Problem addressed

The project aims to address several challenges, including:

1.Lack of Outcome-Based Evaluation: The Piedmont region, despite having a vibrant ecosystem of cooperatives and social enterprises, lacks a systematic framework to evaluate and reward projects based on their outcomes rather than activities or outputs. This limits the ability to scale effective solutions and incentivizes organizations based on activities rather than tangible impacts.

2.Immature Social Finance Ecosystem: Social finance in Italy is underdeveloped compared to other European countries, with limited use of innovative financial instruments like outcome funds or social impact bonds, which are crucial for aligning diverse stakeholders (e.g., public and private entities, investors, and social enterprises) and incentivizing results-driven interventions. This restricts the availability of sustainable funding for social enterprises.

3.Capacity Gaps Among Social Enterprises: Many social enterprises lack the skills and resources needed to attract sustainable investments, particularly those requiring outcome-based financing models. This limits their ability to generate substantial and measurable social impact. They often rely on short-term funding and lack expertise in impact measurement, financial sustainability, and partnership management. The project will provide capacity-building programs to social enterprises and will make social enterprises more investment-ready. 

4.Limited Public Sector Innovation: Italian public financing mechanisms tipically are not designed to focus on outcomes, and this project seeks to shift this paradigm by introducing innovative financial instruments to public authorities and administrators.

5.Replication and Scalability: While outcome-based finance models have been successful in other regions and countries, there is no structured framework to replicate these models across Italy and Europe. The TOUCH project intends to explore and facilitate replication in other Italian and European regions.

6.NEET (Not in Education, Employment, or Training) Challenges: Specific attention is given to supporting NEET populations, especially women and migrants, by creating targeted, outcomes-driven interventions to improve their inclusion and opportunities. Italy has one of the highest NEET rates in Europe, with more than 19% of young people aged 15–29 neither in education, employment, nor training.

Innovative solution

Objective 1: strengthen the nascent outcome-based finance ecosystem in Italy by implementing the first outcome fund in the country. TOUCH has the ambition to develop the first outcome fund in Italy, involving a wide variety of national stakeholders from the private and public sector, which will benefit from the development of this mechanism and from the involvement of international experts. 

Objective 2: strengthen social enterprises in the Piedmont region through capacity building. TOUCH will complement the effort of setting up an outcome fund with the possibility to provide capacity building support to a selected group of social enterprises in the region. 

Objective 3: improve the impact of SEs through structural funding and non-financial support. The TOUCH project will give the opportunity to the social enterprises that will be selected for the outcome based contracts to receive the structural financial support they need to generate significant impact and meet the outcomes target in 3 to 5 years. We believe the nature of this funding will strengthen their impact given the “competitive” process based on positive outcomes and, once selected, it incentivises all the stakeholders involved to help SEs meet their impact goals, especially in the case of impact bonds where impact investors are likely to provide significant non-financial support. 

Objective 4: enhance all stakeholders involved in outcomes-based contracting to reason in terms of positive outcomes. All stakeholders involved in the development and implementation of the outcome fund developed by the TOUCH project, will have to start grounding their reasoning on outcomes, going beyond outputs, which are easier to identify but are limited in describing the targeted impact. 

Objective 5: enhance replication of this mechanism in other Italian and European regions. The TOUCH project will explore replication opportunities in other early stage Italian and European regions. Both promotional and research activities are planned to back this effort. 

Objective 6: provide concrete insights on most effective solutions to a variety of stakeholders (including policymakers). This is the only objective that will probably be achieved thanks to the TOUCH project in a longer time horizon. However, once the outcome based contract will be launched, we can affirm that the evaluations embedded in the mechanisms will provide useful insights for policymakers and other stakeholders. 

Key results and benefits

TOUCH will have a positive impact on different stakeholders. Impact that could be on short, medium and long-term. The success of TOUCH could trigger a profound change in the methods of action of each of the stakeholders involved, as better specified below.

Social enterprises supporting NEET: by receiving the support of the outcome fund, enterprises with a clear social mission will have the opportunity to cover their structural costs and innovate the way in which they generate their impact, benefitting from a competitive tendering process based on outcomes. Social enterprises will also benefit from the capacity building activities included in the project. Moreover, the social enterprises will have to improve their impact measurement and management skills to monitor outcomes, which will also make them more attractive for a variety of additional impact investors. In the medium/long term, if outcome-based finance becomes the norm, social enterprises in general will have access to the capital they need to thrive and generate impact at scale. 

NEET (specifically women and migrants): in the short term, they will benefit from solutions that are outcomes-driven, rather than output-driven, which will lead to better impact results for them. In the medium and long term NEETs will benefit from an ecosystem of social enterprises that will be competing on outcomes generated and will be involving the beneficiary perspective in the solutions offered.

Social enterprises ecosystem: also other social enterprises will be able to benefit from the success of this project, which should trigger a positive more generalized upgrade in the medium term in the cooperation between social enterprises and impact investors and build more and more effective impact ecosystems. 

Outcome payers (private and or public): in the short term, they innovate the way they finance social enterprises, focusing their remuneration not on activities but on the positive outcomes that are achieved. In the medium/long term, outcome payers will benefit from a shift from output/input financing logic, to an outcome one, which is more effective in generating impact and producing positive social change. The introduction of this logic should also encourage innovation in the identification of effective solutions, which would allow, in the medium and long term, to reallocate the resources saved to other social problems that are less covered from the point of view of public and philanthropic spending

Impact Investors: in the short term, they will be able to finance impactful SEs that, without the outcome based mechanisms, would not be investable for them, thus generating additional impact. In the medium/long term they will engage more in these mechanisms, broadening the set of SEs they support and increasing their additionality as investors.

Policymakers: in the medium term, they get insights on the most effective solutions to benefit a specific target group, thus receiving insights on the initiatives to support/enhance. In the long term, they could replicate this approach and work cross-functionally. They can also take advantage from the researches carried out in the project’s frame to design similar policy initiatives in different contexts. Also regulations definition could take advantages from the results. 

Potential for mainstreaming

Replicating the action in other Italian and European regions is crucial within the action as we would like to take stock of what has started in Piedmont, using this call to accelerate the implementation of an innovative financing mechanism  and to conduct a research to highlight necessary conditions to scale the model in other geographical and socio-economic contexts. The TOUCH project will explore replication opportunities in other early stage Italian and European regions. The replicability and the dissemination of the results in different geographies will be ensured by the presence of several partners (such as Diesis Network, Social Impact Agenda and its international network GSG For Impact Investing), which supports the development of the social economy, social entrepreneurship and social innovation worldwide. The replicability actions will be carefully designed in order to involve from the beginning,  in the territories where they will take place, all the relevant potential actors needed for the creation of an outcome fund.