A conference addressing “Social impact investing and its role in in future social public/private investments” brought together stakeholders from government, NGOs, finance and academia on 16 February. The first part of the conference focused on the recently published G8 report Impact Investment: The Invisible Heart of Markets: Harnessing the power of entrepreneurship, innovation and capital for public good.
Two recommendations from the report that resonate with Eurodiaconia positions are that governments and foundations should consider establishing capacity-building grants programmes to boost social sector organisational capacity and to give “Profit-with-Purpose” businesses the ability to lock-in their social mission. One speaker expressed concern that financers were moving faster than the social organisations; this lack of capacity risks leading to an undue influence of the financial sector on the operations of NGOs. Another recommendation of the G8 report is that governments should consider streamlining pay-for-success arrangements such as social impact bonds. Speakers expressed concerns about the encroachment of such “pay-for-success” models in the welfare sector because of the risk of “creaming” of contracts that are easier to be successful with and that it is difficult to measure “success” in working with very vulnerable individuals.
The general feeling among participants and speakers was that private finance should be complementary to public finance, that public authorities must maintain their responsibility to ensure access to social services. In some countries, the group that elaborated the country report for the G8 document lacked the involvement of NGOs, but in Germany the BAGFW was able to engage in the drafting. The German report summarised their opinion on the role of Social Impact Investing as suitable for financing measures that work for the prevention of social problems, innovation in the social sector, and scaling up of successful practice. Numerous people mentioned the need for blended capital, different types of finance for different situations or stages of development of an organisation. A common challenge was finding investors for the start up phase of an organisation.
In France, optional company savings accounts that invest in social enterprises have achieved a great success. The National Advisory Board promotes further development of social savings products, the setting up of a reference framework for impact measurement and supporting foundations to move towards venture philanthropy. Italy has a law on equity crowdfunding and has recognised a social lending platform as a payment institute. In the discussions around the EU Banking Union they advocate for people in inclusive finance to be part of its development, and developing social investment bonds should be considered. In many countries there has been a growth in intermediaries managing funds, which means that the investors are further away from the organisations being invested in, and there is a decrease in understanding of the organisations being financed, with the risk then that standard models are used to measure the impact of organisations.
The conference was organised by the Social Platform, Confrontations Europe, the BAGFW and the EESC. An article by the BAGFW (in German) can be found here.