What is happening in Europe with Social Impact Investments

Social impact investments (SII) were formulated, developed, put into practice and tested. The first country to use them was the United Kingdom in 2010, by creating the first Social Impact Bond (SIB). It was then followed by the United States, particularly New York (2012), where Goldman Sachs invested over nine million dollars as a loan, while Bloomberg Philanthropies offered up over seven million euro in non-refundable grants to be used as a guarantee fund to partially cover the Goldman Sachs loan.

In addition, the current British prime minister and conservative government leader, has worked to achieve special dispensation from the EU regarding the rules on government assistance, with the aim of financing £400 million to the Big Society Capital, which gathers capital to finance organisations within the social sector. This funding has been guaranteed through funds withdrawn from bank accounts that have been dormant for at least 15 years.

The Social Impact Bond is not the only mechanism of its kind. There is also the Pay for Success (PfS) strategy where the financial returns depend on the outcome of the project. In any case, the basis of such mechanisms lies in the need to tackle a social problem by way of preventative measures that are hard to come by for a public administration short of money, using the savings for the public coffers as a guarantee fund for private investments.

The British government is such a firm believer in the SII, that in 2013 it promoted the inception of the Social Impact Investment Task Force established by the G8 with the aim of promoting the development of social impact investments as well as aiding its integration into the G8 member nations. The Task Force is made up of National Advisory Boards and of Working Groups which have worked alongside the Organisation for Economic Cooperation and Development (OECD) to produce a report on this topic.

Even the European Commission has begun taking its first steps in this direction, by implementing a regulatory protocol and a system of certification and accreditation for the European Venture Capital funds. What is more, the European Commission has established the European Social Investment and Entrepreneurship Fund (ESIEF) of €90 million, which serves as a master fund, and works with private investors to facilitate the creation of more funds throughout Europe that are specialised in SII.