Social investors are key for the EU’s resilience and recovery

There is growing recognition of the social economy’s critical role for a European economy that is fair, sustainable and inclusive. The European Commission aims to reinforce this role, as demonstrated by its Roadmap for a European Action Plan for Social Economy, and the upcoming high-level European Social Economy Summit on 26-27 May.

This Summit and upcoming Action Plan are a key opportunity to discuss how the social economy can help reshape the post COVID-19 economy and enhance social innovation and social cohesion. In this respect, the role of social impact investors in boosting social ecosystems across Europe will be crucial.

From the perspective of social impact investing, there are both challenges and opportunities for the EU’s social economy, in particular in the following areas: improving access to diverse resources, facilitating the creation and scaling up of innovative social projects, increasing recognition of social economy organisations, and harmonising social investment principles at the EU level.

Financial intermediaries focused on impact investing play a critical role in access to finance for social enterprises.

Improving access to different kinds of resources is key to reduce the funding gap for social economy actors to be able to contribute to a just and sustainable economy. Financial intermediaries, such as impact funds or foundations, can support small organisations and social entrepreneurs to access EU funding and deploy this funding through different financial instruments. For this reason, it is important that EU institutions focus more on the role of financial intermediaries and offer them additional support, such as advisory services and technical assistance facilities.

Innovation is the core of the social sector.

EVPA has been following the development of innovative financial mechanisms and has documented various best practices within the social economy ecosystem such as the BNP Paribas’ social impact bonds in France, Social Outcome Fund in the Dutch province of Brabant or the Rethink Ireland’s Social Innovation Fund. As innovation is the core of the social sector, we need to develop a better framework for sharing these best practices and institutionalising learnings from the sector with the final aim of scaling-up.

However, the regulatory and fiscal environment is still fragmented across EU member states, hindering cross-geography scale up and replication of innovative social projects. For example, the social economy in France is fully recognised since the Law on the Social and Solidarity Economy was adopted in 2014. It provides an enabling regulatory framework to better support social enterprises. Solidarity-based finance has also been regulated in France since 2001. Yet other EU countries such as Italy or Spain might lag behind and could not transfer or implement all the innovative French practices without a legal recognition of the social economy. Regulations need to be harmonised so that national authorities can collaborate to include tried and tested social innovations into governmental programmes.

In addition, transnational cooperation on experiences of European social innovation clusters should be strengthened. In this respect, academic institutions play a critical role in promoting knowledge, and should be part of these clusters. Improving the relationship between the academic world and social economy actors could stimulate the transfer of knowledge and technology.

Communication is key.

The development of the social economy cannot be built on fragmented communication but requires an ecosystem perspective. Better communication between the European Commission and national public institutions, and between national authorities and social investors, will increase practical knowledge on taking up and deploying EU funds and avoid confusion created by different terminology at the EU and national levels.

What is not measured cannot be totally understood.

The European Commission took recent steps on sustainable finance and EU taxonomy, adopting a package of measures to re-orient investments towards more sustainable technologies and business, but more steps are needed to integrate social values and principles in these measures. Creating a common framework to measure social impact is essential in this respect.

Data does not just reveal impact – it is a prerequisite for making impact and is also the cornerstone of innovation. Data reveals where a social organisation or enterprise could do better, and tells them when they achieved their goals. A common framework for the impact measurement of social investments could therefore enable a more effective classification under a potential social taxonomy regulation.

Social impact investors play a key role in strengthening the social economy and contributing to a better society for all, with potential to actively support EU institutions on all the dimensions mentioned above. In particular, Investors for Impact should be part of any future EU plans so that their full potential can be deployed to strengthen social ecosystems across Europe and enhance public-private collaboration.