670 million

Den Sociale Kapitalfond Effekt II is a reality

Den Sociale Kapitalfond behind new national council for impact investments