Page 145 - Social Enterprise A New Business Paradigm for Thailand

procurement contracts, as governments often engage social enterprises to deliver welfare
services to vulnerable populations, for example, by employing persons with disabilities or

providing eldercare. In addition, in countries with more advanced capital markets, there are also
specialized financial instruments that focus specifically on investment in social enterprises, as
outlined below.

1) Mutual Funds
These funds pool capital from a large and diverse group of investors to build profit-oriented
investment portfolios. Such portfolios typically include a mix of financial instruments, such as
equities, bonds, and other debt securities, and are professionally managed to align with the fund’s
investment policy. The benefit of mutual funds lies in their risk diversification and high liquidity,

allowing investors to buy and sell shares on a daily basis at publicly disclosed prices. Over time, a
new class of mutual funds has emerged that focuses on investments in businesses or projects
with social and environmental goals. These funds offer competitive financial returns while also
giving investors the opportunity to contribute to sustainable social development. Well-known
examples of such mutual funds include the Calvert Equity Fund (CSIEC) and the Pax Global
Environmental Markets Fund (PGINX).

2) Social Bonds
A social bond is a debt instrument through which issuers raise capital to fund social development

projects. These may include initiatives related to housing, education, healthcare, and efforts to
reduce unemployment. One notable example is the CDP Social Bond, issued by the Cassa Depositi
e Prestiti SpA Foundation, which funds social housing projects guaranteed by the European Union
(EU). These bonds typically have defined interest rates and repayment terms, offering investors
clear financial parameters while channeling funds toward socially beneficial outcomes.

3) Social Impact Bonds (SIBs)
Also referred to as Pay-for-Success Bonds or Social Benefit Bonds (Popov, Veretennikova, and
Kozinskaya, 2019), SIBs are financial contracts, usually involving the government as a partner,

where investment returns are contingent on the achievement of pre-agreed social outcomes.
Investors contribute capital to a fund, and if the targeted outcomes are met, they receive financial
returns. However, if results fall short, investors may lose part or all of their principal. What
distinguishes SIBs from other funds is that they are designed from the outset to align financing
with measurable social impact.

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