Social Impact Bonds is one of the vehicles used for the financing of social impact investments in Portugal where a successful roadmap has been made in the area of impact investments.
Social impact financing bonds aims at financing innovative projects committed to achieving social outcomes and efficiency gains in priority public policy areas, such as social protection, employment, healthcare, justice and education, by way of outcome-based contracts.
The project should be implemented by one or more private entities and financed by one or more social investors, and it should set out to achieve measurable social outcomes. For the purposes of achieving this target, the necessary indicators and targets must be validated beforehand by the public authority that oversees the respective sectoral policy.
Proposed social outcomes, as well as their respective indicators and targets, will be established and put into writing beforehand, based on the application. If said outcomes are achieved, the social investors will be fully reimbursed for the amount invested in achieving them.
Applications should be submitted in partnership with the organisations involved in the implementation, social investors financing the project and the public authorities which have confirmed that the project is aligned with the existing public policies and the expected social outcomes are in line with the requirements.
In this model, the financing requirement in the project should be at least €50,000 and for the purposes of encouraging the subject matter financing vehicle, the necessary legal basis has been established by way enacting the fundamental legislation under the Portuguese laws. Accordingly, with Law No. 114/2017 the social impact bonds have been taken under the scope of tax incentives regardless of any future reimbursement, allowing the investors to recognise 130% of the total amount invested in social impact bonds in each tax period as an expense.
In this way, Portuguese companies are encouraged to make investments in the innovative and experimental projects experiencing new approaches in the areas of priority public policies for the solution of the social problems encountered.
Source: Portugal Inovação Social
