Позитивные изменения, Том 3 №1, 2023. Positive changes. Volume 3, Issue 1 (2023)

One of the major social impact operators in Russia, VEB.RF state corporation, presents the following list of stakeholders: the contractor, investor, public authority, independent evaluator, and operator[45]. This list correlates with the “stateinvestor-contractor” triangle plus the two mediators described by the Urban Institute[46]. Thus, in the Russian model, the mediator’s role is somewhat limited compared to the traditional expert mediators – nowhere does it say he/she is to conduct expert review or assist in the project design before the project launch. The Russian model also does not allow for a participant to guarantee the investor’s interests, other than by the investors themselves.

THE KEY AREAS OF IMPROVEMENT OF THE RUSSIAN MECHANISM FOR ASSESSING THE ACTUAL IMPACT IN SOCIAL INVESTMENT

When discussing the Russian experience of social investment, it is worth focusing on three ways in which they can be legally formalized:

• social impact projects;

• the status of a social entrepreneur;

• public-private partnerships for investment projects to establish social institutions.

In Russia, experts call one of the legislative initiatives to introduce social investments a pilot testing of social impact bonds (SIB). Within the corresponding state program[47], funds are raised from investors to finance social projects. The costs will be later compensated by the state if the projects successfully achieve the intended social impact.

The second tool being considered for the legal registration of social investment in Russia is the status of a social entrepreneur. A review of the existing benefits of social entrepreneur status examines the set of benefits conferred by this status (Umnov, Plyukhina & Matveev, 2018). In particular, the Tax Code of the Russian Federation establishes a preferential tax regime for organizations that carry out socially beneficial activities (exemption from value added tax or profit tax in different areas of activity). Social entrepreneurs are in the focus of a number of government programs (such as the “Social Support for Citizens” program), which are created specifically so that social entrepreneurs can be engaged in their implementation. In the final part of the article, the authors consider the peculiarities of the Russian social entrepreneur’s status in great detail, as one of the key areas for improvement.

The third way to legally formalize social investment is public-private partnership for the development of social infrastructure. Andrey Bednyakov, an expert at the National Center for Public-Private Partnerships and the Rosinfra platform, points out that only 8 % of the funding in Russian PPP projects go to the social sector (Bednyakov, 2022). At the same time, the share of private investment into infrastructure in Russia is 2 % of the total volume. He draws a general conclusion about the low evolutionary state of the respective development institutions, as well as the lack of an effective regulatory system in the form of transparent competitive procedures. The lack of an effective project evaluation methodology (for example, such efficiency metrics as Return on Investment are seldom used) can be identified as a fundamental quality of the Russian case. In contrast, the expert cites Canada, where PPP projects are legally required to have an evaluation methodology and an independent evaluator. The importance of metrics for the development of social investment will also be discussed below.

One major difference between social investment and mere charity is the mandatory measurement of the social results achieved.

One major difference between social investment and mere charity is the mandatory measurement of the social results achieved. This condition is used in a small share of publicly funded social projects. In particular, neither the status of a social entrepreneur, nor the public-private partnership mechanism for support of investment projects to create social institutions involves measuring social impact. This is the main disadvantage of the current mechanisms.

Social investment can be defined as investing into a positive social result. If an entrepreneur invests money and expects to generate revenue or even profit (as in the case of public-private partnerships), this is not social investment, but rather traditional commercial investment in the social sector. Social investment is different from investment in that the returns are not primarily economic but social, which must be proven through the assessment of social impact of the project. The absence of an evaluation mechanism creates a confusion between impact investment and commercial investment, as is the case in the Russian models of social entrepreneurship and public-private partnerships.