In the run up for EVPA’s annual conference taking place this December in Madrid, Stone Soup Consulting has taken a close look at the social impact investment sector in Spain.
Guest blogpost by Clara de Bienassis, partner in EVPA Member Stone Soup Consulting
Certainly and at first glance, the sector looks dynamic, with many new and emerging players and especially after the recent CNMV (the agency in charge of supervising and inspecting the participants’ activities of the Spanish Stock Markets) announcement authorising Bolsa Social, the first crowdimpacting platform in Spain that promises to promote a positive change in society by connecting companies and investors with values. However, let’s get into the details to follow the evolution of the industry and understand the driving factors of the market.
The definitions of the social impact investment sector are so numerous that it can sometimes be confusing. Here is the definition we have used for this blogpost: “social impact investments are those that intentionally target specific social objectives along with a financial return and measure the achievement of both”.
According to Eurosif, impact investing is still a niche market in Spain with a volume of activities of 87M€ in 2014. This represents 0.5 % of the European market. Indeed, although some actors have been active in alternative finances for some time, it is a recent and quite unstructured sector. Paradoxically, the country’s crisis and the insecurity in the Spanish financial world have stimulated social entrepreneurship and consequently the development of intermediaries and financial tools. As we know, impact investing is an opportunity for companies to contribute to social matters, areas that are usually tackled by the public sector. Then, we may wonder if the Spanish government could be an agent of change through policies that encourage the transparency and understanding of the sector, a role that could also help stimulate the participation of more economic actors.
Who are the main actors?
The first initiatives came out in 2010 with Momentum Project, a programme funded by BBVA promoting social entrepreneurship through training and a collaboration ecosystem; and Creas, which believes that bringing together the world of business and the social sector is the best way to build a sustainable future. They manage two social impact funds targeted to innovative and operating projects that create social value. In addition, B-Ready is Ship2B’s program designed to accelerate start-ups with a social impact focus that provides -with proven success- networking, mentoring, financing, capacity building and visibility to promising initiatives. Although we cannot mention all Spanish initiatives, we can name Meridia which has launched an impact fund out of a real estate private equity fund manager, and Gawa Capital, one of the first impact investing funds that focuses on developing countries.
In the midst of this landscape of small and medium-sized actors, 2014 has seen the emergence of a major actor created by an established private equity fund operating in Spain since the 80s and already developing philanthropic activities, Vivergi. It’s the first Spanish registered social impact fund and one of Europe’s largest funds investing in social business (with a target size of 50M€) that focuses on the acceleration of early-stage social entrepreneurs. According to Lara Viada, associate at Vivergi Social Impact Fund, “in Spain there is room for many more players. We’re opening the market, it is a pretty new concept and it takes some time to understand the mix between financial and social return”.
Also, the new operator Bolsa Social will surely shift the lines and play a key role in the democratisation of social impact investing in the country as well. José Moncada, CEO and founder of Bolsa Social, explains: “it occurred to me that the best way to connect social entrepreneurships with impact investors was through an equity crowdfunding platform where everyone could invest.”
In addition to these actors, two organisations support the expansion of the sector: Spainsif, founded by 32 organisations promoting SRI; and REDIS, the recently created network of impact investors which, according to Mercedes Valcarcel, trustee of ###a href="Fundación" class="redactor-linkify-object">http://www.fundacionisis.es/">... Isis, “is composed by professionals with very high technical profiles and a strong social experience that can play a very important part in the short and medium term”.
Where do impact investment funds invest?
Mainly in environmental projects, health and social services, and job creating initiatives led by social entrepreneurs with proven scalable business models and who measure their impact.
In Bolsa Social’s José Moncada’s opinion, “impact measurement is essential: we follow the standards established by EVPA and ESMA”. But still, the tools are very heterogeneous as the topic is relatively recent and a certification about the impact generated would certainly encourage the growth of the Spanish sector: investors and people who are contemplating investing in projects that match with their ethical concerns need concrete evidence that these are socially profitable.
The hope of Vivergi’s Lara Viada is that “more and more capital is invested with a social mindset as people want to have a greater control on their investments and make sure that these are coherent with their way of living”. This is echoed by the different actors involved in the sector: the future of impact investing in Spain is promising provided that the government plays the expected role fostering its consolidation and taking concrete measures setting a clear legal framework, the wide promotion of impact investing and its supervision.
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